US stocks in plus due to Trump

Looking back at the fourth quarter, these were the main developments:

• In November, Donald Trump was re-elected as president of the United States. In addition, the Republicans won a majority in the American Senate as well as in Congress. This makes it easier for Trump to execute his policies (including tax cuts and deregulation). The markets expect that this will play out positively for domestic businesses.
• Inflation levels in Europe as well as in the United States continue to be reasonably high; higher than the targets set by the central banks.
• This quarter, the American central bank (Fed) lowered its policy interest rate twice by 25 basis points, to a range of 4.25% - 4.5%. In the last meeting of 2024, Fed Chairman Powell struck a hawkish tone. That means a tighter monetary policy to rein in inflation, while the markets were counting on further rate cuts going forward. Powell also indicated that further progress would need to be made in terms of mitigating inflation before further interest rate cuts would be possible.
• The European central bank (ECB) also lowered interest rates twice by 25 basis points this quarter, to 3.0%. In its last meeting, the ECB's sentiment was less dovish (this means a less easing monetary policy) than investors had hoped for.
• Political turmoil in Europa. The French parliament dissolved Michel Barnier's cabinet by way of a vote of no confidence. This was sparked by discontent over austerity plans. In Germany, early elections will be held in February 2025, as Christian Lindner, Finance Minister as well as leader of the liberal coalition party FDP, was fired. As a result, the coalition no longer had enough support in the Reichstag.
• It was a poor quarter for European sovereign bonds. Bond investors demanded higher risk compensation amid concerns about rising budget deficits among European governments. 
• European equities also performed poorly this quarter. American equities, on the other hand, benefited from the large victory of Trump and the Republicans.