Donald Trump returned to the White House last week and whilst his executive order pen certainly got a heavy work out as expected, and there was a surprising lack of activity around tariffs, a policy that was a front and centre throughout his election campaign. Clearly, the second Trump administration is firmly in its infancy and further developments on the tariff front are likely, but investors have been weighing up the possibility that the level of taxation levied on imports may not be as extreme as some were fearing. Equity markets took comfort from the lack of tariff news with the S&P500 climbing by +1.7% across the week (in dollars) with sentiment buoyed further by the announcement of a new artificial intelligence (AI) joint venture (JV) Stargate, a tie up between Softbank, OpenAI and Oracle. The JV will reportedly contribute up to $500.0bn towards new data centres and other critical infrastructure in the US[1] with the announcement providing a kicker for most stocks that have exposure to AI.

Continental European equities also rose, the MSCI Europe ex UK index rising by +1.5% (in euros). The annual World Economic Forum in Davos saw various European Central Bank (ECB) policymakers delivering presentations and journalist interviews, with the tone appearing supportive of imminent interest rate cuts. Japanese equities surged despite some modest strength in the Yen, the Nikkei 225 adding +3.9% (local currency) with export focused businesses particularly strong. The Bank of Japan (BoJ) also lifted interest rates last week[2] in what was a largely anticipated move. Across the East China Sea, Chinese equities were little changed despite the lack of Trump tariff announcements with the Shanghai Composite rising by +0.3%. As for the UK, the FTSE100 was flat.

The Trump impact was also felt in oil markets after the US President called for lower prices during his own, virtual address to the Davos contingent. Trump suggested that he would put pressure on OPEC to ramp up output in order to lower prices and markets reacted accordingly with Brent Crude declining by -3.1% to $78.50 a barrel. Gold was an additional beneficiary of the uncertainty around the new President’s trade policies with the precious metal rising for a fourth consecutive week. The +2.1% increase pushed gold to $2,774 an ounce, a level within touching distance of its record peak.

Week Ahead

Source: Workspace DataStream, 27/01/25

[1] T. Rowe Price – Global Markets Weekly Update 24/01/25

[2] Bank of Japan - Decision at the January 2025 MPM, 24/01/2025

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