Amid the likely implementation of tariffs by the United States and Mexico’s strong economic dependence on the world’s largest economy, Mexico will be the most affected economy in Latin America. The impact would be so significant that its GDP could grow only 0.6% in 2025, according to Moody’s Analytics, through its Director of Economic Analysis for Latin America, Alfredo Coutinho.
Moody’s Analytics indicates that the impact on the Mexican economy would mainly result from a slowdown in the volume of exports and imports in the coming months. This would be a natural consequence of a deterioration in Mexico’s trade relationship with its main commercial partner due to a protectionist economic policy like the one U.S. President Donald Trump plans to implement.
“As a result, we estimate that the Mexican economy would lose around one percentage point of growth in 2025. Therefore, we expect the country to grow only 0.6% this year. Without a doubt, it will be the most impacted country in Latin America,” said Coutinho.
Impact of Tariffs: A Multiplier Effect
The imposition of tariffs by Trump, scheduled for February 1, unless negotiations between the two nations prevent them, would have a multiplier effect on the Mexican economy, making their consequences even more significant.
“In addition to affecting foreign trade, tariffs could lead to higher inflation and currency depreciation, which in turn would force the central bank to tighten its monetary policy to counteract these effects,” said Coutinho.
Moreover, an additional economic impact of the tariff imposition would be on investment flows and the arrival of foreign companies to Mexico, a phenomenon known as nearshoring, due to rising production costs.
“The tariff and protectionist policy of the U.S. government will have an effect on investment flows resulting from the relocation of companies, not only from the United States but also from other parts of the world, particularly Asian companies looking to enter the Mexican market,” he explained.
Additionally, new investments were already under threat due to recent constitutional reforms in Mexico, particularly the Judicial Power reform and the elimination of autonomous agencies, which weaken the checks and balances in the country’s governance.
Latin America Will Hold Strong
Despite the risks and uncertainties posed by the new U.S. policies, Alfredo Coutinho acknowledged that the Latin American economy is in a good position to face 2025.
Coutinho highlighted that countries such as Peru, Brazil, Uruguay, Chile, Colombia, and Mexico led the advancement of the Latin American economy during 2024. “Mexico’s case was significant because it went through another year of slowdown, but this was not surprising due to the change in government,” he noted.
Moody’s Analytics forecasts that Latin America will grow 2.1% in 2025, with Argentina leading the region with an expected GDP growth of 3.9%—a very positive outlook considering the country’s long history of economic slowdowns and recessions over the past decades.
At the end of 2024, the Florida real estate market recorded a 1.9% decline in sales compared to 2023, according to Florida Realtors.
However, the real estate market continued to show an increase in new listings for both single-family homes and condos/townhouses, a rise in inventory levels for both property categories, and a stabilization of median prices for existing single-family homes, as well as condo and townhouse units, according to the latest housing data released by Florida Realtors®.
Closed sales of existing single-family homes across the state at the end of the year totaled 252,688, a 1.9% decrease compared to the end of 2023, according to data from the Florida Realtors research department, in collaboration with local real estate boards and associations.
Regarding existing townhouses, a total of 94,380 units were sold statewide in 2024, representing a 10.5% drop from 2023. Closed sales can occur 30 to 90 days or more after sales contracts are signed.
Modest Declines and Price Stability
“In general, Florida’s housing market in 2024 saw mostly modest declines in sales and little change in home prices,” said Brad O’Connor, Chief Economist at Florida Realtors.
Despite some fluctuations in mortgage rates, they remained high relative to recent years, added O’Connor.
Additionally, he noted that the most significant changes in 2024 were the widening performance gap between the single-family home market and the condo/townhouse market, as well as the overall increase in inventory levels.
December Sales Helped Year-End Transactions
O’Connor pointed out that December’s closed sales for single-family homes helped boost year-end transactions.
