Uriel Loredo

Economic perspectives: Key decisions and their global impacts. 

The impact of central bank decisions and global economic performance in early 2025. 

Week of January 27 to 31 

So far this year, global economies have shown mixed signals: 

  • United States: The Fed maintained the benchmark rate at 4.25%–4.5%, while Q4 2024 GDP grew 2.3%, marking a slowdown compared to previous quarters. 
     
  • Europe: The ECB cut the benchmark rate to 2.75% amid economic stagnation in the Eurozone. 
     
  • China: Manufacturing and services activity unexpectedly contracted, reinforcing expectations for new stimulus measures. 
     
  • Mexico: Exports grew 4.1% year-over-year in 2024, while Q4 2024 GDP declined by 0.6%, marking its first contraction since 2021. 

We invite you to analyze this data and consider its implications for your financial and strategic decisions. If you’d like more information or a detailed analysis, please feel free to contact us.

Important events in the next weeks 

  • In the United States, the manufacturing ISM will be released on 02/03. 
  •  In the United States, employment data will be released on 02/07. 

Monitor 

Posted in Weekly Summary

Monetary Policy: The Fed Pauses, but the Market Expects Cuts 

The Federal Reserve holds its benchmark rate steady, but the market anticipates adjustments in 2025. 

As expected, the Federal Reserve (Fed) maintained its benchmark interest rate within the 4.25%-4.5% range. This decision marks a pause following three consecutive cuts since September 2024, totaling a one-percentage-point reduction. 

The Fed’s statement highlighted that economic activity continues to grow at a solid pace, while unemployment remains low and the labor market strong. However, inflation remains somewhat elevated, and the Fed omitted previous references to progress toward its 2% target. 

Looking ahead, markets are pricing in a 3.9% rate by the end of 2025, with a 61% probability of at least two quarter-point cuts this year. The first cut could come as soon as the June 18 meeting. 

We will continue monitoring the Fed’s decisions and their impact on the markets. If you’d like more information on how this policy could affect your financial strategies, feel free to reach out to us. 

Expectations for the Fed Funds Rate

Source: JP Morgan 

Posted in Weekly Comment

Global outlook: Economy and politics under new leadership.

Global Analysis: Politics, economy, and key trends in international markets.

Week of January 21 to 24 

The week was marked by the inauguration of Donald Trump as the 47th President of the United States. He signed executive orders on immigration, energy, and security and announced the possibility of implementing a 25% tariff on products from Canada and Mexico, set to take effect on February 1. 

On the economic front, there was a slight increase in unemployment insurance claims. Meanwhile, the Q4 2024 earnings season had a strong start, with S&P 500 companies reporting an initial 5% growth in sales and a 17% increase in profits.  

In other global markets: 

• Europe: The ECB is expected to announce a rate cut next week, while consumer sentiment shows improvement. 

• Japan: The Bank of Japan raised its benchmark rate to 0.5%, aligning with expectations. 

• China: The People’s Bank of China kept interest rates unchanged for the third consecutive month. 

• Mexico: Inflation fell to its lowest level since 2021, and the IMF revised its 2024 growth forecast upward. 

These developments highlight the importance of staying vigilant regarding key movements in global politics and economics. 

Important events in the coming weeks 

  • In the United States, the Fed’s monetary policy announcement will be on 01/29 
  • In the United States, Q4 2024 GDP will be released on 01/30 

Monitor 

Posted in Weekly Summary

China: Solid growth, but with challenges in sight. 

China exceeds growth expectations in 2024 but faces significant challenges.

In 2024, China’s economy achieved a 5.0% growth rate, meeting the official target. However, this performance—its weakest since 1990, excluding the pandemic years—reflects an economy heavily reliant on fiscal and monetary stimulus. Key highlights include: 

  • Inflation: Increased by only 0.2%, signaling weak domestic demand. 
  • Industrial production: Grew 5.8%, led by high-tech sectors (+8.9%). 
  • Real estate: Declined 10.6%, highlighting weakness in the sector. 
  • Demographics: Population decreased 1.39 million, exacerbating the aging challenge. 
  • International trade: Exports grew 7.1%, and imports 2.3%. 
  • Unemployment: Urban unemployment rate remained stable at 5.1%. 

