Week ending 24th January 2025.

As shown in the accompanying table, it was broadly a positive week for financial markets.

President Donald Trump’s return to the White House was the main focus for investors, as he signed a series of executive orders on his first day back. So far, he has directed federal agencies to take steps to reduce inflation, develop new energy sources, and deport unauthorised immigrants. While he did not impose tariffs on “day one” as he had previously pledged, Trump stated that his administration is considering 25% tariffs on Mexico and Canada. He also announced plans to establish an “External Revenue Service” to collect what he described as “massive amounts of money pouring into our treasury from foreign sources.”

Big tech stocks rallied following the Trump administration’s announcement of a major AI infrastructure initiative, ‘Stargate.’

UK and European shares remained resilient as investors reassessed the potential impact of Trump’s trade policies. So far, there has been no mention of the UK or Europe as targets for tariffs, easing initial concerns. Meanwhile, Trump stated he is considering a 10% tariff on China as early as 1st February—significantly lower than the 60% he floated during his campaign. He also noted that he would prefer not to use tariffs on China, which helped fuel optimism for a potential trade agreement between the world’s two largest economies.

The ‘my wealth invest’ app will be available to clients who hold investments with my wealth, which is a trading name of Wealth at Work Limited, part of the Wealth at Work group.

While U.S. businesses have entered 2025 with optimism, buoyed by expectations that the new administration will drive stronger economic growth, the S&P Global US PMI Flash Composite Output Index dropped to 52.4 in January, a nine-month low from 55.4 in December. The slowdown was driven by weaker growth in the services sector, which saw its slowest expansion since last April but marked its 24th consecutive month of growth. Manufacturing output, though modest, showed improvement after five months of decline.

Meanwhile, Eurozone consumer confidence rose in January for the first time in three months, though it remained in negative territory. While the reading indicates some lingering economic pessimism, it shows significant improvement from the lows of 2022.

In Japan, inflation climbed by 3.0% year-on-year in December, marking its fastest annual increase in 16 months. This set the stage for the Bank of Japan’s latest decision to raise interest rates by a quarter point to 0.5% on Friday. The move was largely anticipated by investors after Governor Ueda indicated earlier this month that tighter monetary policy was under consideration. In response, the yen appreciated, and Japanese government bond yields reached new multi-year highs following the announcement.

Still to come this week we have Japan’s consumer confidence, an interest rate decision from the Fed and Eurozone GDP.

Nicola Tune, Portfolio Specialist