On January 20, 2025, Donald Trump was sworn in as the 47th President of the United States, a historic return to the White House that has been eagerly awaited by financial markets for weeks. While political observers and economists debate the impact of his economic and geopolitical agenda, stock markets have proven surprisingly resilient in January. Despite geopolitical uncertainties and rising tensions between the Trump administration and the US Federal Reserve, the American and especially the European stock markets recorded a dynamic start to the year (thanks to a positive earnings season so far). However, US technology stocks were particularly volatile due to new competition from China, which led to price declines for companies such as heavyweight Nvidia.
Divergent monetary policy: Fed defies Trump, ECB cuts interest rates
A central topic of the month was monetary policy. While President Trump publicly and repeatedly put pressure on the Fed to force an interest rate cut, Federal Reserve Chairman Jerome Powell withstood it. The Fed refrained from cutting interest rates and stressed that economic policy developments must first be monitored (“we don’t have to hurry”). This led to tensions between the White House and the central bank. Trump openly criticized Powell and accused the Fed of not solving the inflation problem it had caused itself. Market analysts fear that this conflict could continue throughout the year. On the other side of the Atlantic, the European Central Bank (ECB) acted quite differently: it cut its key interest rate by 0.25% to 2.75%, thus continuing its course of looser monetary policy. ECB President Christine Lagarde found sometimes drastic words in this context (“existential crisis”) and thus signaled the possibility of further interest rate cuts. This monetary easing supported European equity markets, especially in cyclical sectors.
Records in Germany, uncertainty in the USA
The European stock markets were particularly strong in January, supported by the ECB’s interest-rate-friendly stance. The DAX, for example, reached new highs in the course of the month and exceeded the 21,000 point mark for the first time. In the USA, the development was more differentiated. While the Dow Jones benefited from the stable economic situation, there was considerable turbulence in the technology sector. The “deep-seek shock” (tech icon Marc Andreessen described it as the “Sputnik moment” for the American AI scene) weighed on the Nasdaq 100 in particular. The Chinese start-up Deepseek presented what it said was a much cheaper AI technology (language model), which questioned Nvidia’s market dominance. As a result, Nvidia shares lost 17% or just under $600 billion in market value in a single day – truly a historic slump, although it should be remembered that the stock has had two extraordinarily good years. Nevertheless, the medium and long-term outlook for US equities remains positive. The planned tax cuts under Trump and strong profit growth by many companies could further support the US market.
High US yields cause tensions
While the stock markets benefited from the expansionary fiscal policy, the bond market was characterized by uncertainty. Ten-year U.S. Treasury yields approached the critical 5 percent mark in the middle of the month, reaching over 4.8% p.a. (highest level since October 2023), fueling concerns about the sustainability of the U.S. government debt. President Trump is relying on an expansive fiscal policy with tax cuts and higher infrastructure investment, but also a more restrictive deportation policy. While these measures could stimulate the economy in the short term, there is a risk that they could trigger inflationary effects in the medium term, which in turn could force the Fed to tighten its stance – a potential point of conflict between the government and the central bank.
Gold as a safe haven
In a market environment characterized by uncertainty, gold was able to assert itself as a stabilizing factor. The troy ounce exceeded the USD 2,800 mark for the first time, supported by geopolitical risks and an increasing move away from the US dollar by many emerging markets, especially China. In contrast, there was no clear direction for the US dollar itself. While the increased attractiveness of US Treasuries and growth prospects encouraged capital flows into the dollar area, the currency was also weighed down by the uncertainties surrounding US monetary policy and the question of the Fed’s neutrality.
Conclusion and outlook
January 2025 was a month of contrasts: on the one hand, Trump’s re-election and his economic policy plans (“Make America Great Again”) caused optimism in the markets, on the other hand, uncertainties about monetary policy and the high US national debt (USD 36 trillion) remained. The long-term financing of US government deficits remains particularly critical, as the interest burden now exceeds the total military expenditure of the USA. Short-term bonds are up for renewal, with buyers increasingly demanding higher risk premiums. Recent issues of long-dated (30-year) US Treasuries have been disappointing due to a lack of greater demand. In addition, higher yields (relevant for e.g. consumer loans or real estate financing) stand in contrast to the promise of prosperity of every American as Donald Trump’s central election campaign issue. For investors, 2025 will therefore remain a year full of challenges, but also opportunities. While the euphoria over Trump’s economic policy course initially led to positive market trends, a reality check will now be carried out. This will be accompanied by increased volatility, especially since the new US president prefers to force individual developments by leaps and bounds through social media posts. The truism that political stock markets have short legs may not apply in this case. Nevertheless, one should also consider that Donald Trump is likely to like rising stock prices as a visible sign of his own economic competence. We will have to adapt to this in its entirety and simply accept it to a certain extent. A diversified portfolio with quality stocks from the industries of the future, bonds with strong credit ratings and real tangible assets such as gold continues to appear to be the most sensible strategy.
