Anchor Insights January 2025

• Stock markets stable or slightly down, due to profit-taking and change in expectations about the Fed.
• Rising rates in the US on long maturities and very tight credit spreads.
• Bitcoin surpasses $100,000 in a purportedly favorable political environment.
• The dollar resists, assuming a central bank close to a "pause" mode in interest rate hikes and a possible increase in the fiscal deficit by Trump.

• Increased volatility as we approach Donald Trump's presidential inauguration.
• Media attention to the main armed conflicts is declining, with room for positive reaction to any improvement.
• Doubts about the Chinese recovery with an impact on raw materials.
• Possible disappointment with business results as valuations look for perfection.

Opportunities:

• Technology: high growth, but high valuations; Buy the dip.
• Utilities and Communications: margins improving.
• Health and biotech: higher growth than other sectors and attractive valuations.

• Credit spreads at average levels in European bonds, but high in American bonds. 
• Rally in IRR in government bonds, both European and American.

• The dollar holds the 1.03-1.085 range due to higher interest rates. The weakness of the USD due to the evolution of the public deficit and debt may be counteracted by geopolitics temporarily, but it should depreciate the greenback in 2025.
• The main cryptoassets are experiencing a sweet moment due to the "friendly" policy of Trump 2.0 that is predicted, although very high volatility is around the corner.
• The price of industrial commodities and metals may be weakened by lower demand from China and India, while gold could dip if inflation falls and the reduction of central banks' balance sheets goes on.

• Macroeconomic divergence between regions, reduction of liquidity in financial markets, volatility.
• Increase in cybercrime, disruptions in essential infrastructures.
• Financial fragmentation of the Euro-public debt market, debt crisis.
• Reduction of international trade, tariffs and increased costs, more inflation.
• Political incapacity in the face of inflation, climate crisis and migration cause social tensions, populism.
• Extension of the Israeli Palestinian war to the Middle East, oil at 200 USD.
• Conflict in Ukraine, escalation of NATO-Russia tension, maintenance of sanctions.

• The divergence in the phase of the economic cycle that is predicted between the US, Europe and China increases uncertainty. The less restrictive monetary policy slows down in the US, continues in Europe and becomes expansive in China while the US continues to grow, Europe is facing recession and China is looking for recovery. The sustainability of the US debt makes it difficult to lower rates without a budgetary adjustment, in the face of a new legislature dominated by an increase in the deficit.
• At the business level, the expected earnings growth is demanding, and the first profit and sales alerts appear, in an environment of high valuations by multiples in the USA.
• The Middle East is experiencing changes because of Israel's war with Hezbollah and Hamas, while the conflict between Ukraine and Russia continues pending a possible truce in January. European countries are facing a political crisis in France and Germany as they ramp up military spending, and the U.S. is seeking a pact between Saudi Arabia and Israel to focus on the Asia-Pacific region in its tussle with China.