Global markets caught a bad case of the January blues. America’s S&P 500 ended last month down more than 5%, its worst monthly performance since March 2020 and its worst start to a year since 2009. Big tech firms led the rout, with the tech-heavy Nasdaq Composite falling almost 9%. Japan’s Nikkei 225 dropped 6.2%. The pan-European Stoxx 600 retreated 3.9% in January for its worst month since October 2020. The FTSE 100 ended the month up 1.1%, but the more domestically focused FTSE 250 finished down 6.6%.
The key theme so far this year has been “the hawkish pivot by multiple central banks”, say Henry Allen and Jim Reid of Deutsche Bank. On 31 December, interest-rate markets were pricing in about three increases by the US Federal Reserve this year. By the end of January, that number had risen to almost five. Money looks set to get tighter “much earlier than anticipated”.
That’s a headwind for fast-growing technology stocks in particular, says Patrick Hosking in The Times. Many investors are betting that firms with “innovative intellectual property” or dominant market positions but few or no profits so far can reap big rewards in the future. But higher interest rates make “expected profits in five, ten or fifteen years look dramatically less appealing than hard profits today”. With rates “so close to zero”, even “modest rises” have a huge impact.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
This month’s market “spasms” show that investors are having a difficult time coming “to terms with the end of the era of free money”, says The Economist. Some thought it would “pretty much last forever”. Hence corporations and housebuyers binged on debt during the pandemic, while government borrowing soared. We are about to find out just how vulnerable the world economy is to higher debt servicing costs.
-
8 of the best houses for sale for around £1 millionThis week: the best houses for sale for around £1 million – from a wing of a Grade II-listed Victorian manor house in Sunderland, to a brick-and-flint cottage in Cley next the Sea, Norfolk
-
Starling Bank to scrap 3.25% interest rate from popular current account within daysStarling is to remove the generous 3.25% it pays on current accounts from next week – what does this mean for customers and should you move?
-
Deepseek's Liang Wenfeng: the maths whizz who shook Big TechFew people had heard of Liang Wenfeng until the launch of his DeepSeek AI chatbot wiped a trillion dollars off US technology stocks. His pivot to AI was of a piece with his past exploits.
-
Trump's tariffs and a shrinking market for alcohol deal double blow to DiageoDonald Trump's tariffs are a further headache for drinks giant Diageo, which is already being buffeted by a decline in alcohol consumption.
-
Three stocks in recruitment companies with promising recovery playsRecruitment agency Robert Walters and its peers are struggling, but now's the time to buy, says Rupert Hargreaves
-
Four UK data companies to buy nowCompanies that create, harness or turn data into a valuable offering could be sitting on a hugely profitable gold mine. Rupert Hargreaves picks four of the best UK data companies to buy now.
-
China's DeepSeek AI is a 'Sputnik moment' for the USThe US is facing a new “Sputnik moment” with the sudden appearance of China's DeepSeek AI firm wiping $1 trillion off the value of US tech stocks.
-
RedNote: the rise of the new TikTokRedNote, a Chinese rival to social-media app TikTok, has seen millions of US users flock to it in the wake of the US TikTok ban. That caught the company by surprise. What is RedNote and can its popularity last?
-
Luxury stocks rally after Richemont sales boom – is there hope for the sector?Cartier owner Richemont’s robust results have boosted sentiment about luxury stocks – but are investors getting carried away?
-
What’s the outlook for the shipping industry in 2025?All we know for certain about the year ahead is that it will be volatile. But the container shipping sector thrives on choppy waters
