Client Login
Global stock markets lost ground last week although this was entirely due to the US Dollar weakening. The US Dollar sold off as President Trump said he would “demand” lower interest rates! This stance from President Trump should make for good viewing at Wednesday’s Federal Reserve press conference where Fed Chair Jerome Powell will be speaking. Away from that, fundamentals continued to be very strong last week (as companies reported good results) and the intensity picks up this week with some of the big US technology companies reporting their Q4 results.
Last week
- The Pound rose strongly (which took the shine off overseas’ equity returns)
- President Trump was inaugurated and was more measured than had been anticipated
- US companies continued to report strong 4th quarter earnings numbers
- The Bank of Japan raised interest rates to 0.5%
This week
- The rubber hits the road for US earnings season, with 4 of the “Magnificent 7” companies reporting this week. Meta, Tesla and Microsoft all report on Wednesday, whilst Apple reports on Thursday. There’s also earnings from the likes of SAP, Boeing and Starbucks (Tuesday), ASML and IBM (Wednesday), Shell and Visa (Thursday) and Novartis and Exxon Mobil on Friday.
- The Federal Reserve conclude their interest rate decision meeting on Wednesday night: we expect no change and for interest rates to be held at 4.5%.
- The European Central Bank meets on Thursday: we expect interest rates to be cut from 3% to 2.75%.
Equity returns are in GBP, Oil is in USD. Gold is shown in GBP. Bond returns are all shown in GBP. Source Bloomberg.
More detail:
- The Pound rose strongly last week which meant that most overseas’ equity returns translated back with modest losses. The Pound rose by 2.6% on the week vs the US Dollar which meant that when the good US equity returns for the week in Dollars were translated back into Sterling, they amounted to losses of 0.8%. That said, the US market remains up 4.1% for the year-to-date in Pounds Sterling, with the Global share market (of which the US comprises c74%) up by 4.3%.
- President Trump was inaugurated on Monday last week and much of the focus was on his words and actions. The good news (as far as markets were concerned) was that there weren’t blanket tariffs and the tone was conciliatory. He noted he would “rather not have to use” tariffs on China although he did pledge to impose 25% tariffs on Canada and Mexico. He also announced a joint venture called “Stargate” which will reportedly provide up to $500 bn for the construction of AI data centres and other related AI infrastructure.
- President Trump gave a virtual address to the World Economic Forum in Davos and said he would “demand” lower interest rates. This was a key reason the US Dollar sold off last week. President Trump then followed up this stance on Thursday during a press appearance at the Oval Office: saying that he knew rates “much better” than the Fed and “certainly much better than the one who’s primarily in charge of making the decision.” This comment was aimed at Fed Chair Jerome Powell who was the subject of Twitter rants from President Trump during Trump’s first term.
- The Bank of Japan raised interest rates last week to 0.5%. Whilst still very low, this is the highest level since 2008! The Japanese stock market rose last week (boosted by President Trump’s decision to not impose new tariffs) with the Chinese market following similarly.
- Corporate earnings growth (which is the biggest driver of long-run stock market returns) continued to come in very strong last week. Last week saw knock-out earnings from Netflix who announced that they’d attracted 18.9million new customers in the last 3 months of 2024 and that their profits had nearly doubled from the same time last year. This (plus some strong earnings from other companies) helped build on the excellent earnings from the Banks the week before last. This now puts the Q4 blended growth rate for US earnings at 12.7% which is better than was forecast at end December (before the companies started reporting).
- Bond markets were calm last week, with UK gilts and UK corporate bonds posting modest gains. The UK 10-year gilt closed out the week with a yield of 4.63%.
The value of investments and the income from them can go down as well as up and you could get back less than you invested. Past performance is not a reliable indicator of future performance.
The content of this article is not intended to be or does not constitute investment research as defined by the Financial Conduct Authority. The content should also not be relied upon when making investment decisions, and at no point should the information be treated as specific advice. The article has no regard for the specific investment objectives, financial situation or needs of any specific client, person, or entity.
