In January, many start the new year off by making resolutions and trying to stick to them, at least for the first calendar month of the year. Markets have echoed this new year sentiment, providing positive returns, with Global equities returning 4.2% and the Global Aggregate bond index up 0.4%. This was well received after missing out on a ‘Santa Rally’ at the end of 2024.

The most notable talking point coming into January was always going to be Donald Trump’s return to office as the 47th president of the United States, as uncertainty heightens around the policy promises that were made and how this could impact capital markets. During his inauguration speech, there was little said to spook equity markets. However, he more than made up for this by threatening many countries around the world – such as Columbia, Canada, and Mexico – with a 25% tariff on US Exports.

From his first term, we learned that it is important to take him seriously but not to take his word as gospel. Love him or loath him, his headline-making comments can cause fluctuation in markets and we have another four years minimum of this to experience. However, we are hopeful that Trump’s entrepreneurial background and viewpoints on reducing regulation could help stimulate the US economy going forward.

Although the biggest growth catalyst in 2024, thanks to AI and the ‘magnificent 7’ share prices excelling, the US tech market saw a dip in January 2025. The Chinese start-up DeepSeek introducing itself to the market was a main driver for this, claiming the ability to produce artificial intelligence in a more cost-efficient manner in comparison to its Western competitors. However, despite this and Trump’s tariff announcement, the US equity markets have continued to show resilience.

European markets have had a tough time of it in recent years, as their energy costs have been in the region of three times more expensive than their US counterparts. However, in January, European Equities were the top-performing developed market with an 8.2% return in British Pounds. It has been almost a decade since we last witnessed such a switch from US to European equities, which was predominately down to the slight rattling of the US technology sector and some positive news coming out of Europe regarding its future economic outlook, therefore increasing market sentiment.

Looking forward for UK businesses, there continues to be a lot of pessimism in the air. We await the impact of the Chancellor’s increase of employer National Insurance Contributions as well as the increase in National Living Wage to come in April. Although looking at this from a pessimist’s viewpoint, UK businesses are relatively undervalued which appears to have caught the eyes of investors, with January showing as the best-performing month in aggregate terms for over two years.

January also provided interesting talking points from central banks across the globe, many taking different actions from another. The European Central Bank cut its interest rate by 0.25% percentage points to 2.75%, which is the fourth consecutive rate cut to the eurozone deposit rate. A day prior, the US Federal Reserve held rates steady reflecting a cautious approach following varied economic signals. The Bank of Japan set their interest rate to the highest level in over 17 years to 0.5%, moving away from decades of quantitative easing. These are just three examples of differing routes that central banks are taking, with the aim of getting to the same juxtaposition; controlling inflation whilst trying to promote economic growth.

As we look ahead to what 2025 may bring, experts are hopeful that capital markets can manage to maintain their ‘new year’s resolutions’ by providing more of the same general positive returns throughout the remainder of the year.

If you would like to discuss any of the issues covered in this update or explore your own investment opportunities, please do not hesitate to get in touch with a MacDonald Partnership Independent Financial Adviser on 01463 242 242. 

Author: Bradley Cross, MacDonald Partnership

Published: 13th Feb 2025