“This strong performance brought us to nearly 253,000 closed single-family home sales statewide for the year, which is just under 2% below the 2023 total of nearly 258,000 sales but also marks the lowest annual sales we have seen since 2014,” he said. “There was little variation across the state in 2024, as most counties saw only small year-over-year decreases,” he explained.
The statewide median sale price for existing single-family homes at year-end was $420,000, a 2.4% increase from the previous year. Meanwhile, the statewide median price for condos and townhouses was $320,000, reflecting a slight decline of 0.8% compared to the prior year. The median price represents the midpoint—half of the homes sold for more, and half sold for less.
December 2024 Market Trends
Although year-end sales were lower than in 2023, December showed stronger performance for single-family homes, with closed sales increasing 12.8% compared to December 2023. In contrast, condo and townhouse sales declined by only 0.5% year-over-year, according to Florida Realtors data.
The statewide median sale price for existing single-family homes in December was $415,000, reflecting a 1.2% increase from the previous year. Meanwhile, the statewide median price for condos and townhouses was $315,000, a 4.5% drop from the previous year’s figure.
Invesco expands its product range with the launch of the Invesco S&P 500 Equal Weight Swap UCITS ETF, a fund designed to replicate the performance of the S&P 500 Equal Weight Index using a synthetic structure. According to the asset manager, the benchmark index is built from the S&P 500 Index, assigning the same weight to each company in the index instead of the standard method of weighting companies by market capitalization.
“This is the world’s first Equal Weight ETF with synthetic replication. For investors seeking exposure to the S&P 500 Equal Weight Index, Invesco now offers both physical and swap-based ETFs, allowing investors to choose their preferred replication method,” the firm stated.
According to Invesco, demand for Equal Weight strategies has continued to rise since Mega Cap stock prices hit multi-decade highs and began to appear overvalued. This trend has been particularly noticeable in U.S. equities, where S&P 500 Equal Weight ETFs have attracted more than $10 billion in net inflows since July 2024. The top 10 stocks in the S&P 500 Index still represent 37% of market capitalization, keeping concentration at historically high levels.
Unlike existing products in the market, the Invesco S&P 500 Equal Weight Swap UCITS ETF aims to replicate the performance of the S&P 500 Equal Weight Index through swap-based replication. The ETF will hold a basket of high-quality stocks and achieve index returns through swap agreements with major financial institutions. These swap counterparties will pay the ETF the index return, minus an agreed fee, in exchange for the returns of the ETF’s held stock basket.
Following this launch, Laure Peyranne, Head of ETFs Iberia, LatAm & US Offshore at Invesco, stated: “We are excited to start the new year with an ETF that combines two areas of Invesco’s expertise. We are a global leader in equal-weighted equity exposures, a rapidly expanding area whose demand surged significantly in 2024 and which we now offer through our solid and highly efficient swap-based structure, developed over 15 years ago. We have the world’s largest synthetic ETF, and now investors can benefit from the same advantages for their exposure to the S&P 500 Equal Weight.”
Peyranne also noted that when a Europe-domiciled ETF uses synthetic replication on certain core U.S. indices, it is not required to pay taxes on dividends received.
“This allows us to negotiate better terms with our swap counterparties, including receiving the gross return of the index, which is an advantage over a physically replicated ETF that typically pays a 15% to 30% tax on dividends. In the case of the S&P 500 Equal Weight, given current dividend levels, this translates to an approximate 20 basis point improvement,” she explained.
Invesco has committed to the swap-based replication model, maintaining an uninterrupted track record of over 15 years and accumulating more than $65 billion in assets across its swap-based ETF range. Its product lineup includes the Invesco S&P 500 UCITS ETF, which, at $39 billion, is the largest swap-based ETF in the world, according to the company.
This latest launch also expands the firm’s Equal Weight offering by adding the Invesco S&P 500 Equal Weight Swap UCITS ETF to its existing Invesco Nasdaq-100 Equal Weight UCITS ETF and Invesco MSCI World Equal Weight UCITS ETF.
