Market commentary by eToro analyst for Romania, Bogdan Maioreanu
Investors are anxiously eyeing the tariff-related decisions Donald Trump may make once he reaches the Oval Office in the White House. And this is showing in the markets, the S&P 500 index, Dow Jones and Nasdaq practically moving sideways, with gains below 1% year to date. Among investors who support the crypto area, there is optimism because Trump could implement friendlier policies with fewer regulations that could benefit crypto assets.
Despite this tense start to the year, companies' profitability projections may bring confidence in the financial markets, but their valuations urge caution. This is the problem. The valuation of companies in the S&P 500 index, for example, has risen to an average of over 23 times their future earnings, which is much higher than the historical average. The earnings reporting season for the fourth quarter of 2024, which JP Morgan traditionally opens unofficially in mid-January and Nvidia closes in the second half of February, will also clarify companies' expectations for 2025.
The US Federal Reserve, European Central Bank and other central banks will continue to cut interest rates through 2025, but may not do so in this first quarter. The market sees only one interest rate cut by the Fed this year, sometime in June, a normal effect of the uncertainties about the steps the Trump administration will take and their impact on the economy. This is despite Trump's statements that interest rates are too high, even as he decried still-elevated inflation. This is setting up renewed tensions with the US Federal Reserve chair, Jerome Powell, who resisted pressure to cut rates during Trump's first term. The Fed expressed concern in its last minutes about what the economic environment could look like this year because of proposed changes by the incoming Trump Administration.
In the latest eToro Retail Investor Beat survey, when asked about the biggest external risks to their portfolios, global retail investors ranked a potential recession in the global economy, an international conflict and inflation in their top three concerns. And Donald Trump's latest public statements feed precisely these fears. Romanian retail investors are also feeling these uncertainties, with 50% saying they will not increase their portfolios in the first quarter of this year, versus 47% of investors surveyed saying they will invest more. However, 59% of individual investors globally expect the bull market to continue through 2025. Romanian investors are even more optimistic, with 76% of those surveyed expecting this. When it comes to which equity markets will offer the best returns in 2025, 46% of Romanian investors are betting on the United States, 37% on Europe and 24% see the Chinese market.
