By Bas Kooijman, CEO and Asset Manager of DHF Capital S.A
United States: Markets Start the Year Strong Amid Mixed Economic Signals
U.S. financial markets began the year on a positive note, with major stock indexes reaching new highs despite ongoing geopolitical uncertainty and emerging signs of economic cooling. Investors showed renewed confidence, particularly in smaller and value-oriented companies, which outperformed the large technology-driven stocks that dominated returns in recent years. This shift suggests broader participation in the market rally and growing optimism beyond a narrow group of companies.
Policy announcements from Washington added volatility at the sector level. Defense stocks moved sharply during the week following contrasting signals on military spending and corporate restrictions, while housing-related shares reacted to proposed measures aimed at lowering mortgage costs and limiting large-scale institutional ownership of single-family homes. These announcements reinforced the market’s sensitivity to government action, especially in industries closely tied to public policy.
At the same time, economic data pointed to a gradual softening in the labor market. Job growth slowed more than expected, and revisions to previous months showed fewer jobs created than initially reported. Measures of job openings and hiring activity also declined, indicating reduced momentum. Manufacturing activity remained under pressure, continuing a prolonged contraction, while the services sector showed resilience and ongoing expansion. In bond markets, U.S. government yields moved modestly, while corporate and municipal bonds benefited from steady demand, reflecting cautious but stable investor sentiment.
Europe: Economic Momentum Builds as Inflation Eases
European markets delivered solid gains during the week, supported by improving economic data and a more favorable inflation outlook. Stock indexes across the region rose, led by Germany and France, as investors responded positively to signs that economic activity may be stabilizing after a challenging period. In particular, stronger-than-expected industrial production figures in Germany, Spain, and France suggested that manufacturing conditions are beginning to improve.
Germany stood out, with factory output and new orders both exceeding expectations, signaling a potential turning point for the region’s largest economy. Retail sales across the euro area also increased, indicating that consumer demand remains resilient despite higher interest rates over the past year. Together, these developments helped reinforce confidence in the eurozone’s near-term economic trajectory.
Inflation data provided additional reassurance. Headline inflation slowed to the European Central Bank’s target level, while core inflation also eased slightly. However, price pressures in services remained elevated, raising concerns among policymakers that inflation may not fall quickly enough to justify further interest rate cuts. In the United Kingdom, signs of cooling emerged in the housing market, with mortgage approvals and house prices both declining toward year-end. Overall, European markets were supported by improving fundamentals, even as central banks remain cautious about easing policy too quickly.
Asia and Global Trends: Technology, Policy, and Consumer Recovery
Asian markets showed mixed but generally positive performance, driven largely by technology stocks and currency movements. In Japan, equities posted strong gains as a weaker yen boosted exporters and technology companies continued to attract investor interest. Household spending rebounded sharply, suggesting that consumer activity may be recovering despite ongoing pressure from inflation on real wages. Expectations of gradual interest rate increases by Japan’s central bank continued to influence bond markets and currency trends.
In China, stock markets advanced on renewed enthusiasm for artificial intelligence and technology-related investments. Trading activity increased significantly, reflecting strong investor participation. However, underlying economic challenges remain. Consumer prices rose modestly, while producer prices continued to fall, highlighting persistent deflationary pressures linked to weak domestic demand and excess industrial capacity. Annual inflation remained well below official targets, reinforcing expectations that policymakers will continue to support the economy through accommodative measures.
Across global markets, the common theme was cautious optimism. Investors welcomed signs of economic stabilization and consumer resilience but remained attentive to policy decisions, inflation trends, and geopolitical risks. As the year begins, markets appear supported by improving data and targeted stimulus efforts, even as uncertainties continue to shape the global outlook.
Looking Ahead
As markets move into the new year, investors will remain focused on economic resilience, policy direction, and how global growth dynamics continue to evolve. Despite ongoing uncertainties, current market trends suggest a cautiously constructive outlook supported by improving data and targeted policy measures.