Investment markets had a positive start to 2025. A ceasefire deal between Israel and Hamas was announced during the month and helped ease geo-political tensions. The ceasefire deal will be carried out in three stages with stage one of the ceasefire agreement expected to last 42 days. In the US the inauguration of President Trump occurred during the month and the 47th President of the United States of America was quick to hit the ground running signing a multitude of executive orders. Towards the end of the month investors in artificial intelligence linked companies were thrown a curve ball when Chinese company, DeepSeek, released its free artificial intelligence chatbot app. The app quickly became the most downloaded free app on the Apple App Store in the US. The release of the DeepSeek app in January caused ripples for artificial intelligence related companies given the company’s claims of relatively cheap development costs together with the fact the app is open source meaning anyone can copy, download and build on it.

The European Central Bank (ECB) cut its three key ECB rates by 25 bps in January as inflation expectations continued to moderate in the region. In the US, official cash rates were maintained at the US Federal Reserve’s target of 4.25% – 4.50%. The Bank of Japan raised its short-term policy rate from 0.25% to 0.50% at its January meeting – the highest level in 17 years. The first meeting of the Reserve Bank of Australia (RBA) for 2025 will be held in February with expectations building the RBA will announce a rate cut at this meeting.

Australian large cap equities gained 4.45% in the month led by the Consumer Discretionary sector (+7.13%). The two worst performing sectors for the month were Utilities (2.40%) and Communication Services (1.52%). Currency hedged global equities gained 3.46% with the Australian dollar appreciating versus the US Dollar by 0.3 cents (0.48%) to close the month buying US$0.6218. Unhedged global equities returned +2.58% for the month.

Bond market performance was mixed for January. The Australian 10-year government bond yield increased by 7bps to 4.42% and the Australian 2-year government bond yield fell by 6bps to 3.80%. The US 10-year government bond yield fell by 3bps to close at 4.54% and the US 2-year government bond yield fell 4bps to 4.20%.

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Article source: Personal Financial Services Ltd (PFS)

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