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


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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

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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.

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FTSE 100: new all-time high

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With dividends re-invested, FTSE 100 performance looks better…

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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.

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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.

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Source: BNP Paribas. Note: total return data 1987-2024


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