Despite these figures, China’s economy continues to face significant pressures, including weak domestic consumption, a persistent real estate crisis, and ongoing trade tensions with the U.S. Analysts anticipate that the government will announce new stimulus measures, although fiscal and monetary policy options are increasingly constrained. 

We will closely monitor the growth target China sets in the near future and assess the impact of its measures on the global economy. 

Annual and quarterly GDP evolution 

  • oya: Refers to year-over-year variation. 
  • Q/Q: Refers to quarter-over-quarter variation. 

Source: JP Morgan 

Posted in Weekly Comment

Global economic outlook: Key data from the United States, Europe, and more. 

Financial results and inflation key events so far this year. 

January 13th-17th Week 

The global economic outlook continues to provide crucial insights for understanding market trends. Here’s a summary of the most relevant data: 

  • United States: The Q4 2024 earnings season began with strong reports from JP Morgan, Citi, and other institutions. Meanwhile, inflation closed at 2.9% annually in December, in line with expectations, and retail sales advanced by 0.4%. 
  • Europe: The ECB may continue easing its monetary policy after four rate cuts last year. However, Germany’s economy has experienced two consecutive years of contraction.  
  • Japan and China: Japan is debating potential interest rate hikes, while China showed a recovery in exports with, a 10.7% annual growth. 
  • Latin America: In Mexico, the Plan México was introduced to attract strategic investments, while Argentina ended 2024 with a significant slowdown in inflation, dropping to 117.8% annually. 

Important Upcoming Events:

  • In the United States, Martin Luther King Jr. Day will be commemorated on 01/20. 
  • In the United States, consumer confidence indicators will be released on 01/24. 

Monitor 

Posted in Uncategorized

December Brings Encouraging Signs in Inflation 

Core inflation shows signs of deceleration, while shelter costs register their lowest growth rate since 2022. 

The Consumer Price Index (CPI) rose by 0.4% in December, aligning with market expectations. Over the past 12 months, headline inflation increased by 2.9%. The Core CPI, which excludes food and energy, showed signs of deceleration with a 0.2% monthly rise, the lowest in four months. On an annual basis, it dropped to 3.2%.  

Key components include: 

  1. Energy: Contributed 2.6% to the monthly increase, driven by a 4.4% rise in gasoline prices. 
  1. Food: Prices rose by 0.3% in December, with annual variations of 1.8% for food at home and 3.6% for food away from home. 
  1. Shelter: Increased by 0.3%, marking its smallest annual variation (4.6%) since January 2022. 

These figures provide some relief for the Fed, reflecting a slowdown in core prices, which could pave the way for further rate cuts in 2025. For now, the rate is expected to remain between 4.25% and 4.50% at the upcoming January meeting. 
 

Annual Variation (%) of the Consumer Price Index (CPI): General and Core CPI 

Source: US Bureau of Labor Statistics 

Posted in Weekly Comment

Economic Report: Global Insights for 2025

Key indicators mark the beginning of 2025: inflation, employment, and global challenges. 

Week of January 6 to10 

The beginning of the year brings key data that impacts global markets and investment decisions. Here are some of the main highlights: 

  • United States: Strong job growth with 256,000 new positions in December and a drop in the unemployment rate to 4.1%. However, persistent inflation has pushed 10-year treasury yields to 4.74%. 
  • Europe: Inflation in the Eurozone rose to 2.4% annually in December, with Germany reporting figures above the ECB’s target. Economic activity continues to contract, reinforcing challenges in the region. 
  • Asia: In China, government measures to boost household consumption include subsidies for appliances and digital goods. In Japan, growth in services has been driven by local demand. 
  • Latin America: In Mexico, annual inflation of December hit its lowest level since 2021 (4.21%), opening the door for potential rate cuts. In Argentina, the country risk fell to its lowest level since 2018, reflecting increased confidence in its assets. 

