Explore the latest trends and strategic insights in the January 2025 edition of the “Market Compass.”
This issue provides an in-depth analysis of the global financial landscape, with a review of a turbulent end to 2024 and an outlook for the new investment year.
Highlights Include:
Fed Disappoints Investors at Year-End: The Federal Reserve concluded 2024 with a third consecutive rate cut, reducing the target range to 4.25%–4.50%. However, Fed Chairman Powell signaled a more gradual pace for rate cuts in 2025, revising the outlook to two cuts instead of the previously expected four. This led to a -2.5% decline for the S&P 500 in December, while European indices like the DAX (+1.4%) and EuroStoxx 50 (+1.9%) outperformed.
Rising Yields Weigh on Fixed Income Markets: Despite ongoing rate cuts, US 10-year Treasury yields continued to rise, nearing the April 2024 peak of 4.73%. This upward pressure, partly driven by concerns over President-elect Trump’s expansionary fiscal policies, poses significant risks for both equity and bond markets.
Tech Dominates Market Performance: The S&P 500 posted a strong 23.3% return for 2024, with over half of the index’s gains attributed to just seven tech giants—the “Magnificent Seven.” Nvidia led the pack with a 172% annual return, underscoring the importance of disciplined stock selection in concentrated markets.
Market Outlook for 2025: The upcoming earnings season is expected to reveal an 11.9% year-over-year growth in Q4 earnings for the S&P 500, led by Silicon Valley firms. We maintain a constructive view on technology and communication services, with structural trends like AI continuing to drive growth. However, heightened political risks around the new US administration prompt a neutral equity allocation with a preference for US and Emerging Markets like India and Vietnam.
Opportunities in Fixed Income and Gold: The recent spike in yields offers attractive risk-adjusted returns in US fixed income markets, while gold remains an effective hedge against inflation and geopolitical uncertainties. Falling real interest rates, a weaker US dollar, and strong central bank demand further support the outlook for gold.
Ready to dive in? Download the full PDF of our January 2025 Market Compass for a detailed analysis and forward-looking guidance on navigating today’s financial markets.
Do not hesitate to contact us with any questions about the topics discussed. We are happy to assist you with our expertise.
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