Bassanese Bites: In Trump we trust – January 20 2025

Global markets

It’s good to be back! Global equities enjoyed a bounce higher last week thanks to a lower-than-expected US inflation result and encouraging news on the Trump ‘trade wars’ front.

2025 has started somewhat cautiously, with resilient US economic growth and persistent inflation leading to a scaling back in Fed cut expectations – with higher bond yields and softer equities as a result. Adding to the mix is concern over what Trump may do in his first few days in office.

The previous week’s US payrolls result was a case in point, with stronger- than-expected employment causing stocks to drop – with markets in a “good [activity] news is bad news” funk.

So last week’s softer-than-expected December core CPI result provided some welcome relief, with core prices up only 0.2% (market +0.3%), allowing annual core inflation to ease to 3.2% from 3.3% – the first decline in annual inflation in four months. 

Adding to the relief last week were news reports suggesting Trump may be less draconian in applying tariffs than feared – with more gradual increases affecting a narrow range of goods and countries. 

As it stands, Wall Street currently expects only one or two rate cuts this year at most from the Fed. 

Global week ahead

There’s only second-tier data in the US this week so the focus will naturally be on the inauguration of Donald Trump as America’s 47th President, and his actions in the first few days of office. My working assumption is that while Trump adds a new element of volatility to markets (unlike Biden) on balance he won’t want to risk the health of either the US economy or Wall Street – so will talk tough but tread cautiously. 

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