Jacobo Taurel

Key economic and market developments: A global perspective.

The first week of the year highlighted the resilience of the housing market in the U.S. and contractions in manufacturing in Europe and Asia. Key points:

Week of December 30 2024 to January 3 2025 

Weekly Summary 

United States: The week was marked by low market activity due to New Year celebrations. Regarding economic data: Pending home sales in November reached their highest level in 21 months and home prices increased by 3.6% year-over-year. 

Europe: In Germany and France, industrial activity declined in December. Similarly, in the United Kingdom, manufacturing activity contracted at the fastest pace in 11 months. 

Asia: In China, President Xi Jinping reiterated the need for more proactive and effective macroeconomic policies in 2025 to counter economic slowdown. 

Latin America: According to the Bank of Mexico, international reserves hit a historic high in 2024, totaling $228.789 billion and PEMEX reported a 35% decrease in oil shipments to the U.S. through November of last year. 

Important events in the next weeks 

  • In the United States, the ISM Services Index will be released on 01/07. 
  • In the United States, employment indicators will be published on 01/10. 

Monitor 

Check the full report, here
Posted in Weekly Summary

Q4 2024 quarterly earnings season and 2025 Perspectives. 

Expectations for the S&P 500 in 2024 and 2025 reflect strong growth, with significant gains projected across multiple sectors. 

S&P 500 Outlook for Q4 2024 

As is customary, JP Morgan will kick off the corporate earnings season in mid-January. However, it is notable that estimated earnings for the S&P 500 in the fourth quarter remain below initial expectations. Despite this decline, the index could still achieve its highest year-over-year (YoY) earnings growth rate in three years, currently estimated at 11.9%. This growth would bring the full-year 2024 earnings increase to 9.4% YoY. 

If confirmed, this figure would represent the strongest YoY earnings growth since Q4 2021. Additionally, seven out of the eleven sectors in the index are projected to report YoY growth, with Finance, Communication Services, Technology, Consumer Discretionary, Utilities, and Health Care leading the way. Conversely, four sectors are expected to see a YoY decline in earnings, with Energy being the only one forecasted to post a double-digit drop. 

What About 2025? 

Looking ahead, analysts anticipate robust earnings growth for the S&P 500 in 2025, projecting nearly 15% YoY growth, well above the 10-year historical average of 8%. Interestingly, companies outside the “Magnificent 7” group (Google, Amazon, Microsoft, Apple, Tesla, Meta, and Nvidia) are expected to show significant improvement, with earnings growth estimated at 13% for 2025. 

Key Takeaways 

The evolution of the Q4 earnings season and the start of Q1 2025 will be crucial. Investors have displayed considerable optimism in recent months, betting on the persistence of a favorable environment for the corporate sector. 

Expected annual earnings growth for the S&P 500 in Q4 2024 


Source: Facset – Earnings Insight 

Posted in Weekly Comment

2025 Perspectives: Analysis of global markets and economic landscape

Discover our annual report ‘2025 Perspectives’ and the key insights for the upcoming year.

The final stretch of 2024 continues to reflect an outstanding performance in the markets, maintaining the positive trend that has prevailed throughout most of the year. This growth has been driven by several key factors that have strengthened global stability:

  • Disappearance of political uncertainty: The resounding victory of Donald Trump and the Republican wave in both chambers have paved the way for a more predictable political environment.
  • Interest rate reductions: The Federal Reserve has initiated a cycle of benchmark rate cuts, creating a favorable environment for investments.
  • Strong earnings performance: Corporate financial results have exceeded expectations, generating a positive balance for the year.

Looking ahead to 2025, the new political agenda is expected to focus on potential tax cuts, reduced regulation, and policies to stimulate the domestic economy. However, the implementation of these measures could present challenges, such as:

  • Trade tensions.
  • A higher public deficit.
  • Rising inflation and higher interest rates.

These factors may pose a challenge for the Federal Reserve, particularly in a context where inflation has slowed to levels more comfortable for the institution.

In this highly dynamic environment, we are pleased to present our annual report, ‘2025 Outlook’. In it, you will find:

  • The perspective of our Investment Committee on this economic scenario.
  • Expectations for each asset class and region.

We are confident this report will provide valuable insights into the next steps to take and how to optimize your investment strategies.

To access the full report, click on the next button or contact us for more details.

