Monthly market summary – Review of January 2025

3 minute read

Our market summary

It was a strong start to 2025, with both equities and fixed income delivering broadly positive returns. We saw a change from the recent norm in equity markets with Europe outperforming the US and value stocks beating their growth counterparts. The ‘America First’ policies of President Trump helped US equities, but the emergence of DeepSeek, a new Chinese artificial intelligence (AI) model, impacted US tech stocks.

Fixed income markets experienced increased volatility in January due to Trump’s proposed mix of tariffs and tax cuts. These fuelled expectations of higher inflation, leading to rising bond yields globally. The UK also faced challenges of its own. Indications of slower economic growth raised worries about public finances, which caused significant volatility in gilt yields.

US

Trump’s promise of deregulation and tax cuts fuelled optimism over the US economy with the IMF raising its GDP growth forecast from 2.2% to 2.7%. However, news of potential tariffs rattled markets at the end of the month. The emergence of DeepSeek and its challenge to the US leadership in AI, also weighed on sentiment. Whilst the tech sector fell, communication services, healthcare, and financials were among the top gainers. Overall, US equities were up 3.9%.

Europe

Europe was the best performing developed equity market in January returning 8.3% despite mixed economic data. The performance was supported by the consumer discretionary and financials sectors, with banks delivering particularly robust returns. European equities also benefited from a low weighting to technology stocks following the DeepSeek breakthrough, while signs of a long-awaited improvement in the luxury goods sector were welcomed.

UK

UK equities also outperformed as they were up 5.5% in January. This was primarily driven by the large financial, industrial, and energy names. Sterling weakness also provided a tailwind for these UK large-cap names as much of their revenue is generated overseas. January’s performance contrasted with the outlook for the domestic economy, which remained difficult with business confidence weakening.

Emerging markets

Overall, emerging markets equities were up 2.6% in January. Chinese equities, the largest component of the index, were up 1.8% over the month. This was driven by encouraging domestic economic data and the possibility of less severe US tariffs compared to those mentioned during Trump’s campaign. Elsewhere, Colombia was the top-performing region, followed by Poland and Brazil, with Malaysia and the Philippines posting the largest losses.

Fixed income

January was a mixed month for global government bonds. A weak start was followed by a rebound due to positive inflation news. Overall, global government bonds returned 0.3% and US Treasuries were up 0.6%. In the UK, concerns around the nation’s fiscal health saw a sharp rise in gilt yields. However, as the focus shifted back to inflation, with core inflation surprising on the downside, yields fell back towards month end. Against this backdrop, UK gilts returned 0.8%.

Source: Quilter Investors as at 31 January 2025. Total return, percentage growth, rounded to one decimal place. The performance shown for each equity market is represented by the appropriate MSCI index, global government bonds by the Bloomberg Global Aggregate Government Treasuries (GBP Hedged) Index, US Treasuries by the ICE BofA US Treasury (GBP Hedged) Index; and UK gilts by the ICE BofA UK Gilt Index.

Important Information

Investment involves risk. The value of investments and the income from them may go down as well as up and investors may not get back any of the amount originally invested. Because of this, an investor is not certain to make a profit on an investment and may lose money. Exchange rate changes may cause the value of overseas investments to rise or fall.

This communication is issued by Quilter Investors Limited (“Quilter Investors”), Senator House, 85 Queen Victoria Street, London, United Kingdom, EC4V 4AB. Quilter Investors is registered in England and Wales (number: 04227837) and is authorised and regulated by the Financial Conduct Authority (FRN: 208543).

This communication is for information purposes only. Quilter Investors uses all reasonable skill and care in compiling the information in this communication and in ensuring its accuracy, but no assurances or warranties are given. You should not rely on the information in this communication in making investment decisions. Nothing in this communication constitutes advice or personal recommendation.

Any opinions expressed in this document are subject to change without notice and may differ or be contrary to opinions expressed by other business areas or companies within the same group as Quilter Investors as a result of using different assumptions and criteria.

Data from third parties (“Third-Party Data”) may be included in this communication and those third parties do not accept any liability for errors and omissions. Therefore, you should make sure you understand certain important information, which can be found at www.quilter.com/third-party-data/. Where this communication contains Third-Party Data, Quilter Investors cannot guarantee the accuracy, reliability or completeness of such Third-Party Data and accepts no responsibility or liability whatsoever in respect of such Third-Party Data.

Marcus Brookes

Chief Investment Officer & Managing Director

Marcus is chief investment officer and managing director of Quilter Investors. Marcus joined Quilter Investors in December 2021 from Schroders Personal Wealth, where he also held the role of chief investment officer. He has considerable investment management experience with a deep understanding of the multi-asset sector having managed multi-manager fund ranges for more than 20 years.

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