Market Musings 010225:
Santa Rally comes late for stocks
Summary:
A strong January tends to predict a strong year for stocks
European stock markets lead in January: DAX, Euro STOXX 50, FTSE 100,Swedish OMX all hit fresh all time highs
Sector rotation: from Tech to new leaders Banks,Industrials
Deepseek AI LLM plants China on the AI map,challenging the 4 US hyperscalers
Mag 7 starts to splinter: Microsoft,Nvidia stutter
Gold hits new all-time high at $2800/oz, silver looks poised
Tump tariff implications: how big the hit to Mexico, Canada,China and ultimately to the US consumer?
ECB cut interest rate again: BoE likely to follow soon
Podcast -
Euro high yield corporate bonds: 2025 may not be a repeat of 2024
European stocks led in January
January was a good month for European stock markets,in spite of the pervasive pessimism surrounding core countries Germany and France.
Weak German IFO Business Climate survey reflects economic pessimism
The German DAX index led with a near-10% return (including dividends) on the month, the Euro STOXX 50 index of leading eurozone companies gained 8%, and the FTSE 100 +6%. All these indices marked fresh all-time highs by month end.
FTSE 100: new all-time high
With dividends re-invested, FTSE 100 performance looks better…
Where January goes, so goes the year…
When the S&P 50 index is positive in the first calendar month of the year, it tends to suggest a strong rest of year for the stock market.
This is also true for European stock markets - the Euro STOXX 50 index shows a similar trend when January is positive with an average annual return of nearly 17%, compared with only 2.5% when January is negative.
Source: BNP Paribas. Note: total return data 1987-2024
US ex-Tech beats Tech
In the US, leadership came from the S&P 500 ex Tech, while the tech-heavy Nasdaq 100 index struggled in the wake of the announcement of impressive results from Chinese AI large-language model Deepseek R1, supposedly achieved on…