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Andrew Gillham of Team Asset Management offers this week’s market review
HEADING into 2025 there was optimism that artificial intelligence, interest-rate cuts and the pro-business agenda of the incoming Trump administration would drive stocks forward once again, but also concerns that “America First” would lead to trade wars and that chronic government debt problems in the G7 would hurt growth.
In the first few trading days of the new year, the optimists have been in ascendance, albeit in choppy trading, led by the technology-focused Nasdaq index which has gained 2.9%.
Shares in Nvidia, the semiconductor powerhouse, gained 171% last year as the AI frenzy took hold and it is off to another fast start this year, rising 11% to a new all-time high in the first three trading sessions. On Monday, chief executive Jensen Huang took to the stage at the annual Consumer Electronics trade show in Las Vegas and told the packed arena that he saw a “multi-trillion dollar” opportunity in revolutionising robotics through AI and revealed he had struck a deal with Toyota to use Nvidia’s self-driving car technology.
Another investor favourite last year, Tesla, is also ahead this year but in a much bumpier ride. Its shares fell 6% on Thursday after it reported its first fall in annual vehicle deliveries in more than a decade amid fiercer competition from Chinese competitors and a consumer shift towards lower-priced hybrid vehicles.
Tesla delivered 1.79 million vehicles last year, down from 1.81 million in 2023, and China’s BYD is closing the gap with 1.76 million electric vehicles sold in 2024. However, Tesla’s shares bounced back more than 8% on Friday as investors switched their attention back to the longer-term prospects for the company which are expected to benefit from Elon Musk’s close relationship with the president-elect. Tesla shares have risen 70% since the 5 November election.
Many revellers will have suffered a new year’s hangover and manufacturers of alcoholic beverages were also nursing a headache on Friday after the US surgeon-general Vivek Murthy issued a public-health advisory to warn that consumption of alcohol is the third leading preventable cause of cancer in the US, behind tobacco and obesity.
The report found that alcohol was responsible for around 100,000 cases of cancer, and 20,000 cancer deaths annually in America and Murthy is pushing for risk warnings to be mandatory on bottles and cans of alcohol, similar to labels on cigarettes. Shares in Anheuser-Busch InBev, the world’s largest brewer, and Diageo fell 3% and 4% respectively on Friday.
Shares in Boeing fell 6% last week in the wake of the crash landing of the Jeju-Air-operated 737-800 aircraft at Muan International Airport in South Korea, which killed all but two of the 181 passengers and crew on board.
The Boeing 737-800 is one of the world’s most commonly used planes with more than 4,000 in operation and has a strong safety record.
However, it is gradually being replaced by the more modern and fuel-efficient 737 Max which has been beset by manufacturing problems and safety issues, including crashes in 2018 and 2019 and the blowout of a door on an Alaska Airlines flight shortly after take-off a year ago.
Chinese stocks (-4%) are off to their worst start to a year since 2016 as weak manufacturing data and the prospect of looming US tariffs weighed on sentiment. While policymakers in Beijing have pledged to provide more stimulus to revive its ailing economy, investors are holding out for more direct measures to boost domestic consumption. Reflecting the challenging economic outlook, China’s ten-year government bond yields have fallen to a record low 1.6%.
In commodities markets, Brent crude and West Texas Intermediate climbed to their highest levels since October as severe winter storms across the US boosted demand for oil and gas. Saudi Arabia also announced a price hike for February deliveries to Asian countries, which are the largest buyers of its crude exports.
The economic calendar in the week ahead is highlighted by the release of the US nonfarm payrolls report for December on Friday. Another hot report, analysts are forecasting 160,000 new hires during the month, which will put more pressure on the Federal Reserve to hold back on any further interest-rate cuts.
