In January, financial markets experienced some turbulence. On balance, however, the results were limited. On the political front, Trump’s inauguration was in the spotlight. While businesses believe his reign will have a positive impact on the investment climate, there were also concerns about the effects import tariffs may have on consumer prices and disruptions in supply chains. On the economic front, concerns about the U.K. budget deficit and increased inflation expectations led to slightly higher interest rates in the capital market. Partly as a result, the Fed did not change the policy rate, where the ECB cut by 0.25% to 2.75%. The Bank of Japan raised the policy rate by 0.25% to 0.5%. With this, it appears that a long period of economic stagnation and deflation is behind us. Shares were briefly under pressure after an announcement by the company DeepSeek that has developed an AI model that costs a fraction compared to other models. It also works more efficiently and requires fewer chips. Markets were reassured afterwards by strong quarterly figures from companies in the technology sector.
Shares
At the end of the month, a handsome return of +3.0% remained for the MSCI All Countries World index (measured in euros). Developed markets led the way with a plus of 3.1%, and emerging markets (+1.4%) lagged slightly behind. Interestingly, Europe significantly outperformed other regions within developed markets. With a return of +6.5%, it stayed well ahead of Pacific excluding Japan (+3.2%), North America (+2.6%) and Japan (+1.2%).
Outstanding among emerging markets was Latin America with a return for the month of +9.1%. The EMEA region (+4.1%) did not come close. China (+0.5%) and Asia (+0.3%) were only just able to stay in the green. Style value stocks (+3.8%) outperformed style growth stocks (+2.2%).
Bonds
The results on interest rates were limited last month. We again saw 10-year government bond yields in the Netherlands (+0.06%) and Germany (+0.09%) rise more than euro swaps (+0.05%). In contrast, 10-year U.S. interest rates fell slightly by -0.03% to a level of 4.54%. Unlike government bonds, bonds with a higher risk profile rose in price in January. The risk premium of less risky corporate bonds fell 0.11% (to 0.88%). More risky corporate bonds experienced an even sharper decline (-0.18% to 2.89%), double the decline of emerging market government bonds (-0.09% to 3.16%).