The State of Markets: “Global Equities: Poised at Key Levels”
Global equities performed well this week, as several European markets made new record highs towards the end of the week (including the UK’s FTSE100*, the German DAX*, and the Italian MIB). Various key US indices also rallied back towards/above their early December highs (including the S&P500 & NASDAQ100). With that, the global equity index is therefore close to its December highs, and back at the top of its trading range, see key chart below.
Arguably much of that rally reflects better than expected news on tariffs (post Monday’s inauguration). That is, tariffs were not part of Trump’s initial flurry of ‘Executive Orders’ and, later in the week, he hinted at (only) 10% tariffs for China (i.e. less than expected, and significantly below the 60% rate discussed before the election).
The key question, therefore, is: Are US (& global) equity markets about to break out of their recent trading ranges? Or, are they about to roll over? We outline our views on those questions in recent research (e.g. see recent ‘Daily Risk Appetite’ & ‘Tactical Asset Allocation’ publications).
Next week’s macro data will be watched closely and includes policy decisions from major central banks, i.e. the Fed & Bank of Canada on Wednesday, followed by the ECB on Thursday. It’s also ‘GDP week’ with Q4 ‘first’ estimates for the US, Germany, France, Italy, and the Eurozone on Thursday (as well as Spain on Wednesday). Elsewhere the US personal income and spending is due on Friday while there are several earnings reports from key tech companies during the week, including Microsoft, Meta and Tesla (Wednesday), followed by Apple and Amazon (on Thursday). Please see below for a full list of key data and events next week.
Key chart: DJ global equity index shown with 50 & 200 day moving averages
*before closing lower on Friday.
Upcoming important data/events this week:
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Events: |
Fed policy decision (Wed, 7pm) followed by press conference (7;30pm); Bank of Canada policy decision (Wed, 2:45pm); ECB policy decision (Thurs, 1:15pm) followed by Lagarde press conference (1:45pm); market holidays in various Asian countries e.g. China on account of Chinese New Year (Tues – Fri). |
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Monday: |
Chinese manufacturing & service sector PMIs (Jan, 1:30am); US new home sales (Dec, 3pm). |
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Tuesday: |
US durable goods orders (December first estimate, 1:30pm); US Conference Board consumer confidence (Jan, 3pm). |
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Wednesday: |
Spanish GDP (Q4 first estimate, 8am); Eurozone M3 money supply (Dec, 9am). |
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Thursday: |
GDP for France (6:30am), Italy (9am), Germany (9am) & Eurozone (10am) & US (1:30pm); – all Q4 first estimates. |
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Friday: |
US personal income & spending including headline & core PCE (Dec, 1:30pm); US Chicago PMI (Jan, 2:45pm). |
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Key earnings: |
AT&T (Mon); Louis Vuitton, Starbucks (Tues); Microsoft, Meta Platforms, Tesla, Alibaba (Wed); Apple, Amazon, Visa A, Mastercard, Blackstone, Nordea Bank, Shell (Thurs); Exxon Mobil, Samsung Electronics Co. (Fri). |
Key Research
Longview on Friday, 24th January 2025:
“Trump 2.0 vs. 1.0 –> What’s Different? What Matters for Markets? Is Europe Finally Having its Day (in the Sun)? PLUS the View from Sweden”
Markets, as widely predicted last year, are grappling with the unpredictability of Trump policy making ‘on the hoof’. Already multiple Executive Orders, prepared comments/speeches (e.g. to Davos re oil & OPEC), and throwaway remarks are driving market volatility.
The question, though, is what are the guardrails? What really matters? And will Trump 2.0 be similar to 1.0?
