Infinity Portfolio Plus Update February 2025
Broader Market Moves
Key Market Drivers
Markets gyrated on economic and geopolitical newsflow last week, as President Trump’s headline-grabbing reoccupation of the White House gathered pace, and new figures on inflation and unemployment triggered a weaker end to the week. The S&P 500 (-0.2%) and Nasdaq (-0.5%) both sold off on Friday, but our market had previously recovered much of Monday’s tariff-driven fall, finishing the week down -0.2%.
Uncertainty around the scale, scope and impact of Trump’s tariff plans have driven volatility in recent weeks. While markets had been soothed by the proposal to delay Canadian and Mexican tariffs by a month, Trump’s comments on Friday that he planned to implement ‘reciprocal’ tariffs on trading partners shook the confidence of investors still trying to digest his plans to “take over” and “own” Gaza.
This nervousness was compounded by simmering inflationary concerns after the US unemployment rate fell to 4%, and consumer expectations for price increases over the next year jumped to 4.3% (up 100bp from last month). 10-year bond yields closed up 6 b.p. in response.
At this stage of the US earnings season, with ~62% of companies having released results, the percentage of companies reporting positive surprises and the magnitude of those surprises are both above their 10-year averages. The blended earnings growth rate for the fourth quarter is currently 16.4%, which, if sustained, will mark the highest year-over-year earnings growth rate reported by the index since Q4 2021. It will also mark the sixth consecutive quarter of year-over-year earnings growth for the index.
Domestically, the half year reporting season began to ramp up during the week. Although Australia has little direct trade with the US, analysts will be keenly watching commentary regarding the impact of tariffs on input costs and/or our major trading partners (e.g. China). High profile results on the agenda this week include CSL, Commonwealth Bank, Seven West Media, ASX, AGL, South 32, Cochlear and JB Hi-Fi.
Macro/Economic Newsflow
The US economy added 143K jobs in January 2025, (vs 307k in December and 170k est.), potentially reflecting a reduction in job openings of 556k to 7.6 million. Although the unemployment rate dipped by 0.1 percentage points to 4.0% in January, marking its lowest level since May, the data was in line with the view that the US labour market is gradually cooling.
University of Michigan consumer sentiment for the US fell to 67.8 in February (vs 71.1 in January and forecast). Inflation expectations for the year ahead soared to 4.3%, the highest since late 2023 and only the fifth time in 14 years with a 1%+ rise, as consumers appear worried that high inflation will return.
In Australia, a preliminary estimate of total dwellings approvals grew by 0.7% month-on-month to 15.2k units in December 2024. This represented a rebound from a 3.4% drop in the previous month but was below market estimates of a 1% rise.
Retail sales in Australia fell by 0.1% month-on-month in December 2024, marking the first decline in nine months. Though the drop was milder than the forecasted 0.7% contraction, the result points to weakening consumer spending, adding to expectations that the RBA will start cutting rates this month.
The Reserve Bank of Australia’s Index of Commodity Prices slumped 11.9% year-on-year in January 2025, marking the 23rd consecutive month of falling commodity prices.
A preliminary estimate of Euro Area inflation edged up to 2.5% in January, slightly above 2.4% in December and market expectations. It was the highest inflation rate since July 2024, driven by energy costs.
Meanwhile, nominal wages in Japan rose 4.8% year-on-year in December 2024, up from 3.9% in November, and marking the highest wage growth in nearly three decades.
Stocks in the News — S&P/ASX 200
NB: These are not necessarily the biggest price moves in the S&P/ASX 200, but rather elected to highlight particular newsflow of interest.
Major Share Price Moves — Infinity Portfolio Plus
NB: These stocks sit across all Infinity Portfolio Plus portfolios
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