By Craig McAvinue – 5 February, 2025
“Ten people who speak make more noise that ten thousand who are silent”
So 2025 starts off with a generally positive month. Though as is often the case the devil is in the detail and the overall positive numbers can mask some more negative underlying issues.
Data from Google Finance
The USD gave a bit back though again the end of month result came about after some volatility.
Data from Google Finance
On the geo political level, news of the month was Donald Trump being inaugurated as US president. Regardless of whether you think his leadership will be good or bad for the economy, there is no doubt that his words move markets in the short term, one way or the other.
With a far more vocal and apparently active approach to politics, often markets will react to his statements. Recently having suggested high tariffs on imported goods from the US’s leading import partners saw markets fall, only for them to recover again when Donald issued these partners, Canada, Mexico and China, a reprieve pending further discussions.
Our job is not to trade in shares or indeed markets but to invest in long term solid solutions for long term sustainable growth. In light of that, the volatility which comes about through a leader like Trump does not affect our decision making. His leadership ambitions are seen as more global as he continues to talk about controlling foreign trade, his position on two of the world’s major conflicts and how he will “resolve” these. Whether he does or whether he does not ultimately does not interfere with our overwhelming strategies which is buying good companies, through good managers.
Too many people believe that Geo political issues are major drivers in stock market performance. Undoubtedly those who voted for Trump believe he will be good for the economy, whilst those who did not do not believe so. The answer is neither are correct. Statistics show that S&P and general world stock market performances in developed countries do not alter greatly whether the government is left leaning or right leaning.
Listening to a lot of media over the last two years, we could easily be led to believe that we are in an economic crisis, yet the S&P had back to back gains of over 20% per year. Granted there appears to be a drop in standards of living in some places, with salaries not increasing at the same rate as inflation, but when our job is to look at whether the time to invest is now or not based on the “state of the economy”, this is not a consideration.
To paraphrase the greatest investor of all time, Warren Buffet, its “Time in” the market not “Timing”
Much has also been spoken about the factors behind the recent market growth and the main driver being the development of Artificial Intelligence and the market performance of the Magnificent Seven” Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla and Meta
One of this elite group which has been the best performing over the last two years, Nvidia had an extremely bad month. In one day the share price fell 17%. The value of that fall was around US$589 billion. To put this into perspective that is roughly the market cap of JP Morgan the US’s largest bank. This illustrates the size of these giants and also the dangers of individual share investing.
Federal receive policy and upcoming corporate earnings will likely determine where the markets head next. The Fed is currently sat in “wait and see” mode as the aforementioned political changes take their effect.
Unemployment and Inflation remain steady and within expectations at 4.1% and 2.9% respectively
Success in building your portfolio for the long term stems from patience and quality. Block out the noise and buy well in accordance with your risk appetite and time horizons.
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