Logic Monday Espresso Podcast

Monday Espresso Podcast - 6th January 2025

[00:00:00] Sarah Todino: It's Monday, the 6th of January. I'm Sarah Tadino, Assistant Portfolio Manager at Marlborough, and I'll be running through some of the main news from last week and a review of the last year with our analyst, Alex King. Good morning, Alex.

[00:00:12] Alex K: Morning, Sarah.

[00:00:13] Sarah Todino: Well, you can't talk about 2024 without elections. It was the biggest year in history with elections across 73 countries.

[00:00:20] Sarah Todino: But with this, we saw episodes of short term volatility in markets and November saw Trump's return.

[00:00:27] Alex K: Yes, in the US we saw the re election of Donald Trump. His return to the White House raised concerns about government spending, but it did renew investor confidence with his pro business agenda expected to boost domestic growth prospects.

[00:00:39] Sarah Todino: But his re election will shape relationships with the US and other countries next year. Back in 2018, the Trump administration launched a trade war with China, introducing trade tariffs. So Europe, as a significant export region, could also be impacted this time around. So Alex, what are your thoughts on China?

[00:00:59] Alex K: Well, China's economy in 2025 faces a complex mix of deflationary risks, structural challenges and global pressures. Weak domestic demand remains a key concern as efforts to stimulate consumption through trading programs and fiscal expansion show only partial success. While the government is likely to continue rate cuts and enact other stimulus measures, their ability to address deeper issues such as faltering property market and high local government debt is uncertain.

[00:01:29] Alex K: On the global stage, trade tensions and protectionist policies, particularly from the US and Europe, challenge China's export driven growth model. However, these pressures could accelerate innovation in sectors like AI, green energy, and advanced manufacturing, where the government continues to prioritise investment.

[00:01:47] Alex K: Meanwhile, Chinese companies are expanding their global footprint, particularly in Southeast Asia, Europe, and the Middle East, driven by favorable policies and local partnerships. 2025 will test China's ability to balance short term economic stabilisation with long term transformation.

[00:02:04] Sarah Todino: Thanks, Alex. So speaking of the Middle East, geopolitical landscape was also a key factor for global markets in 2024 with escalations in the Middle East, raising fears of broader conflict that could have disrupted global markets and the ongoing war in Ukraine as well.

[00:02:21] Alex K: Yeah, so historically spikes in the oil price due to conflict lead to uplifts in inflation and a recession.

[00:02:28] Alex K: At the moment, no major oil producing countries have been directly involved in the conflict, which has prevented significant market disruptions.

[00:02:36] Sarah Todino: So it's a year for elections, geopolitical risk continued, but after a series of aggressive rate hikes in 2023, central banks started to cut interest rates in 2024, with the ECB, the first major central bank to cut in June, followed by the Bank of England in August and the Fed in September.

[00:02:55] Alex K: Yep, central banks are likely to continue to lower interest rates, with Europe and the UK possibly acting sooner due to weaker growth. Following the Fed's meeting in December, they are now signalling two interest rate cuts next year compared to the previously mentioned four interest rate cuts.

[00:03:12] Sarah Todino: So 2024 was eventful.

[00:03:14] Sarah Todino: How did markets end the week and indeed the year, Alex?

[00:03:18] Alex K: Well, the Santa rally was a bit of a damp squib this year with Jerome Powell's comments on the need for caution with respect to cutting interest rates too quickly, knocking the shine off a strong finish to the year for equity markets. Most markets finished the week down apart from the UK which finished up modestly.

[00:03:33] Alex K: The hardest hit was the US which finished the week down 1.5%. The US did, however, lead major markets as a top performer over the year for a second year in a row. The S&P 500 index returning 23.3% and the NASDAQ 28.6%. Also, gold, which is heightened by demand as a safe haven asset, has ended the year 27 % higher.

[00:03:55] Alex K: It's a fairly rare case where both risk off assets, like gold, and risk on assets, like US tech, both have strong years, highlighting the uniqueness of 2024 in markets.

[00:04:05] Sarah Todino: So despite challenges, markets perform well in 2024, and 2025 looks set to be an interesting year, not least with Trump's potential policy changes and the impact for the US and other regions.

[00:04:18] Sarah Todino: So Alex, looking ahead to the week?

[00:04:19] Alex K: Yeah, so this week we've got unemployment rates coming out in Europe. We have non farm payroll and unemployment data in the US. We've got consumer confidence data coming out from Europe and Japan. And we've got PMI data for the US, UK and Europe, which is a survey and provides an indicator of economic trends in manufacturing and services.

[00:04:41] Sarah Todino: Thanks, Alex. So lots of information and knowledge to digest. Thanks to everyone for listening, and as always, do let us know if you have any questions, and we hope you all have a Happy New Year.