
HIGHLIGHTS
Overall market sentiment is risk-on, driven by the new term of the US president. Earning season had a strong start, and almost half of the companies in the S&P500 by market cap are set to report next week.
Policy: Trump reiterated the plans to cut regulations and corporate taxes, with a cautious approach to tariffs. The 25% tariffs on Mexican and Canadian goods are still standing by 1 Feb. Likelihood of a tariff hike on China in Q1 is small as Trump ordered an assessment of performance of the country - the Phase 1 Deal, which is due on 1 Apr.
Japan: Bank of Japan (BoJ) hiked its rates as expected by 25bps, which is the largest rate hike since 2007. BoJ reassured the markets that it is careful about the spillover effects and yen depreciation. Nikkei went up about 3.8% while yen remained stable.
TikTok: The ban on Tiktok is halted and is granted a 75-day reprieve from prohibition. US government reiterated the stance that American companies should own at least 50% of Tiktok. A basket of social media stocks was up more than 3% this week.
MARKETS
19,954.30 | +1.65% | |
S&P 500 | 6,101.34 | +1.75% |
Dow | 44,424.25 | +2.15% |
10-Year | 4.63% | +2bps |
Brent | 77.48 | -4.09% |
DXY | 107.46 | -1.77% |
*Data as of market close. 5-day change ending on Friday.
VIEW FROM THE STREET
Equity
UBS: We believe the risk-reward in equities is favorable, despite the near-term volatility driven by tariff. We expect 8% upside for US equities in 2025 driven by the solid economic growth, tailwinds from AI, and decline in yields.
Morgan Stanley:Â Stock-bond correlation is positive again, indicating that investors will need to diversify stock risk with other asset classes like commodities, hedge funds, real estate. 2025 would be a good entry point.
Fixed Income
Morgan Stanley: The recent backdrop creates an ideal opportunity for corporate credit, including solid economic growth, backup in treasury yields and stable credit spreads. Nominal yields are attractive at above 5%, as inflation moderates toward 2.5%.
UBS:Â High-grade and investment-grade bonds are recommended. We expect the 10Y treasury yield to fall to 4% by year-end because of rate cuts, moderating inflation and slowdown in economic growth.
Economy
Barclays: Trump’s administration is going to disrupt the status quo for regulation and energy. We wait for clarity about fiscal policy and tariff, and expect Fed to hold.
J.P. Morgan:Â Despite the sign of easing inflation, consumer inflation expectations are rising. Consumer inflation expectations are volatile and sensitive to recent price changes in certain categories such as gas. Consumer surveys usually overestimate inflation outside major regime shifts, which may limit its reliability in long term.
KNOWLEDGE TRANSFER
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DISCLOSURE
This newsletter is meant for informational purposes only and is not investment advice. Always consult a licensed investment professional before making important investment decisions. Advertising and sponsorship do not influence editorial content or decisions. Market Hedwig is not responsible for the promises made or the quality or reliability of the products or services offered in any advertisement.
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