1) 📊 Last Week in Review (Week ending January 9, 2025)

Performance snapshot (levels + weekly % + YTD):

• FTSE 100: 10,124.60 | +1.7% (YTD +1.9%)
• S&P 500: 6,966.28 | +1.6% (YTD +1.8%)
• MSCI World: 3,922.31 | +1.6% (YTD +1.8%)
• UK 10y gilt yield: 4.38% (-16 bp) | US 10y: 4.17% (-2 bp)
• GBP/USD: 1.3403 (-0.4%) | Brent: $63.34 (+4.3%)

What moved markets:

• Equities pushed to fresh highs as lower developed‑market yields and still‑solid US data kept the “soft‑landing with gradual cuts” narrative intact.
• Energy and miners outperformed after renewed geopolitical worries in oil‑producing regions and M&A chatter in the mining space, lifting the FTSE 100 back to record territory.
• US data were mixed but not alarming, with softer labour indicators offset by resilient services activity, allowing risk assets to grind higher while rate‑cut hopes stayed in place.

Sector & style:

• Best sector (UK): Mining/Energy as oil and metals rose on geopolitical and deal news.
• Growth vs Value: Growth still leads globally, helped by mega‑cap tech strength in the US.
• Large vs Small: Large caps outperformed, with flagship indices (FTSE 100, US500) at or near records while broader baskets lag.

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2) 🌟 The Defining Narrative

Inflation Reality Check: Can the US Consumer and Earnings Save the Bull Market?

Last week’s hot jobs data broke the bond market, sending yields spiking. This week, the focus shifts to prices (US CPI) and profits (US Bank Earnings). If inflation remains sticky while rates rise, the “Goldilocks” narrative for equities unravels, forcing a deeper correction in global risk assets.

3) 🏦 Central Bank Watch

What’s scheduled: Several MPC speeches and market‑sensitive remarks in the mid‑week UK data window (e.g. BoE speakers around Wednesday–Thursday UK time).

Market pricing: Futures still imply several 2026 cuts, but less front‑loaded than the Fed; path sensitive to incoming UK GDP and inflation data.

Key thing to listen for: Whether speakers lean towards earlier easing because of weak growth or emphasise inflation persistence, especially in services and wages.

UK implications: Any dovish tilt would support gilts and domestic rate‑sensitives, but could cap GBP; a more hawkish tone risks the opposite.

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4) 🌍 Macro Calendar

Day (UK)	Region	Event	Consensus vs Prior	Why it matters	Most sensitive asset
Tue 13:30	US	PPI Inflation (Dec)	0.2% vs 0.4%	Leading indicator for CPI; high PPI signals sticky pipeline pressures.	US 10y Yield
Wed 07:00	UK	CPI Inflation (Dec)	2.6% vs 2.6%	Crucial for BoE pricing. A drop boosts hopes for a Feb/Mar cut.	GBP/USD
Wed 13:30	US	CPI Inflation (Dec)	Headline 2.9% vs 2.7%	The #1 Event. Any beat confirms “higher for longer” rates.	S&P 500 / Gold
Thu 07:00	UK	GDP (MoM) (Nov)	0.2% vs -0.1%	Confirms if UK technical recession risk is fading or growing.	FTSE 250
Thu 13:30	US	Retail Sales	0.6% vs 0.7%	“Hard landing” check. Strong sales = Fed stays hawkish.	USD
Fri 07:00	UK	Retail Sales	0.4% vs 0.2%	Signs of life in the British consumer after a weak Christmas?	GBP/USD

5) 📊 Earnings Watch

Q4 Earnings Season begins. Focus is on US Financials (economic health check) and select UK reporting.

US (financials + key global tech supply chain):

• JPMorgan (JPM) — Tue:
  • What matters: net interest income + credit quality + management tone on growth
  • The “tell” headline: “consumer strong” vs “delinquencies rising”
  • Read-across: banks as a live read on the economy and risk appetite
• Bank of America (BAC) — Wed:
  • What matters: NII trend + deposit costs + credit metrics
  • The “tell” headline: pace of loan growth and charge-offs
  • Read-across: broader US credit conditions
• Wells Fargo (WFC) — Wed:
  • What matters: NII + consumer/SME credit trends
  • The “tell” headline: guidance clarity (or caution)
  • Read-across: “main street” health signal
• Citigroup (C) — Wed:
  • What matters: trading/investment-banking tone + credit
  • The “tell” headline: market-sensitive businesses vs core banking
  • Read-across: risk appetite across capital markets
• Goldman Sachs (GS) — Thu:
  • What matters: investment banking + trading + asset & wealth flows
  • The “tell” headline: “deal activity stabilising” vs “still muted”
  • Read-across: market activity and confidence
• TSMC (TSM) — Thu:
  • What matters: AI/advanced-node demand and 2026 outlook
  • The “tell” headline: guidance that confirms (or questions) AI capex momentum
  • Read-across: global semis/AI complex

UK (not many FTSE 100 “mega” reports this week, but some market-moving updates):

• Oxford Nanopore — Mon (trading statement): read-through for UK growth/biotech sentiment
• Persimmon — Tue (trading statement): UK housing demand/cost backdrop signal

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6) 🧠 Sentiment Check

Current mood: Cautiously Risk‑on – record‑high indices but growing sensitivity to macro data.

Market gauges:

• VIX / MOVE: VIX in mid‑teens and US 10y volatility moderate, consistent with complacent but not extreme risk appetite.
• Rates: Real yields have eased slightly as inflation expectations hold near target and nominal yields drift lower.
• Credit spreads: Still tight, signalling confidence in soft landing and supportive liquidity.
• USD/JPY: Elevated but off extremes, reflecting BoJ’s slow normalisation and periodic risk‑off demand for USD.

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7) 📈 Valuations & Expectations

• Valuation snapshot:
  • S&P 5S&P 500 fwd P/E: around 20–21x, above long‑run average, reflecting AI and soft‑landing optimism.
  • FTSE 100 fwd P/E: roughly 11–12x, still at a discount to global peers despite record price levels.
  • Implication: The US looks highly valued, while the UK retains a valuation cushion but relies more on cyclicals, energy and financials.
• Earnings expectations:
  • Next‑year EPS growth (consensus): US high‑single‑digit to low‑double‑digit; UK mid‑single‑digit given sector mix.
  • Revisions trend: Globally stable to modestly positive, with tech and communication services leading, while more cyclical areas remain mixed.

8) ⚡ The Bottom Line

• If US CPI comes in hotter than expected → then yields likely rise and equity multiples compress → watch US 10y and high-duration growth
• If big banks guide cautiously on credit/loan growth → then “soft landing” confidence can wobble → watch US financials and credit spreads
• If UK monthly GDP surprises weaker → then gilts could rally but GBP may soften → watch UK 10y and GBP-sensitive UK equities.

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© Clearly Investments Ltd. Educational information only. This is not investment advice.