Pictet Group
Weekly house view | Musk Tok
The week in review
While they remained on tenterhooks to discover the first concrete decisions Donald Trump takes after his presidential inauguration today, US stock markets rebounded last week. This was thanks to some relatively benign inflation and economic data as well as dovish comments from senior Fed officials. A further boost came from solid Q4 bank results. The S&P 500’s gains of 2.9%[i] (in USD) were outstripped by the 4% chalked up by the rate-sensitive small-cap Russell 2000[ii]. A decline in bond yields also helped equities outside the US, with the Stoxx Europe 600[iii] up 2.4% (in euros), while economic data and a rare telephone call by Trump to China’s president, Xi Jinping, helped China’s CSI 300[iv] to a 2.2% gain (in USD). A drop in December inflation fuelled speculation that the Bank of England would cut rates in February. While this eased stress in the gilt market, it also meant sterling continued to wobble. The drop in Treasury yields meant that the US dollar lost steam (especially against the yen, as speculation rose that the Bank of Japan would raise rates this week), while oil prices rose after the US imposed new sanctions on Russian oil revenues.
Geopolitics
A six-week ceasefire between Israel and Hamas took effect on Sunday, raising hopes of a pause – and potentially an end – to their conflict.
Key data
The US consumer price index ticked up to an annual rate of 2.9% in December from 2.7% in November but came in slightly below expectations while core CPI fell to 3.2% from 3.3%. US retail sales rose 0.7% in December, up from 0.4% in November, while industrial production increased 0.9% last month, well ahead of expectations. The UK CPI slowed to an annual 2.5% in December from 2.6% in November, and core CPI to 3.2% from 3.5%. Elsewhere in Europe, German GDP declined by 0.2% in 2024, having already fallen by 0.3% in 2023. China’s trade surplus soared to almost USD1 trn in 2024, 21% higher than the previous year.
[ii] Source: Pictet WM AA&MR, Thomson Reuters. Past performance, Russell 2000 (net 12-month return in USD): 2020, 20.0%; 2021, 14.8%; 2022, -20.4%; 2023, 16.9%; 2024, 11.5%.
[iii] Source: Pictet WM AA&MR, Thomson Reuters. Past performance, STOXX Europe 600 (net 12-month return in EUR): 2020, -1.5%; 2021, 25.5%; 2022, -10.1%; 2023, 16.5%; 2024, 9.5%.
[iv] Source: Pictet WM AA&MR, Thomson Reuters. Past performance, China CSI 300 (net 12-month return in USD): 2020, 38.4%; 2021, -1.0%; 2022, -26.5%; 2023, -10.9%; 2024, 14.9%.