The new U.S. president, Donald Trump, took office on January 20 and has since made his mark with key policy decisions. Among the various orders he has announced and signed is the directive for federal workers to end remote work.
“The heads of all executive branch departments and agencies must, as soon as possible, take all necessary steps to end telework arrangements and require employees to return to in-person work at their designated locations full-time, provided that department and agency heads make exemptions as they deem necessary,” Trump stated in a memorandum published in the local press.
In the fiscal year 2023, 43% of federal civilian workers teleworked “routinely or situationally,” according to the Status of Telework in the Federal Government Report to Congress from December, prepared by the U.S. Office of Personnel Management (OPM).
While Trump‘s directive may take longer than expected to fully implement due to practical or financial reasons, some companies have already begun taking the initiative.
For example, JP Morgan announced to its employees that they must return to the office five days a week starting in March, ending a hybrid work-from-home policy that was implemented during the pandemic.
Some office locations still lack the capacity to accommodate a full return of all employees, and the bank will confirm where it is feasible by the end of the month, according to a memo confirming a Bloomberg News report from mid-January.
“We know that some of you prefer a hybrid schedule, and we respectfully understand that not everyone will agree with this decision,” committee members said in the memo, as cited by AdvisorHub. However, the company argued that they believe “this is the best way to run the business.”
More than half of the bank’s nearly 300,000 employees already work in the office five days a week. For those affected by the new policy, JP Morgan said it would provide at least 30 days’ notice before requiring a full-time return. The option to work from home “based on life events” will remain available, according to the bank’s communication.
Last year, Amazon.com Inc. ordered its employees to return to the office five days a week starting in January, but the company had to delay that timeline for thousands of workers due to space constraints in some cities. Other companies have had to remind employees to comply with in-office requirements.
Elon Musk and Vivek Ramaswamy, who were at the time nominated to lead Trump‘s newly created Department of Government Efficiency, pointed out that having a full-time return-to-office mandate was an invitation for many to resign.
“Requiring federal employees to be in the office five days a week would trigger a wave of voluntary departures that we welcome,” they wrote in The Wall Street Journal, as cited by CNN.
Alejandro Rubinstein has joined Insigneo as Senior Vice President. Based in the Brickell office in Miami, he will focus on providing advisory and brokerage services to clients in the United States, Chile, Colombia, and Peru, according to a statement issued by Insigneo,.
Rubinstein, who brings more than 25 years of experience in international markets, comes from Merrill Lynch. His expertise in global financial services and focus on customized solutions for clients aligns with the company’s strategy, the press release said.
“I’m excited to be part of Insigneo’s innovative culture, where expertise and creativity combine to deliver outstanding client experiences,” said Rubinstein.
As Senior Vice President, he will leverage Insigneo’s platform of resources and services to expand his business and develop financial strategies tailored to his clients’ needs, the firm adds.
“We are pleased to have Alex join the Insigneo team,” said Jose Salazar, Market Head of Miami. “His experience in international markets complements our robust platform of services and resources. We look forward to growing together and developing his business.”
Citi will lose its Global Head of Private Banking, Ida Liu, as the executive announced in a LinkedIn post.
“After nearly two decades at Citi, including the privilege of serving as Global Head of Citi Private Bank, I have made the decision to leave the firm and embark on the next chapter of my professional journey,” Liu posted on LinkedIn.
The expert, with more than 25 years of experience, joined Citi in 2007, where she held various positions until her most recent role as Global Head of Private Banking, according to her LinkedIn profile.
“Great careers are defined by embracing new challenges and opportunities, and this is the right time to leverage my global experience, leadership expertise, and passion for growth in bold and exciting new ways,” added the executive of the U.S. bank.
In addition to Citi, Liu worked at Merrill Lynch (1999-2004) and Vivienne Tam (2004-2007).
