On the investment markets, 2025 has started in a more unsettled backdrop than last year, as both the equity and fixed income markets have been fluctuating up and down. Underlying factors include the transition of power in the U.S.A. as well as events on the AI front.
The year has begun more erratically on the markets compared to last year, and the equity market in particular has been fluctuating. The key reason behind this is the transition of power in the U.S.A. in January, but AI is another topic that has had an impact. On a global level, the return on the equity markets has been reasonable and the group of winners has been larger than last year.
The interest rate rose soon after the turn of the year, but it has since come down. Volatility on the fixed income market has also stabilised. All fixed income asset classes have developed favourably.
Republican President Donald Trump’s administration has been in power for only a short while, but has already made many changes during that time. On the markets, the biggest news so far has been related to trade policy – in practice, with Trump’s back-and-forth decisions on tariffs.
So far, the U.S.A. has raised tariffs on China, and China responded similarly. In addition, the U.S.A. has been planning new tariffs on steel and aluminium products. It is unlikely that the pace will slow down in the near future, which may foretell heightened volatility down the road.
The economic data for the beginning of the year has not brought any big surprises. In the U.S.A., the data has been mixed, but the economic data has not significantly deviated from expectations in any market area. During the current week, the U.S. inflation report as well as the retail and industrial production figures, among others, have attracted interest.
The U.S.A. is now well into the earnings season, while in Europe the earnings season has only just started. Overall, the reported earnings in the U.S.A. have been strong, and earnings have grown over 12 per cent in relation to the comparison period. Approximately 13 per cent earnings growth is expected for 2025. The highest growth expectations are still focused on the so-called Magnificent 7 companies, whose earnings growth expectations have, however, taken a turn in recent weeks.
In the equity markets, the year has started with Europe in the lead. However, it must be noted that, looking at the calendar, only about 10 per cent of the year has passed. Like the rest of Europe, Finland has also experienced major success in the beginning of the year.
The better-than-expected economic data in the euro zone is underpinned mainly by the recovering industry. For example, Germany, Spain and Italy have reported surprisingly positive industry-related figures. Consumer confidence figures from Spain and France have also been strong.
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