See the full report

Posted in Quarterly Positioning

Key Fed decisions and changes in the global economy

Summary of key events: Fed rate cuts, elections in Germany, and mixed data from Asia impacting global markets. 

Week of December 16 to 20 

We bring you the most relevant events shaping the global economic landscape: 

United States: 

  • The Fed reduced its benchmark interest rate to a range of 4.25%-4.5%, returning to December 2022 levels. According to the “dot plot,” only two additional cuts are expected by 2025. 
  • Congress reached a funding agreement to prevent a government shutdown, valid through March, despite opposition from President-elect Donald Trump. 

Europe: 

  • Inflation in the UK reached 2.6% year-over-year in November, aligning with expectations, while the Bank of England kept its rate at 4.75%. 
  • Germany will hold early elections in February following a vote of no confidence in Chancellor Scholz. 

Asia: 

  • Japan’s manufacturing sector is contracting, but its services industry partially offsets the decline. 
  • In China, while industrial production grew by 5.4% year-over-year in November, retail sales hit their weakest point in three months. 

Latin America: 

  • In Brazil, the real fell to its lowest level in two years, while Credit Default Swaps reached a 14-month high due to fiscal uncertainty. 
  • Mexico received a stable rating from S&P, highlighting its macroeconomic prudence and fiscal stability. 

Weekly Summary 
Key events in the coming weeks 

  • In the United States, consumer confidence data will be released on 12/23. 
  • In the United States, the week will be shortened due to the Christmas holiday on 12/25. 

Monitor 

Posted in Weekly Summary

The Fed cuts rates: Less future adjustments  

The Federal Reserve announced a rate cut but adjusted its projections to show less cuts in the coming years. 

In a decision anticipated by markets, the Federal Reserve reduced its benchmark rate to a range of 4.25%-4.5%, returning to levels not seen since December 2022. However, the Fed’s message was clear: a more gradual path of adjustments is expected in the coming years. 

According to the “dot plot”, projections indicate only two additional cuts in 2025, half of what was expected in September. Two more adjustments are projected for 2026, and one more in 2027, with a long-term “neutral” rate estimated at 3%, reflecting a slight upward adjustment. 

Not all Committee members agreed: Beth Hammack, president of the Cleveland Fed, voted against it, continuing the line of dissent that began in November. This marks the first time since 2005 that such a level of opposition has been recorded among the governors. 

The Fed reaffirmed its commitment to monitoring economic data and adjusting monetary policy if necessary. This cautious approach will be key to continuing to balance growth and inflation in the months ahead. 

FED indicators update (December vs. September) 

Source: Federal Reserve

Posted in Weekly Comment

November Inflation Reinforces Expectations of Rate Cuts. 

The November inflation report could confirm a new interest rate cut.

The Consumer Price Index (CPI) for November showed a 0.3% increase, marking a slight acceleration after four consecutive months of 0.2% rises. On an annual basis, overall inflation stood at 2.7%, while core inflation (excluding food and energy) advanced by 3.3%, both figures in line with expectations. 

Among the main factors driving this result was the increase in the housing component (shelter), which contributed nearly 40% of the monthly rise. Additionally, food prices rose by 0.4%, and the energy sector recorded a modest 0.2% increase. 

Excluding food and energy, other components such as housing, used cars, furniture, and healthcare showed significant increases, while the communication index was one of the few to register a decrease. 

In this context, market consensus predicts that the Federal Reserve will implement a 25 basis point rate cut during its next meeting. This move reaffirms the Fed’s commitment to economic stability in an environment of moderate inflation and a strong labor market. 

Expectations for the benchmark interest rate 

Fuente: CME 

Annual change in inflation and core inflation   

Fuente: US Bureau of Labor Statistics 

Posted in Weekly Comment

Key strategies for a successful financial retirement

Essential steps to understand the challenges, benefits, and strategies of a well-planned retirement.

In a world where life expectancy continues to rise and traditional pension systems are evolving, planning for retirement has become a crucial priority to ensure financial stability and maintain the desired lifestyle in later years. 

Retirement is not just a common financial goal—it’s a universal necessity. Whether you dream of traveling, dedicating time to your passions, or simply enjoying time with your family, having a solid financial plan is essential. Here are some key points to consider: 

  • Increased Longevity: Growing life expectancy means planning for decades of retirement. 
     
  • Shift from Pensions to Personal Savings: As traditional pensions decline, personal savings and investments have become more important than ever. 
     
