Sabco® Investment's Monthly Market Report - January, 2025

Sabco® Investment's Monthly Market Report - January, 2025

​January 2025 commenced with a robust start for global financial markets, as equities and bonds delivered positive returns, and investor sentiment was buoyed by strong economic data and corporate earnings. However, the month concluded with heightened volatility due to escalating trade tensions and concerns over inflation.​

​

In the United States, major stock indices posted gains: the S&P 500 rose by 2.8%, the Dow Jones Industrial Average increased by 4.8%, and the Nasdaq Composite added 1.7%. Large-cap value stocks outperformed, with the Russell 1000 Value Index up 4.5%, while small-cap stocks, represented by the Russell 2000 Index, gained 2.6%. The equal-weighted S&P 500 Index also outpaced its capitalization-weighted counterpart, indicating broader market participation beyond mega-cap growth companies.

​

Sector performance was predominantly positive, with healthcare leading the way, advancing 6.8%. Conversely, the technology sector experienced a slight decline of 0.7%, partly due to concerns over emerging competition in artificial intelligence from Chinese firms like DeepSeek.

​

International markets also fared well. The MSCI EAFE Index, representing developed markets outside the U.S. and Canada, returned 5.3%, while the MSCI Emerging Markets Index gained 1.8%. European equities outperformed, with the Stoxx Europe 600, FTSE 100, and Germany's DAX all closing at record highs, driven by positive geopolitical developments and economic improvements.

​

In fixed income, U.S. Treasury yields remained relatively stable. The 10-year Treasury yield ended January at 4.58%, unchanged from the end of 2024, despite intra-month fluctuations peaking at 4.79% mid-month. The Federal Reserve paused its rate-cutting cycle, maintaining the federal funds target range at 4.25%-4.50%, citing persistent inflationary pressures.

​

Economic indicators reflected ongoing growth. The U.S. economy expanded at an annualized rate of 2.3% in the fourth quarter of 2024. The ISM Manufacturing PMI improved to 50.9, indicating expansion in the manufacturing sector for the first time since March 2024.

​

However, inflation remained a concern. The Consumer Price Index (CPI) and the Personal Consumption Expenditures (PCE) price index both increased year-over-year. Core inflation rose to 3.3%, exceeding expectations and complicating the Federal Reserve's path forward on interest rates.

​

Commodities experienced notable movements. Gold prices surged by 7.8% in January, reaching $2,812.10 per ounce, as investors sought safe-haven assets amid geopolitical uncertainties and inflation concerns. Brent crude oil prices rose by 3.6%, influenced by potential supply disruptions and escalating trade tensions.

​

Trade policy developments added to market volatility. On the last day of January, President Trump announced new tariffs on imports from Canada, Mexico, and China, leading to a market sell-off. The S&P 500 fell by 0.5%, the Dow Jones Industrial Average dropped 0.8%, and the Nasdaq Composite declined by 0.3%. These tariffs raised concerns about potential inflationary effects and the Federal Reserve's monetary policy trajectory.

​

In summary, January 2025 began with strong performance across global financial markets, supported by positive economic data and corporate earnings. However, the month ended with increased volatility due to renewed trade tensions and inflation concerns, setting a complex stage for the months ahead.