As we started laying out last week, the US economy is in a notably different position in 2025 relative to 2016/17: i) The starting fiscal deficit is ~7% of GDP (vs. 2% in 2016 – fig 2); ii) there's a soft underbelly to US growth (as a result of tight monetary policy for the past 3 years); while iii) the S&P500 is 2 ¼ years into a bull run without a significant break in its uptrend (i.e. since Oct 2022 –> versus 10 months into a new bull phase by Jan 2017), with that; iv) the index is close to record high valuations (at 21/22x forward EPS, versus 17x in 2017).
Key North American macro data & events:
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Events: |
Fed policy decision (Wed, 7pm) followed by press conference (7;30pm); Bank of Canada policy decision (Wed, 2:45pm). |
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Monday: |
US building permits (December final estimate, 1pm); US Chicago Fed national activity (Dec, 1:30pm); US new home sales (Dec, 3pm); US Dallas Fed manufacturing sector activity (Jan, 3:30pm). |
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Tuesday: |
US durable goods orders (December first estimate, 1:30pm); US FHFA house price index (Nov, 2pm); US S&P/Case-Shiller 20-city & national house prices (Nov, 2pm); US Dallas Fed service sector activity (Jan, 2:30m); US Conference Board consumer confidence (Jan, 3pm); US Richmond Fed manufacturing index (Jan, 3pm). |
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Wednesday: |
US wholesale & retail inventories (December first estimate, 1:30pm). |
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Thursday: |
Canadian CFIB business barometer (Jan, 11am); Canadian employment change (Nov, 1:30pm); US GDP (Q4, 1:30pm); US weekly jobless claims (1:30pm); US pending home sales (Dec, 3pm). |
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Friday: |
Canadian GDP (Nov, 1:30pm); US personal income & spending including headline & core PCE (Dec, 1:30pm); US Chicago PMI (Jan, 2:45pm). |
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Key earnings: |
AT&T (Mon); Rtx corp, Stryker, Boeing, Lockheed Martin, Starbucks, Chubb, Royal Caribbean Cruises Ltd, General Motors, PACCAR (Tues); Microsoft, Meta Platforms, Tesla, T-Mobile US, ServiceNow lnc, IBM, Danaher, Progressive, ADP, Lam Research, Waste Management, General Dynamics, Norfolk Southern (Wed); Apple, Amazon, Visa A, Mastercard, Blackstone, Thermo Fisher Scientific, Caterpillar, Comcast, United Parcel Service, Marsh McLennan, KLA corp, Intel, Sherwin-Williams, Trane Technologies, Parker-Hannifin, Altria, Cigna, Northrop Grumman, Arthur J Gallagher, Atlassian Corp Plc. (Thurs); Exxon Mobil, AbbVie, Chevron, Eaton, Aon, Colgate-Palmolive (Fri). |
Fig B: US real GDP (Q-o-Q %)
Key European macro data & events
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Events: |
ECB policy decision (Thurs, 1:15pm) followed by Lagarde press conference (1:45pm); Riksbank policy decision (Tues, 8:30am); ECB releases bank lending survey (Tues, 9am); speeches by the ECB’s Orban, Lagarde, Holzmann, Kazimir & Vujcic at a central bank conference in Hungary (Monday), Villeroy in Paris (Tues, 9:30am), Cipollone at an event organised by the Banque de France (Tues, 2:30pm) & Villeroy at OMFIF event (Fri, 2:30pm). |
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Monday: |
German IFO business climate (Jan, 9am). |
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Tuesday: |
French INSEE consumer confidence (Jan, 7:45am); Spanish unemployment change (Nov, 8am). |
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Wednesday: |
Spanish GDP (Q4 first estimate, 8am); Eurozone M3 money supply (Dec, 9am); Italian ISTAT consumer & manufacturing confidence (Jan, 9am). |
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Thursday: |
French consumer spending (Dec, 6:30am); GDP for France (6:30am), Italy (9am), Germany (9am) & Eurozone (10am) – all Q4 first estimates; Spanish headline & core CPI (January first estimate, 8am); European Commission consumer confidence (January, 10am); Italian unemployment rate (Dec, 9am); Eurozone unemployment rate (Dec, 10am). |