CC-BY-SA-2.0, FlickrPhoto: ankakay
. Moneda Asset Management Announces US$100 Million Investment from CPPIB Credit Investments Inc.
The ETF industry started 2025 on the right foot. Among the standout news at the beginning of the year is that asset manager BlackRock launched a new Bitcoin exchange-traded fund (ETF) on Cboe Canada, according to information from the Canadian stock exchange released earlier this week. The announcement was confirmed in a statement issued by BlackRock itself.
This Canadian fund, registered as the iShares Bitcoin ETF, will trade under the same symbol, IBIT, as BlackRock’s U.S. product. Additionally, shares denominated in U.S. dollars will trade under the symbol IBIT.U, according to the stock exchange.
“The iShares fund offers Canadian investors a way to gain exposure to Bitcoin while helping eliminate the operational and custodial complexities of holding Bitcoin directly,” said Helen Hayes, Head of iShares Canada at BlackRock.
The ETF is designed to provide Canadian investors access to BlackRock’s primary U.S. spot Bitcoin fund, iShares Bitcoin Trust (IBIT). It will invest all or most of its assets in IBIT, according to a statement from Cboe Canada.
Likewise, this fund will join a dozen other Bitcoin ETFs already trading on Canadian exchanges, according to sources at Nasdaq.
According to figures from BlackRock, its U.S. IBIT ETF has become the world’s most popular Bitcoin fund. Since its launch in January 2024, this fund has recorded over $37 billion in net inflows.
As recently as November, U.S. Bitcoin ETFs surpassed $100 billion in net assets for the first time, according to data from Bloomberg Intelligence. It is expected that Bitcoin ETFs will attract approximately $48 billion in net inflows this year.
The week has begun with the tech sector reeling. On Monday, Nvidia led a market slump—dropping as much as 17%—triggered by the strong performance of the low-cost generative AI assistant developed by Chinese company DeepSeek. According to experts, the emergence of a potentially more efficient approach to AI processing—reducing model training costs by 86%—raises questions about the necessity of the billions of dollars planned for infrastructure and intellectual property investment.
As a result, the S&P 500 index dropped 1.5%, and Nvidia‘s decline—the largest single-day market capitalization loss for the company at $589 billion—dragged the Nasdaq Composite down 3.1%. “The emergence of the new competitor has primarily impacted the entire data center value chain. This includes chip manufacturing equipment makers like ASML (-7.2%), high-performance chip manufacturers (Nvidia and Broadcom (-17.4%)), as well as companies specializing in energy infrastructure like Schneider Electric (-9.6%) or the real estate side of data centers like Digital Realty (-8.7%),” explain analysts at Banca March.
What explains these movements? In recent days, the generative AI assistant developed by DeepSeek has become the most downloaded app for iPhone, surpassing the popular ChatGPT application from OpenAI. Nvidia‘s drop has been the most visible consequence of this shift, driven by fears about the impact DeepSeek could have on the demand for high-end microchips.
“DeepSeek could be a seismic shift for the AI industry. If its advancements hold true, model training costs would drastically decrease, changing the game for everyone,” says Víctor Alvargonzález, founder of Nextep Finance. In his view, one of the main reasons behind Wall Street’s recent sell-off—particularly Nvidia‘s worst-ever trading session in U.S. stock market history—is DeepSeek‘s promise to reduce algorithm training costs. Estimates suggest that training costs could drop from the current $50 million per model to just $7 million or less, thanks to process simplification and a 75% reduction in memory requirements.
Amid these declines, Louise Dudley, portfolio manager of global equities at Federated Hermes Limited, believes there are still many questions left unanswered. “For Nvidia, as a key supplier of premium chips worldwide, the concern is whether companies will need fewer chips in the future. However, the company responded to the news by highlighting ‘excellent progress,’ signaling optimism about ongoing AI model developments, which are still in their relative infancy.
