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Lloyd Adams of Team Asset Management offers this week’s market review
US stock markets posted their strongest weekly gains since early November, lifted by a positive start to the fourth-quarter corporate earnings reporting season and some more encouraging inflation data. The blue-chip S&P 500 and technology-focused Nasdaq indices each gained 2.8%.
Some of Wall Street’s biggest investment banks set the tone with a clean sweep of earnings reports which exceeded analysts’ forecasts. JPMorgan Chase underlined its status as the country’s most profitable bank in history as fourth-quarter profits rose 50% to $14 billion, lifted by better-than-expected net interest income.
Meanwhile, Goldman Sachs revealed that its profits had doubled to $4.1 billion during the fourth quarter, as trading activity surged and its investment banking division benefited from the revival in private equity and IPO deals. The bank’s chief executive David Soloman revealed that he had witnessed a “meaningful shift in CEO confidence” since the US election and that the prospect of deregulation should increase the appetite for dealing making in the year ahead.
However, there were also some notable losers during the week, including Moderna which saw its shares fall 17% on Monday after it cuts its 2025 sales guidance by around $1 billion due to a slow rollout of its Respiratory Syncytial Vaccine and reduced demand for Covid-19 vaccines.
Shares in another pharmaceutical giant, Eli Lilly, also fell (-7%) on Wednesday after it cut its full-year revenue guidance for 2024. The world’s largest drugmaker by market value warned that sales of its blockbuster diabetes and anti-obesity drugs, Mounjaro and Zepbound, were growing more slowly than expected.
In broader economic news, there was some encouraging news on the inflation front on either side of the Atlantic. In the US, annual core inflation, which excludes more volatile items such as food and energy, slowed to 3.2% and Federal Reserve governor Christopher Waller suggested that three to four interest-rate cuts could still occur this year if inflation continues to ease. Money markets, however, are just pricing in one quarter of a percentage point by the Fed. Meanwhile, speculation grows that the Trump administration will take a more gradual approach to tariffs which could avoid a damaging spike in inflation.
In the UK, the annual headline rate of inflation unexpectedly slowed to 2.5% in December, pulled down by lower restaurant and hotel prices. The news provided some respite for Chancellor Rachel Reeves who has seen the UK’s borrowing costs rise sharply in recent weeks over concerns of stagflation, a period characterised by slow economic growth accompanied by higher inflation.
Climate-related natural disasters, such as the recent wildfires in southern California, are driving up insurance costs across the country. With projections of over $20 billion in insured losses, insurers face rising claims, especially in high-risk areas, where homeowners pay up to 82% more for protection than those in safer locations. As climate events increase, insurers must adjust pricing to prevent becoming unaffordable, which could destabilise the insurance market and local communities.
Bitcoin and other cryptocurrencies surged ahead of Donald Trump’s inauguration in anticipation of crypto-friendly policies, including a Bitcoin strategic reserve. The returning president was once a sceptic, suggesting that Bitcoin “seems like a scam” but he has now embraced digital currencies with zeal, promising to turn the US into the “crypto capital” of the world during his election campaign. The president and first lady also launched meme coins, $Trump and $Melania, over the weekend, which pulled in billions of dollars.
Oil prices climbed to their highest levels in months, despite a ceasefire easing tensions in Gaza. The rise was largely driven by a more optimistic demand outlook from the International Energy Agency and concerns over potential supply disruptions from sanctions on Russia.
Looking ahead to this week, attention turns to Donald Trump’s inauguration, with significant challenges awaiting him, including addressing the nation’s pressing debt financing needs. The World Economic Forum in Davos has gathered nearly 3,000 leaders, but key figures such as Indian Prime Minister Modi, Chinese President Xi and British Prime Minister Keir Starmer are absent. The theme, Collaboration for the Intelligent Age, focuses on global challenges.
