Monthly Market Review

Review of Markets over January 2025

Zara Nokes

Global Market Analyst

Published: 03-02-2025

With market concentration at record levels, it is critical to diversify both within and beyond the US market.

It was a strong start to 2025 for investors, with both equities and bonds broadly delivering positive returns.

In the equity market, we saw a departure from the status quo of the last two years, with Europe (+7.1% on the month) outperforming the US (+2.8%), and value stocks (+4.5%) beating their growth counterparts (+2.6%). The return of President Trump to the White House, along with his ‘America First’ policy agenda, proved supportive for US equities, but the emergence of Chinese artificial intelligence (AI) company DeepSeek, called into question the US technology sector’s ability to deliver against lofty expectations. As we highlighted in our 2025 Investment Outlook, how the technology boom evolves will ultimately be more important than politics in determining equity market leadership, and with market concentration at record levels, it is critical to diversify both within and beyond the US market.

Bond markets were characterised by heightened volatility in January. President Trump’s proposed policy mix of tax cuts, immigration curbs and tariffs fuelled expectations for higher US inflation, pushing up yields globally. Ultimately though, the Bloomberg Global Aggregate Bond Index ended the month up 0.6%, amid tighter credit spreads and a softer-than-expected US December inflation print.

Commodities were one of the top performers of the month, with the broad Bloomberg Commodity Index rising 4.0%. Gold and other metal prices rose on the back of Trump’s tariff threats, while oil prices were lifted by cold winter weather and US sanctions on Russia.

Exhibit 1: Asset class and style returns

Read more about Asset class and style returns in the chart

Source: Bloomberg, FTSE, LSEG Datastream, MSCI, J.P. Morgan Asset Management. DM Equities: MSCI World; REITs: FTSE NAREIT Global Real Estate Investment Trusts; Cmdty: Bloomberg Commodity Index; Global Agg: Bloomberg Global Aggregate; Growth: MSCI World Growth; Value: MSCI World Value; Small cap: MSCI World Small Cap. All indices are total return in US dollars. Past performance is not a reliable indicator of current and future results. Data as of 31 January 2025.

Equities

The best performing major equity market in January was the MSCI Europe ex-UK Index, up 7.1% on the month. Gains were supported by the financials and consumer discretionary sectors owing to the solid global economic backdrop and tentative signs of improvement in the eurozone macro data. The eurozone composite Purchasing Managers’ Index (PMI) edged into expansionary territory at 50.2 in January. Meanwhile, retail sales came in at 1.2% year on year for November, marking the fifth consecutive month of growth. Europe’s outperformance, however, can most likely be attributed to its low weighting to the technology sector ( just 10% of the index) and analysts revising up their 2025 earnings expectations in response to positive surprises in the fourth quarter earnings season.

UK stocks also outperformed, with the FTSE All-Share up 5.5%. With three quarters of the index’s revenues derived abroad, the sharp depreciation in sterling added a tailwind to the UK market.

In the US, the S&P 500 Index returned 2.8% in January. The US economy continues to show signs of strength, with 256,000 jobs added in December and healthy GDP growth of 2.3% annualised in the fourth quarter. President Trump’s promise of deregulation and tax cuts further fuelled optimism over the economy. However, the US market’s heavy tech concentration weighed on performance towards the end of the month, as DeepSeek’s ability to produce efficient low-cost AI models hurt Nvidia, which was the largest constituent of the S&P 500 Index. Nvidia’s market value fell by nearly $600 billion on 27 January, the largest one-day wipeout in US stock market history.

In China, equities edged up marginally over the month, driven by more positive domestic economic data and less aggressive tariff threats from Trump than the 60% suggested on the campaign trail. The lacklustre performance of Indian equities (-3.5%), however, weighed on the overall performance of the MSCI EM Index (1.8%) and MSCI Asia ex-Japan Index (0.8%). This fall marked the fourth consecutive month of declines in Indian stocks, driven by a combination of multiple compression, weak earnings and an uncertain economic outlook.

Japanese equities were the laggard in January, with the TOPIX delivering 0.1%. The Bank of Japan (BoJ) delivered a 25 basis point interest rate hike as its confidence in the sustainability of domestic wage growth increased. The upward pressure on the yen proved to be a headwind for the export- oriented equity market.

Exhibit 2: World stock market returns

Read more about World stock market returns in the chart

Source: FTSE, LSEG Datastream, MSCI, S&P Global, TOPIX, J.P. Morgan Asset Management. All indices are total return in local currency, except for MSCI Asia ex-Japan and MSCI EM, which are in US dollars. Past performance is not a reliable indicator of current and future results. Data as of 31 January 2025.

Fixed income

10-year Treasury yields climbed around 20 basis points in the first two weeks of January, as Trump’s return to office fuelled investors’ expectations for fiscal largesse and inflation stickiness. However, US government bonds subsequently rallied, initially on the back of a weaker-than-expected December US inflation print, and subsequently following the AI tech sell-off. As a result, US government bonds delivered 0.5% on the month.

Exhibit 3: Fixed income government bond returns

Read more about Fixed income sector returns in the chart

Source: Bloomberg, LSEG Datastream, J.P. Morgan Asset Management. All indices are Bloomberg benchmark government indices. Total returns are shown in local currency, except for global, which is in US dollars. Past performance is not a reliable indicator of current and future results. Data as of 31 January 2025.