For companies involved in building data centers, the short-term impact is likely to be significant, as demand has been very strong. The new DeepSeek model code will be reviewed for potential performance improvements. Existing projects under development are at risk, and this will be a key focus for investors. This news will likely increase both corporate and consumer appetite for AI tools, given improved accessibility, leveraging this innovation and accelerating AI adoption timelines,” Dudley points out.
Market Reactions and Expert Insights
According to Hyunho Sohn, portfolio manager of the Fidelity Funds Global Technology Fund, Chinese AI startup DeepSeek has introduced AI models that perform comparably to OpenAI’s ChatGPT models while being significantly more cost-effective. “This efficiency advantage has raised a series of questions about the perceived ‘winners’ in the global AI ecosystem, the implications for hyperscaler capital expenditures, and the effectiveness of sanctions and export bans aimed at preventing high-level generative AI progress in China.
This is an evolving situation, and we may see short-term volatility until it becomes clear how much more efficient this technology really is. While broader implications must be assessed on a case-by-case basis, I generally believe this development will be deflationary,” Sohn states.
Despite the shockwaves, Fidelity’s portfolio manager believes this is ultimately beneficial for end-users and service providers, though it could have negative implications for hardware. “This is similar to what we saw in the early days of the internet when people vastly underestimated the scale of innovation, technological adoption, and service-based business potential, while greatly overestimating the total addressable market (TAM) for hardware,” explains Sohn.
In the view of Amadeo Alentorn, manager of the Global Equity Absolute Return fund and head of the systematic equity team at Jupiter AM, DeepSeek’s rise is part of a broader trend that has been developing for months. In recent times, there have been major advances in Small Language Models (SLM), which contrast with the large models used by companies like OpenAI. The central question has been whether it is possible to build more precise, specialized models that focus on specific areas, such as law or medicine, rather than encompassing all knowledge.
“So far, the rise of artificial intelligence has primarily benefited a small group of large companies. However, recent advancements suggest that we may be witnessing a paradigm shift, where smaller companies can also leverage this technology without needing massive infrastructure investments. Identifying which companies will lead this new AI phase is a complex task, but what is clear is that this evolution promotes diversification within the sector. AI could expand beyond tech giants and create new business opportunities across various industries,” Alentorn asserts.
High Valuations Under Scrutiny
In this context, Fidelity’s portfolio manager acknowledges that, as he has been saying for some time, many AI semiconductors are expensive, with sentiment, valuations, and momentum slowing down—“the most interesting opportunities lie within the services ecosystem.”
“It’s still early, but I would add that the rapid developments in generative AI highlight the need for proximity and connection throughout the tech ecosystem—something we are well-positioned for, given the breadth and depth of our research coverage,” Sohn adds.
For Oliver Blackbourn, portfolio manager in the Multi-Asset team at Janus Henderson, AI has long been considered a highly complex area of development, with industry leaders perceived as having technological advantages that would allow them to maintain rapid growth. In his view, the expectation of high earnings growth has been used to justify elevated valuations, making these stocks highly vulnerable to any disappointment.
“Competition always seemed like the biggest threat, but also the hardest to assess for investors. The market’s reaction to a perceived radical shift in the competitive landscape has been fierce. Before U.S. markets opened today, Nasdaq 100 futures had fallen 3.9%, and ASML—one of Europe’s companies most exposed to the AI theme—had dropped more than 10%,” Blackbourn notes.
In his opinion, while it is easy to get ahead of events, it is also important to remember that high expectations have driven up valuations across the U.S. stock market and, consequently, global equities. “If we start to see U.S. stock valuations drop significantly, there is a risk that this will spill over into other high-valuation areas in Europe and Asia.
Similarly, with U.S. consumers more exposed than ever to the stock market, there is a broader risk of negative feedback loops if consumer confidence is shaken. A significant tightening of financial conditions due to stock market losses could quickly change the Federal Reserve’s outlook,” Blackbourn concludes.
