Global equities move higher as President Trump starts his second term

Global and Philippine Market Update
Jan. 16 to Jan. 22, 2025

Global Markets

Global Stocks trended higher as tariffs were notably absent from the first round of executive actions.

• S. stocks rose as investors evaluated Donald Trump's initial actions as president and were relieved that he did not begin his second term with broad tariff increases. Although Trump did not provide concrete plans for universal tariffs or additional surcharges on close trade partners, he mentioned considering duties on Canadian and Mexican goods starting February 1. Despite ongoing concerns about tariffs and the potential for a global trade war increasing inflation, Goldman Sachs lowered its forecast for the likelihood of a universal tariff this year to 25% from 40% in December. Carol Schleif, chief market strategist at BMO Private Wealth, noted the market's relief and surprise that tariffs were not included in the first round of executive actions, suggesting a more nuanced approach by the administration.

• President Donald Trump directed federal agencies to investigate U.S. trade deficits, unfair trade practices, and alleged currency manipulation by other countries. In a presidential memo, he instructed the Commerce and Treasury departments and the U.S. Trade Representative to assess the economic and national security risks of large trade deficits and recommend appropriate measures, such as a global supplemental tariff. Investors and foreign capitals, who had anticipated immediate tariff actions, noted that Trump's memo essentially called for further research to support potential future tariffs.

Philippine Stocks

Philippine Stocks remained rangebound as investors awaited clarity on new US policies.

• The Philippine market remained cautious, closely watching US President Trump's initial days in office. Concerns centered around his protectionist foreign trade policies. The market experienced a quiet session post-inauguration, with US markets closed for Martin Luther King Jr. Day. However, futures trading saw gains as optimism grew over anticipated pro-economy measures, particularly in banking and energy, and the absence of new tariffs on day one. Financial markets were volatile at the start of Trump's second term, with a softer stance on China but signals of punitive tariffs on North American neighbors.

• Rizal Commercial Banking Corp. chief economist Michael Ricafort observed that the market found support due to expectations of a possible local policy rate cut at the next Bangko Sentral ng Pilipinas (BSP) meeting, based on recent signals from monetary officials. The Monetary Board's first meeting is scheduled for next month. Despite this, trading remained weak, and foreign investors continued to be net sellers to start the year.

Philippine Bonds

Philippine Bond yields stayed elevated amid rising inflation expectations.

• The Bureau of the Treasury fully awarded a reissued 10-year Treasury bond with a remaining term of nine years and four days at an average rate of 6.251%, which is lower than the prevailing secondary market rates. Expectations of further easing by Bangko Sentral ng Pilipinas (BSP) in the first half of 2025 have pushed yields lower, attracting investors to Treasury bills. However, long-term yields are rising due to higher government debt, increasing 10-year US Treasury yields, and rising inflation expectations.

• The Philippine Statistics Authority (PSA) reported that unmilled rice output fell to a four-year low of 19.09 million metric tons (MMT) in 2024, based on preliminary data. This represents a 4.84% decrease from 2023, marking the weakest production since 2020's 19.29 MMT. The full-year rice output was below the Department of Agriculture's (DA) revised estimate of 19.3 MMT for 2024. Analysts attributed the decline to dry spells and droughts caused by El Niño in the first half of the year, followed by heavy rains and typhoons in the latter part of 2024.

FWD Guidance: Uncertainty leads to downside risks, but diversification and a long-term investment horizon still provide the best chance for financial success.

Sources: (1) https://www.reuters.com/markets/us/futures-climb-investors-brace-president-trumps-trade-policy-plans-2025-01-21/ (2) https://www.reuters.com/world/trump-lay-out-trade-vision-wont-impose-new-tariffs-yet-wsj-reports-2025-01-20/ (3) https://www.bworldonline.com/stock-market/2025/01/21/648004/psei-drops-in-cautious-trade-as-trump-sworn-in/ (4) https://manilastandard.net/business/314549612/ph-stocks-rise-on-optimism-about-possible-bsp-rate-cuts.html (5) https://www.bworldonline.com/economy/2025/01/21/648098/2024-palay-output-hits-four-year-low-of-19-09-million-mt/(6) https://www.pna.gov.ph/articles/1242275 

Disclaimer: The purpose of this article is to inform and should not be taken as an advice or offer to purchase securities. Seek professional advice before making a decision based on this presentation. Information given does not represent the views of FWD and its agents and employees.