January market recap: Tariffs pending
January market recap: Tariffs pending
January market recap: Tariffs pending
02.12.2025
Global equities gained about 3% in January, with gains roughly evenly distributed between US and international issues. Small caps stocks participated, while bonds posted more modest gains.
Administration changes, uncertainty stays
President Trump took office on January 20th and began acting immediately on policy initiatives and campaign promises. Noticeably absent for the first 10 days were meaningful developments related to tariffs. That changed toward the end of the month with announcements of broad 25% charges on imports from Mexico and Canada and 10% on China. Markets initially retreated but quickly recovered on news that one-month delays were granted for Mexico and Canada in return for agreements on increased border controls.
It seems many investors are now assuming Trump is mostly bluffing or negotiating with tariffs, especially after the quick reversals early this week. While most people believe tariffs would be a drag on global growth, it is also worth noting that the economy is not the stock market. Afterall, for much of the past two years, bad news for the economy was often cheered by a market hoping for more rate cuts. Uncertainty remains high and there is little clarity on the tariff front. However, we would still not be surprised if increased tariffs become a significant part of the 2025 story. Markets may be underestimating this possibility.
DeepSeek shakes up AI
DeepSeek shocked the technology world this month by releasing a generative AI large language model similar to ChatGPT which appears to require less powerful GPUs (and less power) to train and run. Shares of Nvidia and other AI infrastructure providers were negatively impacted. This may prove an overreaction, but it feels inevitable that existing AI technologies will become more efficient. Currently unimagined applications may still require more and more computing power, but DeepSeek was a good reminder that innovation can come from anywhere and no company is immune.
Rates untouched
After three straight cuts, the Fed left interest rates unchanged at its meeting in January, as was expected. With inflation remaining sticky above the 2% target, the committee felt it “doesn’t need to be in a hurry” to further reduce rates, but did leave the door open for further actions later this year.
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Market stats and data mentioned in the text are sourced from Empower's internal YCharts, as of February 5, 2025.
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Craig Birk, CFP®
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Craig Birk is the Chief Investment Officer for Empower Personal Wealth. A CERTIFIED FINANCIAL PLANNER™ professional, he is responsible for Empower’s retail investment portfolio, providing strategic and executive direction to drive the optimal management of client assets.
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