The Hansen & Heinrich Universal Fund (current equity allocation of 93%) started the new year with a pleasing price increase of just under 4%. January was marked by noticeably higher volatility than December 2024, which offered us attractive opportunities in the area of standstill business and allowed us to generate additional income. In the portfolio, we deliberately reduced positions in BB Biotech and Hermes, while we used market weaknesses at Arista Networks, Broadcom and Nvidia to further expand our allocations, in some cases in conjunction with short-term options. Our position in Deutsche Telekom continues to develop positively. The company with the distinctive “T” is now one of the ten most valuable brands in the world. Particularly remarkable: The expansion into the US market, which was previously criticized as oversized and expensive – the sale of which failed 15 years ago due to a lack of interested parties – has proven to be a strategic stroke of luck. The US subsidiary has been delivering strong business figures for several quarters and now accounts for more than half of the group’s total sales and profit. Thanks to innovative marketing, Deutsche Telekom was able to win millions of new customers in the USA and hold its own against established competitors such as AT&T and Verizon. The company is also setting positive accents at management level: The recently announced contract extension of CEO Tim Höttges until 2026 ensures continuity in corporate management. Shareholders will benefit from this development through a planned dividend increase to EUR 0.90 per share for 2024 as well as ongoing share buybacks. In view of the stable business development, Deutsche Telekom remains an integral part of our portfolio as a reliable dividend stock.
The H&H Stiftungsfonds (current equity quota 37%) also made a pleasing start to the new year with its balanced structure and recorded a price increase of almost 2%. In January, global issuance activity picked up noticeably again, allowing us to carefully analyse a large number of new bond placements. In this context, we acquired fixed-income securities from issuers with strong credit ratings, such as Deutsche Telekom, Kerry Group, NatWest and Norsk Hydro. The maturities ranged between 2030 and 2033 and were deliberately chosen in order to optimise our maturity band of maturing bonds. Depending on the issue, the yields of these securities range between 3.1% and 3.8% p.a., which means that they offer attractive income and high stability at the same time. In equities, we have reduced our positions in Colgate, GSK and Salesforce, and in return have made targeted investments in AstraZeneca, Intuit and Schneider Electric. These companies are characterized by strong business models, sustainable growth and long-term competitiveness. Our position in Medtronic, one of the world’s leading medical technology companies based in Ireland, developed particularly well. The company develops, manufactures and sells innovative medical devices and therapies in the fields of cardiology, neuromodulation, diabetes management and minimally invasive surgery. Financially, the company is characterized by stable sales, a strong operating margin and a sustainable dividend policy. Demographic development and rising healthcare expenditure offer long-term growth
opportunities thanks to innovative strength. Sustainability plays a central role in the corporate strategy. Medtronic pursues ambitious ESG goals, including a reduction in CO2 emissions, energy-efficient production processes and sustainable supply chains. In addition, the company uses its technologies to improve the quality of life of millions of patients worldwide and actively contributes to promoting access to medical care in emerging countries. Medtronic is therefore a good example of how we reconcile economic success with sustainability criteria.
In WoWiVermögen (current equity quota: 14%), we mainly took advantage of the resumption of new issuance activities. At the beginning of the year, the issue calendars are traditionally well filled. We were able to take good advantage of these opportunities as we prudently withheld liquidity from net cash flows last month. Among other things, we were able to successfully participate in new issues from well-known issuers such as Commerzbank, RCI Banque, Ferrovia, Natwest and Carrefour. Our current focus is on strengthening the mid-term segment. Due to our defensive structure, a number of bonds will still mature this year, so that we can continue to collect attractive coupons for our investors in the future. At the beginning of January, market sentiment was very tense with regard to European companies. Political strife in the governments of the two largest European economies, in addition to weak economic development, ensured that investors were in a negative mood for the European continent. This was reflected in the fact that, for example, yield spreads on French government bonds reached levels last seen in 2012. Credit spreads on Polish government bonds have also risen again recently. All this while risk premiums for European corporate bonds remain at the lower end of their 5-year average. Due to this relative divergence, we decided to significantly strengthen our sovereign bond segment in addition to issuing new corporate bonds. Government bonds of France and Poland are now a new portfolio component. The Republic of Poland is an interesting case, as the national debt in relation to gross domestic product is considerably lower than in Germany, for example (51.45% for Poland vs. 62.8% in Germany) and has a much more positive demography. In Poland, the largest proportion of the population is currently between the ages of 40 and 50, while in Germany the majority of the working population will retire in the next 10 years (60 years and older). In addition, the Polish economy has a significantly higher economic dynamism than its neighbour. In addition to higher long-term growth potential, the cyclical upswings and downturns are more pronounced than in the German economy. This results in a higher sensitivity to economic upturns or recoveries on the European continent. Another special situation is the fact that credit risk premiums rose sharply at the beginning of the Ukraine war in 2022. Any marginal improvement in the direction of a ceasefire and an upcoming reconstruction of Ukraine should ensure a relevant narrowing of the premiums and thus price increases in the corresponding bonds. We also increased our positions in Alphabet shares in January. After a pleasing performance in the still young year, we took the first profits in our position in LVMH. The portfolio company Enel paid a dividend of 22 cents per share in the month under review. Over the past 12 months, the company’s dividend yield has been approximately 6.2%. The distributions are covered by stable income in the energy business. For 2025, we are sticking to our course of generating decent income above money market interest rates through a combination of interest income and dividend income in order to offer defensively oriented investors a stable portfolio component.
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