Update Equities – Earnings season brings a lot of volatility
In January, equity markets showed quite a different picture compared to last year. During the last month, it was the European equity markets that were able to outpace their US counterparts. Emerging markets performed in line with US equity markets.
On a sector level, it is noticeable that the US tech sector is far less dominant after a stellar run in the previous year. Meanwhile, after a bleak 2024, the healthcare sector is trying to catch up again, and the financial sector continues to deliver a solid performance. In recent trading days, equity markets have moved more in tandem so far.
Financial markets have a lot of news to digest these days. Ongoing political uncertainty remains a concern. Trade tariffs are the talk of the town, which could lead to increased volatility in the coming period. Geopolitical tensions continue to lurk under the surface, with investors still grappling with the potential impact of the Chinese AI start-up DeepSeek, especially concerning semiconductor and software companies. Fortunately, the earnings season is still in full swing. It gives an opportunity to analyse the financial data and outlooks that companies send to the market.
When it comes to corporate earnings, it has been a challenging week. We have seen a disappointing stock price reaction from pharmaceutical company Merck as it is halting its HPV-vaccine shipments to China, an important growth market. The results from search and cloud behemoth Alphabet were also poorly received by investors. While the results also had several green shoots, investors were less impressed by the growth in the cloud business and the huge amount of planned capital expenditures. Shares of Uber and chip producer AMD were also down after posting results. On a more positive note, we saw some recovery in Novo Nordisk’s share price, with investors responding positively to its guidance for the upcoming year. Similarly, the industrial company Johnson Controls share price rose after boosting their guidance and appointing a new CEO.
Arthur Boelman