Market Quote: Inflation Rises, Markets Rotate
Author: The editor's desk
February 14, 2025
A mid-week analysis of what’s happening in global financial markets from the perspective of AGF’s investment management team.
Cut Back
The U.S. Federal Reserve (Fed) seems unlikely to cut interest rates until the end of the year and may end up not cutting at all in 2025 following this week’s release of U.S. inflation figures for January that showed prices rising more than expected.
Granted, that could change once the U.S. administration’s true intent regarding tariffs is better known and finally implemented to full effect in the weeks ahead. If levies on imports result in more inflation, we expect the Fed will be even less inclined to cut rates, but the central bank must also weigh the potential of weaker economic growth should other countries retaliate with tariffs on imports from the U.S. In that scenario, rate cuts may end up being a priority again.
Taking a Spin
Globel equity markets continue to perform relatively well in the face of heightened geopolitical tensions. This can be attributed in part to a stellar U.S. earnings season over the past few weeks, but the stabilization of U.S. bond yields may also be viewed as a positive catalyst.
Investors could benefit from remaining diligent about their investments in a landscape that continues to foster extreme market rotations, much like it did in 2024. We believe more of this trend is in store because headline risk surrounding tariffs and other uncertainties are unlikely to disappear anytime soon, causing systematic knee-jerk reactions across financial markets, particularly in over-crowded and high-valuation areas. This potential increased volatility underscores the importance of maintaining a balanced approach in equity portfolios.
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The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds, or investment strategies.
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Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. Our companies deliver excellence in investing in the public and private markets through three business lines: AGF Investments, AGF Capital Partners and AGF Private Wealth.
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