The year 2025 was poised for market turbulence with Donald Trump’s return to the White House. Even before his inauguration, anxieties surrounding persistent inflation, economic stagnation, and escalating sovereign debt triggered a sell-off in government bonds, driving borrowing costs upward.
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Trump’s second term commenced on January 20th with a rapid succession of executive orders. Surprisingly, this spurred market optimism, culminating in the S&P 500 (^GSPC) reaching a new high that week. The delay in imposing trade tariffs offered a temporary reprieve for investors.
AI-Driven Tech Sell-off Shakes Markets
The market euphoria was short-lived. A week later, an AI-triggered tech stock sell-off sent shockwaves through the market. The release of a groundbreaking AI model by Chinese startup DeepSeek raised concerns about the sustainability of spending in the AI sector by US tech giants. Nvidia (NVDA), a market favorite, suffered a staggering $589 billion loss in market capitalization in a single day, setting a record for the largest single-day loss in stock market history.
Adding fuel to the fire, Trump announced the imposition of 25% tariffs on imports from Mexico and Canada, coupled with a 10% tariff on Chinese imports. These actions sent markets reeling, creating a volatile start to February.
Investor Preferences Amidst Uncertainty
Despite the tumultuous market environment, where did investors allocate their capital in January? Analysis of popular stocks and funds reveals insights into investor sentiment and strategies.
Popular Stocks in January 2025
Data from investment platforms like AJ Bell (AJB.L) indicates that DIY investors maintained a risk-on approach in January. Global markets and the tech sector were favored destinations for capital, reflecting hopes for broad equity market gains and continued tech sector strength.
Tech Dominates Investment Choices
Nvidia (NVDA), despite its late-January setback, remained a popular choice for investors, alongside Advanced Micro Devices (AMD). While Nvidia demonstrated robust year-over-year growth, AMD faced challenges with weaker share price performance and disappointing data center revenue.
MicroStrategy (MSTR), the largest corporate holder of Bitcoin (BTC-USD), also attracted significant investment, mirroring Bitcoin’s price trajectory, which surged following Trump’s election victory.
Tesla Rides the Trump Wave
Tesla (TSLA), fueled by CEO Elon Musk’s support for Trump and his subsequent appointment to a government position, saw remarkable share price appreciation. Musk’s optimistic projections for full self-driving technology further bolstered investor confidence.
Beyond Tech: GSK and Taylor Wimpey
Outside the tech realm, GSK (GSK.L) garnered investor interest after announcing strong full-year results, an increased sales outlook, and a share buyback program. Taylor Wimpey (TW.L), while facing headwinds in the housing sector, provided reassurance by confirming adherence to its guidance.
Top Performing Funds
Passive funds, particularly index funds and exchange-traded funds (ETFs), dominated the investment landscape in January. This trend underscores a growing preference for lower-cost, passive investment strategies that align with specific market indices.
The Fidelity Index World fund (0P000125KV.L), with substantial holdings in major tech companies, delivered significant returns. The Legal & General Global Technology Index Trust (0P000023MW.L) also performed well, reinforcing investor confidence in the long-term growth potential of Big Tech.
Demand for safe-haven assets, such as gold, was evident in the popularity of the iShares Physical Gold (SGLN.L) ETC. Gold prices surged to new highs as Trump implemented tariffs, highlighting its appeal as an inflation hedge.
Conclusion: Navigating Uncertainty and Long-Term Confidence
January 2025 showcased the complexities of navigating a volatile market environment. While AI-driven disruptions and trade tensions created uncertainty, investors demonstrated continued confidence in long-term growth themes, particularly within the technology sector and safe-haven assets. The preference for passive investment strategies further emphasizes a shift towards cost-effective and index-aligned approaches. The evolving market landscape necessitates careful analysis and strategic decision-making to capitalize on emerging opportunities and mitigate potential risks.
