Earnings growth wrestles inflation for control of market narrative

Amidst a flurry of executive orders from President Donald Trump, issued in the wake of his inauguration and days after he launched a new meme coin, investors steered over $5 billion into Alternative Funds during the third week of January with over $4 billion of that total going to Cryptocurrency Funds.

The second week of January saw Americans mourning their 39th president, watching in horror as large swathes of Los Angeles burned and – along with the rest of the world – positioning themselves for the return of Donald Trump to the White House. Against this backdrop, which also included better-than-expected inflation figures from the US and UK, investors steered another $20 billion into US Equity and Bond Funds, rotated from cryptocurrencies to gold, responded strongly to the first round of financial sector earnings reports and pulled over $1.8 billion from Equity Funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates.

A damn-the-torpedoes spirit gripped investors during the first week of the New Year.

Faced with bond vigilantes stampeding UK sovereign yields and year-ahead forecasts devoting space to overheated US valuations, the impact of tariffs on inflation and trade, China’s slowing economic growth, rising corporate defaults and the vast borrowing requirements of most leading economies, investors responded in contrarian fashion. They steered over $10 billion into both US Equity and Bond Funds while flows into China Equity and High Yield Bond Funds climbed to four and seven-week highs, respectively.