European government bonds also experienced volatility, with Italy flat on the month and Spain down 0.1% in January. German Bunds fell a more sizeable 0.4%, with this weaker performance perhaps reflecting increasing expectations for debt brake reform and greater fiscal stimulus after the upcoming federal election in February.

In the UK, international drivers – coupled with growing concerns around the stagflationary domestic outlook – briefly pushed 10-year Gilt yields to the highest level since 2008. A weaker-than-expected UK December inflation print, however, calmed the market and UK bonds ended the month up 0.8%.

In credit markets, spreads tightened across high yield and investment grade bonds. The US high yield market (+1.4%) outperformed its European equivalent (+0.6%), and global investment grade bonds returned 0.6% in January. Meanwhile, a weaker US dollar was a tailwind for emerging market debt, which was up 1.2% on the month.

Exhibit 4: Fixed income sector returns

Read more about Fixed income government bond returns in the chart

Source: Bloomberg, BofA/Merrill Lynch, J.P. Morgan Economic Research, LSEG Datastream, J.P. Morgan Asset Management. Global IL: Bloomberg Global Inflation-Linked; Euro Gov.: Bloomberg Euro Aggregate - Government; US Treas.: Bloomberg US Aggregate Government - Treasury; Global IG: Bloomberg Global Aggregate - Corporate; US HY: BofA/Merrill Lynch US HY Constrained; Euro HY: BofA/Merrill Lynch Euro Non-Financial HY Constrained; EM Debt: J.P. Morgan EMBIG. All indices are total return in local currency, except for EM and global indices, which are in US dollars. Past performance is not a reliable indicator of current and future results. Data as of 31 January 2025.

Conclusion

January highlighted the risk to investors posed by high US stock market concentration and lofty earnings expectations, underscoring the importance of regional diversification. Outside of equities, tighter credit spreads helped lift bond returns. While the global economic outlook looks rosy for now, as we outlined in our 2025 Investment Outlook, government bond allocations will be critical in the event that elevated political tensions undermines business confidence and weakens global growth. If, however, it is inflation and fiscal largesse that remain the key concern, alternatives will be the better diversifier in times of turbulence.

Exhibit 5: Index returns for January 2025

Read more about Index returns for November 2024 in the chart

Source: Bloomberg, LSEG Datastream, MSCI, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Data as of 31 January 2025.

The Market Insights programme provides comprehensive data and commentary on global markets without reference to products. Designed as a tool to help clients understand the markets and support investment decision-making, the programme explores the implications of current economic data and changing market conditions. For the purposes of MiFID II, the JPM Market Insights and Portfolio Insights programmes are marketing communications and are not in scope for any MiFID II / MiFIR requirements specifically related to investment research. Furthermore, the J.P. Morgan Asset Management Market Insights and Portfolio Insights programmes, as non-independent research, have not been prepared in accordance with legal requirements designed to promote the independence of investment research, nor are they subject to any prohibition on dealing ahead of the dissemination of investment research.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own financial professional, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not a reliable indicator of current and future results. J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our privacy policies at https://am.jpmorgan.com/global/privacy. This communication is issued by the following entities: In the United States, by J.P. Morgan Investment Management Inc. or J.P. Morgan Alternative Asset Management, Inc., both regulated by the Securities and Exchange Commission; in Latin America, for intended recipients’ use only, by local J.P. Morgan entities, as the case may be.; in Canada, for institutional clients’ use only, by JPMorgan Asset Management (Canada) Inc., which is a registered Portfolio Manager and Exempt Market Dealer in all Canadian provinces and territories except the Yukon and is also registered as an Investment Fund Manager in British Columbia, Ontario, Quebec and Newfoundland and Labrador. In the United Kingdom, by JPMorgan Asset Management (UK) Limited, which is authorized and regulated by the Financial Conduct Authority; in other European jurisdictions, by JPMorgan Asset Management (Europe) S.à r.l. In Asia Pacific (“APAC”), by the following issuing entities and in the respective jurisdictions in which they are primarily regulated: JPMorgan Asset Management (Asia Pacific) Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited, each of which is regulated by the Securities and Futures Commission of Hong Kong; JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K), this advertisement or publication has not been reviewed by the Monetary Authority of Singapore; JPMorgan Asset Management (Taiwan) Limited; JPMorgan Asset Management (Japan) Limited, which is a member of the Investment Trusts Association, Japan, the Japan Investment Advisers Association, Type II Financial Instruments Firms Association and the Japan Securities Dealers Association and is regulated by the Financial Services Agency (registration number “Kanto Local Finance Bureau (Financial Instruments Firm) No. 330”); in Australia, to wholesale clients only as defined in section 761A and 761G of the Corporations Act 2001 (Commonwealth), by JPMorgan Asset Management (Australia) Limited (ABN 55143832080) (AFSL 376919). For all other markets in APAC, to intended recipients only. For U.S. only: If you are a person with a disability and need additional support in viewing the material, please call us at 1-800-343-1113 for assistance.
Copyright 2025 JPMorgan Chase & Co. All rights reserved.
Image source: Getty Images
 d87d80b0-c53d-11e7-bc64-005056960c63