top of page
Search

Economic Update - February 2025

  • Writer: Luke Palmer
    Luke Palmer
  • Feb 10
  • 3 min read


Welcome to our first Economic Update for 2025 after what has been a very busy January in markets. We'll provide you with insights into the performance of various sectors and the key factors influencing financial markets.



Overall Market Performance


The global financial markets have experienced a mix of positive and negative influences this month. The US economy continues to exhibit solid growth, with a GDP growth rate of 2.5%. The services sector remains strong, and manufacturing is showing signs of recovery. However, the announcement of new tariffs by President Trump on February 1 has created uncertainty and potential headwinds for global growth.



Sector Performance

1. Technology:

  • Positive Influences: The technology sector has benefited from continued innovation and strong consumer demand for tech products and services.

  • Negative Influences: The recent sell-off in artificial intelligence-related stocks has impacted the sector, however diversified portfolios have remained resilient during this period.

 2. Financials:

  • Positive Influences: Financial institutions have seen improved profitability due to rising interest rates and strong economic growth.

  • Negative Influences: Concerns about potential inflation and higher long-term interest rates have created some volatility in the sector.

 3. Consumer Discretionary:

  • Positive Influences: Strong holiday retail sales and consumer spending have supported the sector.

  • Negative Influences: The threat of tariffs and trade tensions could impact consumer confidence and spending in the coming months.

 4. Healthcare:

  • Positive Influences: Continued advancements in medical technology and pharmaceuticals have driven growth in the healthcare sector.

  • Negative Influences: Regulatory uncertainties and potential changes in healthcare policies remain a concern for investors.

 5. Energy:

  • Positive Influences: Rising oil prices and increased demand for energy have benefited the sector.

  • Negative Influences: Geopolitical tensions and environmental regulations continue to pose challenges for energy companies.


Focus of Financial Markets Going Forward

Looking ahead, the focus of financial markets will be on several key factors:

  1. Interest Rates: The behavior of long-term interest rates, particularly the US 10-year bond yield, will be closely monitored. The unusual rise in long-term rates despite the Fed's rate cuts has created a headwind for long-term borrowing.

  2. Inflation: Inflation remains a critical concern, with the current rate at 2.8%, above the Fed's target of 2%. The potential for rising inflation could lead to further interest rate adjustments.

  3. Trade Policies: The impact of new tariffs and trade tensions will be a significant factor. The longevity and extent of these tariffs will determine their economic consequences.

  4. Economic Growth: While the US economy is currently strong, the potential for a protracted trade war could threaten global economic growth. Investors will need to remain vigilant and adjust their portfolios accordingly.


Key Factors Impacting Financial Markets

  • US Government Debt: The rising levels of US government debt and deficit spending are a concern for bond investors. The need for higher interest payments to attract investors could impact bond prices.

  • Global Trade: The ongoing trade tensions and potential for new tariffs will continue to influence market sentiment and economic growth1.

  • Corporate Earnings: The outlook for corporate profits, particularly in growth sectors, will be a key driver of market performance.


In conclusion, January 2025 was a month of mixed signals for the financial markets. While the US economy remains strong, the potential for inflation, rising interest rates, and trade tensions necessitates a cautious approach. Investors should stay informed and consider diversifying their portfolios to navigate these uncertain times.



Stay tuned for our next update, and if you have any queries in the interim, please don't hesitate to reach out.

 
 
 

Comments

  • Facebook
  • LinkedIn

Phone: 07 3185 3414 Mobile: 0488 022 676
Email: luke@elevateadvicegroup.com.au
Mail: PO Box 889, NORTH LAKES QLD 4509  

Elevate Advice Group Pty Ltd (ABN 88 632 894 930) is 

a Corporate Authorised Representative of L2 Financial Pty Ltd

(ABN 83 678 851 020) AFSL No. 700011

This information is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. We strongly suggest that no person should act specifically on the basis of the information contained herein but should seek appropriated professional advice based upon their own personal circumstances. Although we consider the sources for this material reliable, no warranty is given and no liability is accepted for any statement or opinion or for any error or omission. Past performance is not a reliable indicator of future performance. Please refer to the Product Disclosure Statement (PDS) before investing in any products mentioned in this communication. This information is current as at the date of this document.

bottom of page