Market index returns

Week to date since January 01, 2025 as of January 08, 2025

Index definitions: Global Real Estate = FTSE EPRA/NAREIT Developed Index; Global Infrastructure = Dow Jones Brookfield Global Infrastructure Index; Natural Resource Equities = S&P Global Natural Resources Index; Commodity Futures = Bloomberg Commodity Index; TIPS = Barclays US TIPS Index; Global Equities = MSCI World Index; Real Assets Index = 30% FTSE EPRA/NAREIT Developed Index, 30% Dow Jones Brookfield Global Infrastructure Index; 15% S&P Global Natural Resources Index; 15% Bloomberg Commodity Index, 10% Barclays TIPS Index. Source: Bloomberg, DWS. Past performance is not indicative of future results. It is not possible to invest directly in an index.

Market commentary: 

With 2024 in the rear-view, attention turns to 2025 and the performance it may bring. Developed market equities started the year off on a modestly positive note in the face of a new U.S. administration, stickier inflation, weakening sentiment, and upward pressure on U.S. Treasury yields. The VIX, an index of expected S&P volatility, rose a touch to 17.70, up from 17.35, with the larger moves happening in treasury yields. U.S. inflation breakevens rose 9 basis points (bps) and 8 bps for the 5- and 10-year respectively. The U.S. dollar strengthened 0.6%, up to 109.09 for the USD DXY index, an average of the dollar’s performance against major peers. Gold and oil followed suit, up 1.4% to $2,662 and 2.2% to $73.3, respectively.^[1]

Against this backdrop, Natural Resource Equities outperformed the broader equity market, as did Commodity Futures. U.S. Treasury Inflation Protected Securities (U.S. TIPS) lagged equities but outperformed Global Infrastructure securities and Global Real Estate securities. Natural Resource equities were led by energy companies, especially Oil and Gas companies. Precious Metals & Mining and Ag Chemicals also outperformed while Bulk Metals & Mining and Ag Products were weak. Within Commodity Futures, the Precious Metals (platinum) and Energy (crude oil) segments led the way. In Global Real Estate securities, Australia led performance for the period, followed by Data Centers and Regional Malls in the U.S. The U.K. lagged the most, as did Office in the U.S.

Why it matters: Uncertainty can breed investor discontent, and there is plenty to go around.  Global growth still faces challenges and the progress on inflation has slowed. Geopolitics could still play a wild card as the U.S. government transitions to a new administration and a new set of policies amidst several ongoing international conflicts. Politicians and investors alike will need to decipher posturing versus policy.

Macro Dive: This week, we review the latest jobs data, sentiment indicators, and inflation metrics.

• Spending the paycheck: Initial jobless claims came in lower than expected for the week ending Dec. 28 (211k vs. 221k est.). The change in Nonfarm Payrolls was better than expected as well;  it increased 256k in December, beating expectations of 165k, while the prior period was revised down by 15k. Employment data has been resilient in the U.S. and the unemployment rate ticked down to 4.1%, from 4.2%, and average hourly earnings gained 0.3% month-over-month (MoM) and 3.9% year-over-year (YoY). Steady employment and income data bodes well for consumer spending to continue its support of the U.S. economy. However, stronger jobs data contributed to the sell-off of government bonds, which has sent the U.S. Treasury 10-year bond yield to levels not seen since 2023^[1]
• Take a read: S&P Global U.S. Services PMI (Purchasing Managers Index) for December came in at 56.8, down from the prior month’s reading of 58.5, but still in expansion territory (>50), which is a positive, given that a majority of U.S. GDP is driven by the service sector. This contrasted against Manufacturing PMI data which rose to 49.4, up from 48.3. The ISM (Institute of Supply Management) Manufacturing data also strengthened to 49.3, up from 48.4. Factory orders and durable goods orders for November also fell further than expectations. The University of Michigan consumer sentiment index also saw a slight weakening to 73.2, down from 74.0, while the expectations index dropped to 70.2, down from 72.7.^[1]
• The heat of inflation: German inflation rose ahead of expectations for December, both MoM (0.4% vs. 0.3% est.) and YoY (2.6% vs. 2.4% est.). Inflation has been a hot topic, so to speak, especially in political campaigns across the globe. The issue has triggered changes in leadership as voters have demanded action on rising prices. Continued progress on taming inflation is a key input into central banks’ decision-making process for monetary policy. We will receive inflation data for the U.S. in the coming week, to provide additional insight into the Fed’s inflation fight progress^[1]

Real Assets, Real Insights: We’ll first look at the recent “Global Real Estate Strategic Outlook” from our DWS private market counterparts. Then we will continue exploring our theme of data center developments and impacts. Finally, we will look at how one confectioner is handling the rise in cocoa prices.

• How’s it looking? (Real Estate): Our real estate private market counterparts released their 2025 outlook which highlights the recovery period that the market has now entered. Given the backdrop of monetary policy easing and excellent fundamentals, the real estate market is recovering as prices have corrected and yields have stabilized. While the downturn was broad-based, the recovery has been selective and could still face problems that challenge the pace of the recovery. Such conditions could provide a compelling entry point to deploy capital in the asset class. You can find the full report linked here, Global Real Estate Strategic Outlook.^[2]
• Copper to cash (Infrastructure): Utilities in the U.S. have been responding to an increase in power demand--in part driven by  data center deployments--by investing in distribution and transmission projects. Most recently, American Electric Power Co. (AEP), agreed to parcel off a minority stake in its transmission business to raise capital to deploy into projects. Investment firms are also looking to capitalize on the growth in electricity demand, which is expected to surge. This latest announcement follows a similar trend seen across the grid as companies have responded to the projected demand growth by implementing plans to increase their generation and distribution capacity^[1]
• Give me a break (Commodities):  The cocoa market is expected to enter a fourth year of supply shortages as weather and disease disruptions have impacted crops in Ivory Coast and Ghana, which typically account for more than 60% of supply. Despite claims of being “well hedged” for 2025 cocoa needs, Pennsylvania-based Hershey Co. is applying for an exemption to exceed federal position limits on cocoa contracts. The company wants to purchase 4,900 contracts, which equates to 49,000 tons, representing nearly all the certified beans in New York warehouses. Hershey could be trying to limit or hedge the upside of expenses given price dislocations. There are other global production centers and yield is improving in smaller producers such as Ecuador and Peru, which could provide future relief for cocoa consumers^[1]