Start to the year with momentum - but will the momentum be maintained?
January marked a positive start to the year. The global share index MSCI World in EUR rose by 2.15%. While the US stock markets performed solidly (S&P 500 +1.47% in EUR, NASDAQ +0.91%), the European markets were much more dynamic (Stoxx 600 +5.72%, DAX +8.53%). Japan, on the other hand, lagged behind the global trend with a slight gain of +0.48% in EUR.
Overall, we remain constructive for the markets for the time being. The US economy is proving robust, and a recession or financial market crisis seems almost impossible at present. However, a strong economy does not necessarily mean strong stock markets. A scenario similar to that of the mid-1990s - moderate US interest rate cuts in the absence of a recession - remains realistic.
However, market conditions could tighten from the summer onwards. An overall higher interest rate level in the USA continues to speak in favor of the financial sector, which we continue to classify as positive. In addition to the positive outlook for banks and financial stocks, we continue to see opportunities in the construction sector and in infrastructure projects, particularly in the USA. In Europe, selective investments remain interesting, but economic development continues to be characterized by structural problems in Germany and trade risks due to possible new US tariffs.
Opportunities that we see
Structural growth in the USA: The USA continues to offer better investment opportunities than Europe in the medium to long term, as structural potential growth is higher in the USA.
US financial sector: The global and US financial and banking sector has made a good start to the new year and is structurally well positioned. Less regulation is having a supportive effect and high US interest rates for longer could also have a positive impact on interest income. We also expect M&A activity to pick up in 2025. Investments in the crypto market are also likely to receive a tailwind under Trump.
Construction sector: The US and Europe have full pipelines for infrastructure projects. New contracts for the reconstruction of Ukraine could provide additional momentum in the event of a ceasefire or peace.
Japan: Japan offers one of the best market risk premiums, strong growth in share buybacks and low exposure to US tariffs. International fund managers have not yet overweighted the market and Japanese financials could also benefit from higher US interest rates.
Market breadth in the US: Earnings of the remaining S&P 500 companies are likely to rise more strongly in 2025 and 2026, after only the large tech companies (MAG-7) have stood out in recent years.
Technology and AI: The topic of artificial intelligence (AI) remains in focus. High investments in data centers are driving development and could account for up to 1% of US GDP. An important factor for further development is the cost structure of large language models (LLMs). If these become cheaper in the future - as indicated by the developments surrounding Deepseek, for example - this could benefit software companies in particular.
Europe: Companies with cost-cutting potential and low restrictions due to customs duties could offer opportunities if profits rise.
Risks that we are observing
High valuations: The US market is highly valued and many positive developments are already priced in. Optimism regarding US equities is also exceptionally high at present. Volatility and uncertainty due to measures or announcements by the Trump administration could have a greater impact on the markets in 2025 than in the previous year.
National debt: A reduction in the US deficit, e.g. through planned spending cuts of up to USD 2,000 billion, could slow economic momentum and have a negative impact on stock market performance.
Geopolitical tensions: A renewed trade war cannot be ruled out. There is already a threat of additional tariffs if China does not bring its fentanyl exports to the US under control - further trade barriers could follow if no progress is made. A second critical point in relations between the two countries remains the future of TikTok in the US. US companies that are heavily dependent on China could suffer particularly from these tensions.
Inflationary impulses: The Trump administration's planned tariff measures could lead to increased inflationary impulses after a delay. This would lead to higher interest rates at the long end and weigh on the markets.
Structural problems in Europe: Germany is struggling with high energy costs, high wages, excessive bureaucracy and a lack of flexibility, which is hampering the competitiveness of many industrial groups. The key industries of automotive, chemicals and mechanical engineering in particular are suffering a massive loss of international competitiveness.
Dependence on China: The German automotive industry could continue to be burdened by sales problems in China, with negative consequences for the supplier industry.
Energy and renewable energies: The Trump administration is planning a massive expansion of energy production in the USA ("Drill Baby Drill"). Europe is likely to import more expensive LNG from the USA. Energy stocks and utilities should therefore be viewed selectively. In the wind energy sector, massive and low-cost competition from China could create additional pressure.
Monetary
Tariffs, interest rate differentials and geopolitics continue to favor the USD in the medium term. However, many of these effects may already be priced in.
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