Insights

ICM Monthly Outlook - March 2025

February and March have been tumultuous months. It is all President Trump’s doing, as far as we are concerned. Investors can’t make head nor tail of President Trump's daily decrees, diatribes, and general lack of clarity. Some investors have found the Trump cards too hard to hold. Markets like certainty, but right now, they have none, forcing some investors to turn risk-off until the dust settles. So, the market’s general euphoria for President Trump’s victory has waned. The President’s own euphoria seems to have waned, given that he has admitted that the U.S. consumer must endure some economic discomfort. Our central case remains that President Trump will come to his senses before any significant adverse unintended consequences. Let us not forget that the equity market, the bond market, and big business in the U.S. looms large over President Trump if he gets too wayward with these policies.

ICM Monthly Outlook - February 2025

Financial markets have enjoyed a decent start to 2025. Year to date, in rank order, the Euro Stoxx 50 is up 10.0%, the Dow Jones is up c.4.8%. the S&P 500 is up c.3.2%, and the NASDAQ is up c.1.7%. The oil price is up 2.6% year to date. The gold price has increased 10.2%, in a straight line, whereas US equities have been a roller coaster for investors this year so far. We can confidently say that volatility will likely continue for the foreseeable, given President Trump's predictably unpredictable behaviour. President Trump is doling out populist executive orders faster than Elon can tweet. No day goes by when the world is not left wondering what comes next from the leader of the free world. By way of example, consider the 6th of February; but you can take your pick of any day since the 20th of January. On the morning of the 6th, the US President negotiated a peace deal between, ahem, the PGA Golf Tour and LIV Golf, and in the afternoon, he announced that he would “take over” Gaza. That is one hell of a day’s work by anyone’s standards! I fear complacency for whimsical decisions will have long-lasting consequences.

ICM Monthly Outlook - January 2025

Happy New Year, everyone. 2024 was another prosperous year for anyone who went long and stayed long risk assets, just like in 2023. The US economy showed remarkable resilience in 2024, confounding the chorus of doomsayers proclaiming an imminent recession for much of the year. In December, the US Federal Reserve Bank cut interest rates as expected. Chairman Powell’s subsequent commentary tempered expectations for more near-term rate cuts, causing the equity markets to slip. US inflation is now dormant, not extinct. The Federal Reserve Bank’s concern for inflation hinges on President Trump’s policies from here. We are buying the dip, as we explain in our latest newsletter.

ICM Monthly Outlook - December 2024

Investors will look back on the 2024 US presidential election as a turning point for financial markets. Some sectors of the US financial markets have rallied like billyo since President Trump's re-election. Investors expect pro-growth policies, including tax cuts, deregulation, and increased fiscal spending. Investors have interpreted President Trump's re-election as a green light for risk-on, igniting a rally across equities, credit, and cryptocurrencies. Disinflation was on trend all year. Economic growth was better than expected. Interest rates did not fall as fast as anticipated and therein lies some potential for US economic expansion to accelerate, in addition to tailwinds from President Trump's policies. We still believe there are plenty of tailwinds to sustain the rally and potentially accelerate US economic expansion.

ICM Monthly Outlook - November 2024

The US equity market turned full risk-on as soon as the election result became clear. Initially, we saw a relief rally due to the certainty of the outcome, followed quickly by a rally premised on President Trump’s expansionary economic policies, tax cuts, deregulation, and expected higher GDP growth in the US. The fact that US equity markets snapped higher so suddenly tells us the result was not priced in beforehand. Based on the mountain of published analysis so far, it seems the economy kept top billing. Voters punished the Democrats for the ill effects of inflation on their daily lives over the last four years. President Trump has promised to end inflation. US voters will expect him to deliver, but that might be easier said than done. Read on to find out what we believe the market implications will be.

ICM Monthly Outlook - October 2024

In recent months, we have mentioned reasons to be concerned around global trade, such as the possible introduction of tariffs by the next US President. This month, the European Commission imposed tariffs as high as 45% on electric vehicles from China due to state subvention for these industries. The Chinese Government protested their innocence and threatened to respond with tariffs on agriculture and European automobiles, much to the frustration of some member states who stand far worse from losing competitiveness in such a large market. The US Federal Reserve Bank surprised most investors when it cut rates by 50 basis points in September, with interest rates in the range of 4.75% to 5% now. (Thank God we didn’t spend long debating that event - sarcasm alert for our US readers.). Financial markets rallied hard after the 50 basis point cut. Some interpreted the strong action as an admission of tardiness by the Federal Reserve, suggesting it had fallen behind in executing a soft landing. The better employment data in September lessens the need for further aggressive (50 basis points) cuts. The market expects only two more 25 basis point rate cuts in 2024, whereas we anticipate possibly only one more 25 basis point cut for this year.

ICM Monthly Outlook - September 2024

Uncertainty and volatility go hand in glove. Uncertainty refers to the lack of predictability of information, making investment outcomes harder to forecast. Volatility measures the dispersion of short-term shocks around a long-term mean. Volatility has risen since the start of July due to increased uncertainty. Weak job data in the US and a divergence in central bank policy expectations between the US and Japan brought on August’s volatility. We believe the market volatility since the end of July is mid-cycle skittishness rather than the prelude to a more severe end of cycle sell-off. That said, we are not surprised that volatility has increased given the vulnerabilities festering over the last few months. Now, investors are debating all the interconnected economic factors, overlayed with rising political and geopolitical risks, to determine what will happen next. Investors are less endowed with certainty right now. There is no question that weak economic data spooked the market in early August, but we have no reason to believe this will worsen in the coming months. The latest economic data has been encouraging, with the unemployment data not as bad as feared and consumer confidence higher than expected.

ICM Monthly Outlook - August 2024

For some time now, we have been bullish on the outlook for risk assets, a view that has primarily played out. Firmly held views can often fall victim to confirmation bias, the tendency to interpret new information in such a way as to confirm existing beliefs. We have enough humility to realise that we are not immune. After such a strong rally, now seems like an ideal time to revisit our bullish thesis on risk assets. Economic growth, like inflation and interest rates, continues to support risk assets. Therefore, in our opinion, we remain in a Goldilocks-like environment due to the twin tailwinds of increasing growth and slowing inflation. While we continue to believe that we are in a Goldilocks period, we recognise that it is maturing and could be in its later stages.

ICM Monthly Outlook - July 2024

The first half of 2024 will be a tough act to follow for equity markets. The S&P has returned c.18% year-to-date and 16% in the first half. Like recent years, a big theme has dominated this year's return. Approximately two-thirds of the US equity markets’ returns were driven by just a few names: Nvidia, Apple, Microsoft, Amazon, and Meta. Even Tesla, one of the laggards of the Magnificent 7, has rallied lately thanks to renewed optimism for robo-taxis and higher sales. Year-to-date, investors' returns are delineated by ‘performance with tech stocks’ versus ‘performance without tech stocks. We are cautious going into 2025. The changing political landscape is the biggest risk to the global economy, in our opinion. Polarised politics will lead to more extreme policies, higher taxes, less globalisation, and lower investor returns.  Against a backdrop of increased tariffs and higher taxes, we are not pollyannish for global trade, which could result in a lower oil price from reduced demand. On the other hand, the value of the US dollar should decline against its trading partners if the Federal Reserve Bank starts to cut rates faster than the other major central banks, which is likely. This would be welcome news for emerging economies. Typically, looser financial conditions and credit expansion favour the real side of emerging market economies. Improving global liquidity and a lower oil price makes it easy to see a path to higher global growth.