Better than expected US inflation data, the ongoing resilience of the US economy and solid corporate earnings results provided support for the US market in January. This was despite uncertainty regarding the impact of Chinese AI startup DeepSeek and President Trump’s plans to apply tariffs on imports.
Providing support for the outlook, the Fed has room to reduce interest rates if US growth slows. Also supportive of global equities, economic growth excluding the US is expected to be higher in 2025 compared to 2024 and several central banks will continue to reduce short-term interest rates.
Locally, the RBNZ is also expected to cut interest rates further in the months ahead. Lower short-term interest rates and the likelihood that domestic corporate earnings are at cyclical lows provide the opportunity for the local sharemarket to perform solidly in the year ahead..
Both domestic and global bonds offer stability of income and the potential for capital gains from further reductions in interest rates as inflation continues to decline and central banks progress interest rate cuts.
Read Select Wealth’s latest Monthly View report here.