We know—the words you’ve probably heard the most last week are Donald Trump. The first week of the 47th U.S. president’s term has been intense, marked by 25 Executive Orders. These range from withdrawing from the Paris Climate Agreement and the World Health Organization to declaring a national emergency on the southern border and an energy emergency. Other areas addressed include tariffs, immigration, and ending federal workers’ remote work policies.
Experts call for caution amid the noise
“So far, he hasn’t enacted any tariffs on imports. It’s unlikely that announcements of new policy measures from the Oval Office—whether they’re implemented or not—will decrease in the short term. Reacting preemptively to these is a losing proposition for investors. At the same time, as shown by the recent tariff threats against Canada and Mexico and the related currency movements, higher financial market volatility is likely to become a permanent feature of the new Trump administration,” notes Yves Bonzon, CIO of Julius Baer.
One of the most attention-grabbing announcements, beyond concerns about tariffs, has been the Stargate initiative, which brings together SoftBank, Oracle, and OpenAI in a joint venture committed to investing $100 billion in early-stage AI. The plan starts with a data center in Texas and aims to reach $500 billion in four years.
According to analysts at Banca March, this initiative boosted the tech sector, especially Microsoft, Nvidia, and Arm, which will build the infrastructure. “For context, it’s estimated that the total investment—regular business and AI deployment—of the four major hyperscalers (Amazon, Meta, Microsoft, and Alphabet) will reach $260 billion in 2025. This shows the ambition and relevance of the announced investments. The new president highlighted the strategic importance of maintaining leadership in AI development, particularly against growing competition from China. However, Elon Musk commented on the social network X that the initiative doesn’t yet have the financial capacity to deploy such a large investment, marking the first public disagreement between Trump and the entrepreneur,” the analysts highlight.
Another Executive Order formally established the Department of Government Efficiency (DOGE).
Although Elon Musk and Vivek Ramaswamy had discussed cutting $2 trillion from the government’s annual $6.8 trillion budget, the text didn’t mention any spending cuts. “Monday’s action shifts the effort away from direct spending cuts and more toward improving efficiency through technological advancements. Ironically, these improvements will likely cost more in the short term (and could require Congressional allocation) even if they save money in the long term. We’ll have to wait to see what DOGE achieves before it expires in mid-2026,” notes Libby Cantrill, Head of Public Policy at PIMCO.
Tariffs and Trade
Everything related to trade and tariffs is drawing the attention of analysts and investors, who undoubtedly see it as a concern. “On trade, we expect Trump to reinstate at least some tariffs on China to the levels implemented during his first term as an immediate first step, with potential for steady increases from there. He could also initiate Section 301 trade investigations into Mexico, Canada, and the EU, which would be a precursor to tariff increases. Ultimately, our baseline trade assumptions incorporate a significant rise in tariffs on China but a more targeted approach by sector and product with other countries, avoiding a global baseline tariff. However, a more expansive use of emergency powers related to trade, including invoking the International Emergency Economic Powers Act (IEEPA), could indicate that trade policy is shifting toward our ‘Trump Unleashed’ scenario,” says Lizzy Galbraith, political economist at abrdn.
In Cantrill’s view, tariffs may not have been raised immediately. “We’d caution against reading too much into what’s more likely a delay rather than an absence of future tariff action. At the same time, we believe widespread tariffs on Mexico and Canada—particularly at the 25% level—are less likely than targeted, country-specific tariffs elsewhere. We still think the EU and China are quite vulnerable.
In the coming days and weeks, as the administration approaches its first 100 days, a flurry of decrees related to immigration, tariffs, and deregulation is expected. These will provide clues about the overall direction of its policy.
