The year 2025 starts off with a bang as the European market, for once, outperforms the American market in January. The EuroStoxx 600 rises by +6.4%, the S&P 500 in Euros by +2.1%, and the Nasdaq finishes almost flat at +1.0%, between December 31, 2024, and January 31, 2025.
Some were eagerly anticipating it while others were dreading it, but the inauguration of Donald Trump on January 20th turned out to be a fascinating show. It almost seemed more like a coronation than just a simple inauguration. With a grand display of theatrical effects, the new president expedited the signing of dozens of Executive orders on his first day at the White House, and it took us some time to understand the specific political and economic consequences of these actions. At this point, it seems clear that the customs duties promised during the campaign will vary and shamelessly be used as a bargaining chip to address non-commercial issues. The negative effects on American consumption and European exporters may be less severe than we feared. Meanwhile, Elon Musk is aggressively pouncing on the federal government and its spending. We will see the effects if they materialise, but an austerity cure is inherently deflationary. It thus seems that the awakening of inflation is far from certain, which will be appreciated by the market.
As soon as the outcome of the election was confirmed on November 6th, we witnessed a significant flow of capital towards the United States. The appeal of American stocks has been surprisingly strong. It seems that the market has capitulated and many have panic-bought Nasdaq stocks until an unexpected setback in late January called into question all these aspirations: the Chinese company Deepseek, unknown to the general public, surprised the world by releasing its brand new R1 language model, with performance equivalent to that of the latest ChatGPT model. The market’s reaction was immediate, with Nvidia’s stock dropping by a significant 17% during the session, as doubts were raised about the massive data center construction plans of the “Magnificent 7” companies. We will overlook the alleged low training cost of the model to focus on two elements that seem more important to us: Deepseek has published its methodology as open source, so it can be copied, and the cost of inference, that is, using the model, is almost twenty times cheaper than that of its competitors. It seems that the computing power required for the proper functioning of AI algorithms has been greatly overestimated.
Fortunately, our exposure to the semiconductor sector had been significantly reduced for several months. In fact, we had sold our Nvidia shares a long time ago, in September 2023. It seems likely that the wave of building data centers specifically dedicated to AI will be at least slowed down in the coming months, which could trigger a very typical cycle of graphics card destocking. At the same time, other macroeconomic indicators, especially in the industrial sector, continue to show positive trends or are improving, which explains the strong performance of the European market. Therefore, it is possible to imagine that the trend that emerged in January may actually continue…
The Clartan funds have performed reasonably well in this challenging month of January. Valeurs rose by +6.6%, Europe by +5.4%, and Ethos by +4.5%. On the more defensive side, Flexible rose by +4.0%, Multimanagers by +2.6%, and Patrimoine by +1.2%.