Global Markets Kickstart: Trump Empowers the Defense Industry
Trump Empowers the Defense Industry
Chart of the Week:
Inflation Stays Elevated, Powell Reiterates No Rush to Cut Rates
Fed Chair Powell stated in congressional testimony that the U.S. economy remains strong with a balanced labor market, while inflation is still above the Fed’s 2% target. If growth persists but inflation remains elevated, restrictive policy will stay in place longer. However, if the labor market weakens or inflation declines faster than expected, easing would be considered.
Market Recap:
Inflation Data and Tariff Concerns Weigh on Markets
Powell’s testimony delayed rate cut expectations, with CPI and PPI data surpassing forecasts. Investor concerns eased as tariff measures were delayed and talks began. European stocks stayed strong, bolstered by solid Q 4 earnings despite Trump’s tariffs. Mainland China and Hong Kong stocks rose, driven by the DeepSeek trend. Japanese stocks recovered after Shigeru Ishiba met Trump, with strong earnings and a weaker yen lifting the Nikkei.
What’s Trending:
Rising Trade Uncertainty Spurs Safe Haven Buying,
Gold Hits Record High
Gold demand has increased not only due to trade uncertainty but also because of central banks’ growing gold holdings. The 2022 Russia-Ukraine conflict sparked a global de-dollarization trend, with emerging markets, including Poland, India, China, and the Czech Republic, boosting gold reserves. Ongoing tariff policies from Trump and the weakening of the U.S. dollar due to rising debt will likely keep gold demand high.
In Focus:
Trump Calls for Military Spending Boost, Defense Stocks Extend Gains
During Trump’s first term (2016-2020), he expressed dissatisfaction with NATO allies’ military spending, particularly European countries. Before 2022, NATO European members had slow defense spending growth, but after the Russia- Ukraine war, spending surged, driven by aid to Ukraine and increased concerns about Russia. Trump, seeing the U.S. as NATO’s largest contributor, expected Europe to continue raising defense budgets under his pressure.