Key events in the coming weeks 

  • In China, international trade figures will be released on 01/13. 
  • In the U.S, inflation and retail sales data will be released on 01/15–16. 

Monitor 

Posted in Weekly Summary

Artificial Intelligence: Opportunities and challenges on the horizon 

The rise of AI presents transformative opportunities and challenges that investors need to consider.

Artificial intelligence (AI) continues to be a central topic in the global tech landscape. Major companies such as Amazon, Alphabet, Meta, and Microsoft have announced investments of up to US$500 billion over the next three years, a move reminiscent of the internet boom of the 90’s. 

While short-term expectations tend to be optimistic, analysts agree that the true potential of AI will unfold over the long term. With applications ranging from semiconductors and cloud services to language models and end-user tools, AI’s impact could be described as “immeasurable.” 

However, this technological revolution is not without its challenges. Increasing demand for energy and materials like copper could create bottlenecks, while the risk of overcapacity and signs of false demand could impact return-on-investment projections. 

AI is expected to evolve in two phases: an initial phase driven by consumer adoption, and a longer phase focused on enterprise integration. This highlights the importance of distinguishing between current enthusiasm and sustainable long-term opportunities. 

Technological development tends to be overestimated in the short term, while its long-term potential is often underestimated. 

Source: Capital Group  

Posted in Weekly Comment

Key economic and market developments: A global perspective.

The first week of the year highlighted the resilience of the housing market in the U.S. and contractions in manufacturing in Europe and Asia. Key points:

Week of December 30 2024 to January 3 2025 

Weekly Summary 

United States: The week was marked by low market activity due to New Year celebrations. Regarding economic data: Pending home sales in November reached their highest level in 21 months and home prices increased by 3.6% year-over-year. 

Europe: In Germany and France, industrial activity declined in December. Similarly, in the United Kingdom, manufacturing activity contracted at the fastest pace in 11 months. 

Asia: In China, President Xi Jinping reiterated the need for more proactive and effective macroeconomic policies in 2025 to counter economic slowdown. 

Latin America: According to the Bank of Mexico, international reserves hit a historic high in 2024, totaling $228.789 billion and PEMEX reported a 35% decrease in oil shipments to the U.S. through November of last year. 

Important events in the next weeks 

  • In the United States, the ISM Services Index will be released on 01/07. 
  • In the United States, employment indicators will be published on 01/10. 

Monitor 

Posted in Weekly Summary

Q4 2024 quarterly earnings season and 2025 Perspectives. 

Expectations for the S&P 500 in 2024 and 2025 reflect strong growth, with significant gains projected across multiple sectors. 

S&P 500 Outlook for Q4 2024 

As is customary, JP Morgan will kick off the corporate earnings season in mid-January. However, it is notable that estimated earnings for the S&P 500 in the fourth quarter remain below initial expectations. Despite this decline, the index could still achieve its highest year-over-year (YoY) earnings growth rate in three years, currently estimated at 11.9%. This growth would bring the full-year 2024 earnings increase to 9.4% YoY. 

If confirmed, this figure would represent the strongest YoY earnings growth since Q4 2021. Additionally, seven out of the eleven sectors in the index are projected to report YoY growth, with Finance, Communication Services, Technology, Consumer Discretionary, Utilities, and Health Care leading the way. Conversely, four sectors are expected to see a YoY decline in earnings, with Energy being the only one forecasted to post a double-digit drop. 

What About 2025? 

Looking ahead, analysts anticipate robust earnings growth for the S&P 500 in 2025, projecting nearly 15% YoY growth, well above the 10-year historical average of 8%. Interestingly, companies outside the “Magnificent 7” group (Google, Amazon, Microsoft, Apple, Tesla, Meta, and Nvidia) are expected to show significant improvement, with earnings growth estimated at 13% for 2025. 

Key Takeaways 

The evolution of the Q4 earnings season and the start of Q1 2025 will be crucial. Investors have displayed considerable optimism in recent months, betting on the persistence of a favorable environment for the corporate sector. 

Expected annual earnings growth for the S&P 500 in Q4 2024 


Source: Facset – Earnings Insight 

Posted in Weekly Comment
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