ATTIVO
January 2025 Market Summary
2024 has proven favourable for investors with exposure to equity markets as part of a diversified portfolio. This period has been marked by significant global election activity which, while contributing to market volatility, aligns with historical trends where markets tend to stabilise and trend upwards in the months following elections. Such movements underscore the importance of maintaining a balanced investment approach amid political and economic shifts.
Market performance overview
Over the previous 12 months to the 2 December 2024, the top indices from around the world have shown growth despite market volatilities and different setbacks. They are reflected as below:
- FTSE 100: +10.35%
- S&P 500: +32.01%
- Europe’s STOXX 600: +9.75%
- Japan’s Nikkei 225: +15.89
UK insights
U.K’s October Inflation figure came out at 2.3% for the year-on-year change in prices that make up the Consumer Price Index (CPI), an increase from September’s data which showed a 1.7% year on year increase. The cause is due to the increase in the energy price cap, which was raised on 1 October this year. Following the Bank of England’s base rate cut in November, Andrew Bailey has warned that future rate cuts will be more gradual, to ensure that inflation rate target can be maintained in the long run. The Monetary Policy Committee which decides monetary policy action meets for a final time in 2024 on the 19 December.
Other economic developments
USA
November’s annual inflation figures for the US released on 12 December revealed that annual core inflation has reached 2.7%, up 0.1% from October’s figures. Following this news the Federal Reserve voted on 18 December to lower the lending rate to the 4.25-4.50% range. Federal Reserve Chair Jerome Powell also announced that they would be slower to drop the base level of interest rate in 2025, citing that the central bank would need to pay closer attention to inflation and the level of job creation in the market. The key lending rate has been lowered by a full percentage point since September.
The major indices in the United States fell sharply following Powell’s announcement, with the Dow Jones, S&P 500 and the Nasdaq Composite all down between 2.6 and 3.6% on the day. All 3 major indices had previously hit record highs in November and early December following the news of Trump’s election victory, and his promises of deregulation and reducing corporation tax.
Asia
In China, economic activity remained subdued compared to previous years, with uncertainty compounded by the growing risk of a trade conflict with the US.
However, China’s property sector showed signs of stabilising following Beijing’s economic stimulus in September. Market reactions were generally positive, with stocks rallying in hopes of better economic conditions.
The Bank of Japan (BoJ) maintained interest rates at 0.25% in December, despite Japan’s core CPI seeing a 2.7% increase year-on-year in November, surpassing the 2.6% forecast and rising from 2.3% in October. With the pace of consumer inflation rising to a three-month high, pressure remains on the BoJ to raise interest rates, a factor many investors are cautious of due to market volatility in the second half
of the year.
Europe
In January 2025 it was announced that the annual core inflation figure in the Eurozone hit 2.4% in December, up 0.2% from November. The increase was attributed to the rise of inflation from 3.9% to 4% in the services sector, which makes up just over 44% of the basket of goods. The European Central Bank have been trying to achieve an inflation figure closer to their 2% target, and on 12 December announced
the lowering of all 3 key interest rates by 0.25% in pursuit of this.
In December 2024 The Eurozone Composite Purchasing Managers’ Index (PMI) increased by 1.2 points to 49.5, driven by a stronger services
sector. This modest recovery followed the impact of political news in November. However, concerns in manufacturing persist as evidenced by the production sub-index, which reached a 12-month low of 44.5.
As 2025 begins, the overarching lesson for investors is clear.
A balanced, informed approach is critical to weathering periods of volatility and capitalising on opportunities within an ever-changing global economic environment.
This article is intended for information only. It is not financial advice or a recommendation and should not be considered as such. If you are unsure whether an investment is right for you, please seek independent financial advice. If you choose to invest, please remember the value of investments and any income derived from them can fall as well as rise and you may get back less than you put in.