January general market comments

by Pierre Mouton Feb 4 2025

“Ballroom Blitz” – The Sweet, 1974

China’s announcement of its LLM tool DeepSeek has been felt like a massive blitz in the global AI ballroom in January 2025. Supposedly way cheaper and less resources consuming (semiconductors and power) than its US equivalents, the DeepSeek bombshell triggered a vast series of questioning about the – so far – winners in the AI space, from chips manufacturers to industrial companies offering data centers cooling and utilities, among others. This, added to the looming tariffs from the US administration towards many of its trading partners, has generated a lot of volatility in global markets, which have nevertheless shown surprising resilience in such a context. Earnings releases have probably helped equities in this environment: in most instances they were good, even if, in some cases, outlooks were less buoyant than expectations (but still showing solid growth in general). Perhaps the continued strength in Gold (+6.6% in USD) and Bitcoin (+9.0% in USD), unbeknownst almost all major currencies, should be an indication that there are some signs of nervousness among the investment community.

The MSCI World rose 3.5% in January, nicely helped, for once, by Europe (+6.3% for the Stoxx 600) which has outpaced the S&P 500 (+2.7%). Despite DeepSeek’s smash, the Chinese market was weak with a 3% fall for the CSI300, and more generally Value outperformed Growth (+4.4% versus +2.6%), the latter having painfully felt Nvidia’s 10.6% retreat. It is noticeable that among European markets, the defensive Swiss equity benchmark SMI was the star of the month with a 8.6% return, reversing part of 2024’s underperformance.On the fixed-income side, yields stayed mostly put, while Credit started the year with a nice show, as highlighted by the 1.25% increase for the Itraxx Crossover. Oil rose 1.1%, and the dollar lost some modest ground versus the Euro, the Yen and the Renminbi.

 

 

 

 

 

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