U.S. Equities
Meanwhile, the Q4 2024 earnings season in the U.S. started off well and will pick up speed next week. As Bonzon recalls, expectations for S&P 500 earnings in 2025 are ambitious, though “not unattainable,” with limited room for positive earnings surprises. “The risk/reward ratio outlook for the S&P 500 has significantly deteriorated compared to two years ago. After two consecutive years of double-digit returns driven largely by valuation multiple expansion, the index is fully valued, though not excessively,” states the CIO of Julius Baer.
In general, Bonzon notes that analysts currently forecast a year-over-year earnings growth of 14.8% for the S&P 500 in 2025. While this is certainly achievable, it leaves little room for positive surprises. “After two consecutive years of returns driven largely by valuation multiple expansion—resulting in a fully valued, but not overly expensive, index—the burden increasingly falls on earnings to drive returns,” he concludes.
The world is experiencing a new environment marked by a cycle of interest rate cuts by the major central banks in developed markets, as well as in emerging regions. According to experts, over the past quarter, most monetary institutions have adopted a more cautious stance.
The best example of this is the Fed, which has once again shifted its focus to inflation, as economic activity has remained strong while disinflation has stalled. “The Fed maintains its data-dependent approach and is beginning to shift its attention to the labor market. We believe labor market conditions could shape the path of its future policy decisions. Similarly, the Bank of England and the European Central Bank also cut interest rates by 25 basis points in the third quarter of 2024, emphasizing data dependency without precommitting to any specific interest rate trajectory,” explain experts from Capital Group.
According to Invesco in its outlook for this year, rates remain generally restrictive in major economies but are easing. “On the one hand, the Fed is likely to remain neutral by the end of 2025, but improved growth prospects may delay rate cuts. On the other hand, European central banks are easing their policies, with relatively weaker growth than the U.S.,” they note.
Divergences in Monetary Policy
This reality brings us to a key conclusion: yes, we are in a cycle of rate cuts, but there will be noticeable divergences in the monetary policies of the major central banks. In fact, Capital Group believes that this divergence will play a significant role in the coming months.
This is reflected in the Central Bank Watch report, prepared by Franklin Templeton, which reviews the activity of G10 central banks, plus two additional countries (China and South Korea), along with their forecasts.
According to the report, the Fed’s shift in strategy has refocused its attention on inflation, as economic activity has remained robust while disinflation has stalled. “The policies of the newly elected president are also likely to influence the Fed’s interest rate projections, which currently only anticipate two cuts in 2025. Across the Atlantic, the European Central Bank and the Bank of England are observing insufficient growth but remain cautious about the future interest rate path, as domestic and geopolitical uncertainties remain high,” the report states.
“Monetary policy divergence is likely to remain a prominent theme in the coming months. The Bank of Japan remains the exception among developed markets, as it has embarked on a rate hike cycle to end an era of negative interest rates. We maintain a relatively cautious stance regarding Japanese rates, as the central bank may make further policy adjustments in response to potential currency pressures. In Europe, the trajectory of monetary easing could depend on the weight policymakers place on downside growth risks compared to the pace and progression of wage pressures and services inflation,” Capital Group experts emphasize.
Another conclusion from the Franklin Templeton report is that “most central banks have become more cautious than they were a quarter ago.” According to their analysis, while the Bank of Canada cut its benchmark rate by 50 basis points in December, this may be its last significant move. “The Riksbank also seems to be taking a more neutral stance, and we believe the Reserve Bank of New Zealand will need to implement fewer cuts than the market currently anticipates. Meanwhile, the Swiss National Bank and the People’s Bank of China remain the most dovish,” the report highlights, noting the behavior of other key monetary institutions.
Lastly, the document underscores that some central banks face a set of dilemmas. “We believe the Norges Bank will lower rates, likely in the first quarter, followed by the Reserve Bank of Australia in the second quarter. Both were among the last to join the easing trend. Meanwhile, the Bank of Japan is expected to continue raising rates gradually in 2025. However, we believe the rigidity of inflation gives the central bank ample room to adopt a more aggressive stance,” the report concludes.
