January 24, 2025
Stocks Rally as Tariff Worries Ease
A review of the week’s top global economic and capital markets news.
AUTHOR
Michael Miranda
Strategist, Strategy and Insights Group
For the week ending 24 January 2025
As of midday Friday, global equities were higher on the week as markets responded favorably to the first week of the Trump administration. The yield on the US 10-year note rose approximately 3 basis points to 4.65% while the price of a barrel of West Texas Intermediate crude oil edged down $2.80 from a week ago to $75.08 in response to expected US policies to increase domestic oil production. Volatility, as measured by futures contracts on the Cboe Volatility Index (VIX), declined to 14.74 from 15.97 a week ago.
MACRO NEWS
Trump Administration Delays Some Tariffs
The new administration’s decision to delay the implementation of some tariffs eased investor worries over trade. The anticipation of tax reforms and additional infrastructure spending boosted investor optimism. Equity markets have rallied in response, with the S&P 500 achieving new all-time highs this week, although the potential for additional volatility remains given the uncertainty related to the administration’s policy agenda.
BOJ Raises Policy Rate
The Bank of Japan increased its policy rate by 0.25% to 0.5%, its highest level since 2008. Markets broadly expected the policy move as consumer prices, including food and energy, have increased at a pace of 3.6% year on year. BOJ members raised their inflation projections, with all members projecting 2% or greater inflation, supporting the view that the BOJ will continue to hike. The yen gained relative to the dollar in response.
US Existing Home Sales Increase
Sales of previously owned homes increased to 2.2% in December to an annualized rate of 4.24 million units. Despite the pickup in sales, 2024 represented the worst year since 1995 for existing home sales. High mortgage rates, high home prices and low inventory impacted the market throughout the year and will likely continue impacting the housing market in 2025.
QUICK HITS
Preliminary purchasing managers’ indices for January increased in the eurozone, United Kingdom and Japan, while those in the US declined as services readings were weaker despite a pickup in manufacturing.
The Monetary Authority of Singapore eased monetary policy for the first time in almost five years as its forecast for core inflation was revised lower.
US consumer sentiment declined for the first time in six months, with the index declining to 71.1 from 74 in December. Concerns about the job market and the potential impact of tariffs on inflation weighed on consumers.
The People’s Bank of China maintained its one-year and five-year loan prime rates at 3.1% and 3.6%, respectively.
Average house prices in the United Kingdom increased by 1.7% in January, the largest jump to begin a calendar year since 2020.
UK consumer confidence declined to -22 in January, the weakest since the end of 2023 as businesses have indicated they may have to cut jobs in response to increased payroll taxes and a higher minimum wage.
Canada’s annual rate of inflation dropped to 1.8% in December. A sales tax break helped bring down prices in the month. Markets expect another interest rate cut from the Bank of Canada next week.
South Korea’s GDP was up just 0.1% quarter over quarter in Q4. President Yoon Suk Yeol’s attempt to impose martial law, his impeachment that followed, and the impeachment of Prime Minister Han Duck-soo negatively impacted consumer and business sentiment.
The Central Bank of Turkey raised its one-week repo rate to 45% from 47.5%, in line with economic forecasts, as year-over-year inflation declined to 44.4% in December. Expectations are for inflation to continue to cool through 2025 to approximately 27% by year end.
EARNINGS NEWS
With about 16% of the constituents of the S&P 500 Index having reported for Q4 2024, blended earnings per share (which combines reported data with estimates for those that have yet to report) shows that earnings rose around 12.7% compared with the same quarter a year ago, according to data from FactSet.
THE WEEK AHEAD
Four of the Magnificent Seven report Q4 earnings results.
Monday: US New Home Sales
Tuesday: Australia CPI, US Consumer Confidence, Case-Shiller home price index
Wednesday: FOMC Meeting, Bank of Canada Interest Rate Announcement
Thursday: US GDP, Eurozone GDP, ECB Meeting, Japan Unemployment, Japan CPI, US Initial and Continuing Jobless Claims, US Pending Home Sales, Japan retail sales
Friday: US PCE
Stay focused and diversified
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The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell or an indication of trading intent on behalf of any MFS product.
Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual or quarterly report. Full holdings are also available on the individual Fund Summary tab in the Products section of mfs.com.
The views expressed in this article are those of MFS and are subject to change at any time. No forecasts can be guaranteed.
Past performance is no guarantee of future results.
Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research, CNBC.com.
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