  • Key Strategies: Diversifying investments, maximizing contributions to plans like a 401(k), and maintaining an emergency fund are critical steps to ensure financial stability. 

Facing challenges such as market volatility or rising healthcare costs requires a disciplined and consistent approach. The good news is that it’s never too late to start. Every step toward structured planning can make a meaningful difference. 

Retirement is widely considered the top financial goal. 

Source: JP Morgan – Apollo  

Posted in Weekly Comment

Weekly Comment Recent trends in global markets: Key data

Week of October 21 to 25 

United States: 

  • Housing sales fell 1%, reaching their lowest level in 14 years, as buyers await more accessible mortgage rates. 
  • The Beige Book reported that economic activity remained stable, with a slight decline in manufacturing and mixed consumer spending. Employment showed slight growth, although wages increased moderately. Insurance and healthcare costs were areas of major concern due to their increases. 

• Europe: 

  • Consumer confidence in the eurozone increased 0.4 points in October, with an improvement in consumer sentiment to -12.5, according to the European Commission. 
  • Christine Lagarde, President of the ECB, emphasized the need for caution regarding rate cuts during her recent appearance at an event in Washington. 

• Japan: 

  • The IMF projected that Japan’s economic growth will slow to 0.3% this year, affected by disruptions in the automotive industry and the loss of tourism momentum. 

• China: 

  • The People’s Bank of China reduced its benchmark interest rates as part of stimulus package to revitalize the economy. 

• Brazil: 

  • Inflation expectations remain above the Central Bank’s target, which will maintain its pragmatic stance regarding the Selic rate. 

• Mexico: 

  • BBVA Research downgraded Mexico’s economic growth for 2024 to 1.2%. However, overall inflation is expected to close below 4%. 

See the full weekly summary

Important events in the coming weeks:  

  • In the United States, consumer confidence data will be released on 10/28. 
  • In the United States, employment data will be released on 11/01. 

Monitor

Posted in Weekly Summary

Global economic update: United States, Europe, and more.

Decline in consumer confidence in the U.S., interest rate cuts in China and Mexico, and more. Check out the weekly financial summary.

  • United States: Consumer confidence recorded its largest drop in three years in September. However, the economy grew at an annualized rate of 3% in Q2 2024, and unemployment claims decreased to 218,000.
  • Europe: In Germany, business activity fell to a seven-month low, and business sentiment contracted for the fourth consecutive month. The Swiss National Bank cut its interest rate to 1%.
  • Japan: Manufacturing activity slightly declined, although the services sector remained strong, supporting economic growth.
  • China: The People’s Bank of China lowered interest rates and implemented another round of significant stimulus to bolster the economy.
  • Mexico: The Bank of Mexico cut the benchmark rate to 10.5%. Inflation continued to slow, and the economy grew by 2% year-on-year in July, driven by the primary sector.

Important Events in the Coming Weeks

  • In the United States, ISM manufacturing and services indicators will be released on 10/01 – 03.
  • In the United States, employment figures will be announced on 10/04.

Monitor

Click for full report
Posted in Weekly Summary

What do rate cuts tell us about the future?

The wait is over. After four years, the Federal Reserve has cut its benchmark rate by 50 base points, bringing it to a range of 4.75% to 5.00%. This move could signal a new direction for markets in the coming months. However, for investors with a long-term strategy, these events are only part of the noise.

Here’s a look at the historical performance of markets following the first rate cut:

  • Positive performance in the past: Since 1974, the S&P 500 has shown positive returns 80% of the time in the 12 months following the first rate cut, with an average return of 15%. Over three years, the average return is 12%.
  • Caution in recession scenarios: If the rate cut is accompanied by a recession, as happened in 2001, 2007, and 2019, the S&P 500 fell by an average of 8% in the following 12 months. Over three years, it remained stable.
  • More optimistic scenario: In an environment of rate cuts without a recession, markets have generated an average return of 22% in the first 12 months and 15% over three years.

In summary, while there is still debate about whether we will see a recession, it’s important to remember that extending your investment horizon increases the probability of achieving your goals.

Future Returns of the S&P 500 After a Rate Cut

  • Past performance does not guarantee future results.

Source: Morningstar

Future Returns of the S&P 500 After a Rate Cut + Recession

  • The data excludes easing cycles in 1974, 1980, and 1981, as recessions were already underway when the Fed made the first cut. Past performance does not guarantee future results.

Source: Morningstar

Posted in Weekly Comment
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