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Friday: |
German retail sales (Dec, 7am); French headline CPI & PPI (January & December first estimates, 7:45am); Spanish retail sales (Dec, 8am); German unemployment (Jan, 8:55am); ECB 1 & 3 year CPI expectations (Dec, 9am); Italian PPI (Dec, 10am); German headline CPI (January first estimate, 1pm). |
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Key earnings: |
Louis Vuitton, Atlas Copco (Tues); Volvo, SEB, ASML Holding (Wed); ABB, Nordea Bank, Shell, H&M, Sanofi, Ferrari, BBVA, Caixabank (Thurs). |
Fig C: Eurozone real GDP (Q-o-Q %)
Key UK macro data & events
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Events: |
N/A |
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Monday: |
N/A |
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Tuesday: |
BRC shop price index (Jan, 12:01am). |
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Wednesday: |
N/A |
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Thursday: |
Nationwide house prices (Jan, 7am); Net consumer credit, mortgage approvals & M4 money supply (Dec, 9:30am). |
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Friday: |
Lloyds business barometer (Jan, 12:01am). |
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Key earnings: |
3i Group (Thurs). |
Fig D: UK Nationwide house prices (Y-o-Y %)
Key Asia-Pacific macro data & events
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Events: |
Speech by the RBA’a Jones in a fireside chat (Thurs, 3:20am); speech by the BOJ Deputy Governor Himino at Hitotsubashi University (Thurs; 6:10am); market holidays in various Asian countries e.g. China on account of Chinese New Year (Tues – Fri). |
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Monday: |
Chinese manufacturing & service sector PMIs (Jan, 1:30am); Chinese industrial profits (Dec, 1:30am); Japanese ESRI leading index (November final estimate, 5am); Japanese PPI services (Dec, 11:50pm). |
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Tuesday: |
Australian headline CPI (Dec, 12:30am); Australian NAB business confidence (Dec, 12:30am); Japanese machine tool orders (December final estimate, 6am). |
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Wednesday: |
Japanese ESRI consumer confidence (Jan, 5am). |
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Thursday: |
Japanese jobless rate (Dec, 11:30pm); Japanese retail sales (Dec, 11:50pm); Japanese industrial production (December first estimate, 11:50pm). |
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Friday: |
Australian PPI (Q4, 12:30am); Australian private sector credit (Dec, 12:30am); Japanese housing starts (Dec, 5am). |
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Key earnings: |
Fanuc Corp. (Mon); Alibaba, MediaTel, Sumitomo Mitsui Financial, Shin-Etsu Chemical, Advantest Corp., (Wed); Chugai Pharmaceutical, Takeda Pharmaceutical, Oriental Land Co. Ltd., NEC Corp. (Thurs); Samsung Electronics Co., Hitachi, Keyence, Daiichi Sankyo, Denso Corp., Fujitsu (Fri). |
Fig E: Chinese manufacturing & service sector PMIs (NBS)
Last week:
Longview on Friday, 24th January 2025:
“Trump 2.0 vs. 1.0 –> What’s Different? What Matters for Markets? Is Europe Finally Having its Day (in the Sun)? PLUS the View from Sweden”
Longview Letter No. 146, 22nd January 2025:
"The British Economy –> Ways to Fix the Lack of Growth"
The SHORT VIEW (& market positioning), 21st January 2025:
"EUR-USD BUY Signals: Full House"
Prior week:
Longview on Friday, 17th January 2025:
“Bond Yield Tops; & the Cheapness of Defensive Assets”
Longview ‘Tactical’ Alert No. 87, 15th January 2025:
"MOVE Tactically OW BONDS a.k.a. Various Equity SELL Signals Have Now Shifted onto BUY"
The SHORT VIEW (& market positioning), 14th January 2025:
"US Dollar: Blow-Off Top?"