One of the key market themes was President Trump’s inauguration and the potential implications for policy, particularly regarding anticipated changes to tariffs and their effects on the US and global markets.
In the US, equities were up more than 2,5%. The Chinese start-up DeepSeek announcement regarding AI shook the information technology sector, but other sectors supported the market, mainly communication services, healthcare and financials. The DeepSeek story called into question the need for elevated investment in advanced AI chips and data centre capacity. Meanwhile, the earnings season got underway with mixed results for some of the US mega caps, and the Federal Reserve kept interest rates on hold, signalled that there may be no further cuts forthcoming.
The Eurozone began 2025 on a strong note (more than 7%), with gains outpacing other regions benefiting from a rotation out of US tech stocks while worries over trade tariffs eased. As expected, the European Central Bank cut interest rates by a quarter of a percentage point, and Christine Lagarde warned that economic risks are tilted to the downside given rising trade frictions and weak consumer confidence.
Regarding other geographies, Korea posted robust returns, rebounding from the poor performance in December 2024.
For 2025, we are making some adjustments in our methodology, such as putting on hold the currencies model, given the new world economic framework with Trump policies, and revising the weights of the economies in our allocations. Therefore, new geographies like India or Poland will be added, and others will leave, like Japan and Korea, and our US exposure will increase (stocks and bonds).
Ultimately, the risk versus return of our primary strategy will be slightly higher than in previous years.
The mix of stocks and bonds is now 55% and 45% (and more concentrated in some markets, although diversified among different types of assets—for instance, with US Government, Corporate, and High-Yield bonds).
