If Carlsberg did trading months..... TPP strategy of the month..

For those who expected a volatile 2025, January did not disappoint.

Before we get into the details, let’s take a step back and observe the overall trend for the month. European stocks outpaced other major global equity markets in January as fears of sweeping US tariffs subsided. In early February, it looks like investors may have celebrated too soon, but something tells us the threat of, and implementation of, tariffs will take up a lot of bandwidth in 2025. This rollercoaster has only just begun.

The January rally had investors moving out of the crowded AI trade and into ‘value’. The Stoxx Europe 600 index edged up to a record closing high on Friday 31st, leaving it up 6.3% for January, its best monthly performance since November 2023.

The US’s S&P 500 index rose around 3%, while Japan’s Topix was up only 0.1% over the same period. London’s FTSE 100 index finished at a record high taking its returns for the year to 6.1% and marking its best monthly performance since November 2022. However, this is following on from a poor December during which the London benchmark posted its worst weekly performance for over a year.

The gains have sparked renewed hopes of a sustained revival in the region’s equity markets. While some have at times performed strongly, Germany’s Dax rose by nearly one-fifth last year, as a whole Europe has lagged well behind the US over the past decade. “After so many years of underperformance, not much needs to happen before everyone becomes excited . . . Everyone is getting warm about Europe,” said Roland Kaloyan, a strategist at Société Générale.

Investors piled into US stocks last year amid excitement about the growth of artificial intelligence, with a small group of tech stocks once again driving gains. At the same time, US President Donald Trump’s tariffs threats weighed on Europe, which sends roughly one-fifth of its exports each year to the US, while homegrown political crises in countries such as France diminished investors’ appetite for bonds and equities alike.

But January saw the biggest rotation from US stocks into Eurozone stocks in almost a decade, according to Bank of America, as investors fled richly valued tech stocks in favour of European defensives, including banks, pharmaceuticals and luxury retailers. Last week’s global tech sell-off sparked by Chinese start-up DeepSeek’s advances in artificial intelligence has only accelerated this shift, analysts said.

After the AI wobbles, “investors have been moving towards Europe”, as the region has less exposure to technology stocks, said Mohit Kumar, an economist at Jefferies. Just eight per cent of the Stoxx Europe 600 is made up of companies in the IT sector, compared with 30 per cent of the S&P 500, according to calculations by SocGén.

The US index’s tech share rises to 45 per cent if stocks such as Amazon and Alphabet, categorised by the French bank as consumer and communications companies respectively, are also included. In addition, Trump’s softer stance on tariffs, the White House has said the US will go ahead with 25 per cent duties on goods from Mexico and Canada and 10 per cent on goods from China, although as yet it has failed to hit the euro area with levies, has come as a relief to investors.

These tariffs were due to be implemented on Tuesday 4^th February but last-minute negotiations have results in them being ‘paused’ for a month.

“Expectations for Europe were on the floor,” said Sharon Bell, a senior equity strategist at Goldman Sachs. “This has changed.” After years of underperforming Wall Street, European shares are also trading near their widest valuation discount to the US since at least the late 1980s.

The UK market in particular has benefited from low valuations, say analysts. “I have been quite surprised by the increased interest in UK equities, it is probably because the growth expectations are pretty high compared to the rest of Europe,” Bell said. “And obviously it is cheap. It could also be seen as a hedge against tech…….for diversification.”

The strong performance of European stocks comes even as the Eurozone struggles to recover from a sharp rise in energy and food prices triggered by Russia’s full-scale invasion of Ukraine, while the US economy continues to grow strongly.

Data this week showed the Eurozone economy unexpectedly stagnated in the fourth quarter. However, the prospect of further interest rate cuts by the European Central Bank may cheer investors, analysts said. In the US, markets believe inflationary pressures will force the US central bank to keep rates higher for longer. “If the market starts to freak about inflation in the US that will also be more positive for European equities in comparison,” said SocGen’s Kaloyan.

However, it is hard to ignore that most of the noise about European stocks is mostly because they seem like the least worst option right now. Equity funds have to buy equities. That sounds silly, but what it means is that the money needs to flow somewhere. Big tech has had a good run, but it’s expensive. In January Nvidia beat its own record for the largest daily fall in capitalisation of any company in history.

Big tech is volatile. It is priced using future earnings which have a tail risk that can whipsaw around as unforeseeable factors have to be priced in as they appear. Last week, DeepSeek shattered the belief that AI is all about Nvidia. This wiped $600 billion of the value of what was briefly the world’s most valuable company. The actual consequences of DeepSeek using fewer chips to train is unknown, but this doesn’t stop the stock market from reacting.

February is already about the ignition of trade wars, but the fact is, there’s always something for us traders to worry about.

Back to Europe and the least worst option. European GDP is flat and going nowhere. After the recent Budget, we would now expect a similar performance from the UK economy. The German stock market, the DAX 40, performed well last year, but this is despite the German economy posting its second year of contraction in a row.

Europe's largest economy shrank by 0.2% during 2024 - on top of a 0.3% contraction in 2023.

If you thought you understood why markets go up and down, think again. A strong performance (stronger than the UK) during the worst bout of economic stagnation for the country since the second world war!

With Trump’s tariff threats increasing, it is hard to see this turn around any time soon. One of the reasons for the FTSE 100’s recent run of form in January is most likely that it should be less affected than most and has historically been a bit cheap and light on tech, and therefore a good place to hide. This could very well be what is going on, fund managers are hiding, and we don’t blame them. Some indices will always do better than others in any given year, the problem is, nobody knows which ones will win, and which ones will lose.

At TPP, we trade in and out of most major markets. By diversifying with a number of different trading strategies, you are more likely to catch the good runs when they come. Unlike many equity fund managers, our traders can leave capital in cash to use when the right moment comes along.

If the global economy looks strained, or Donald Trump is throwing tariffs threats around for fun, then being in cash can be a satisfying place to be. Even when markets fall, they won’t do so in a straight line. TPP looks to take advantage of downward moves by picking levels to buy and then sell back out again. If a tracker were able to miss a few downward drops, then it becomes a superior tracker. This concept is simple.

January was a great example of this. Overall, US markets were fairly flat, some European markets performed well, yet nearly every TPP trading strategy outperformed its benchmark. Our most active, higher risk, strategies did so by some margin.

Our portfolios were all underweight when the markets collapsed overnight before big tech dragged down the global market. Nvidia fell 17% losing $600 billion in a day, one Nvidia ETF lost 51% in a day, yet TPP’s traders were quick to react. A few stayed in cash, retaining client capital, and a few bought into the fall after the market settled.

The result, very few clients were negatively impacted by the drop, and nearly every one of them actually made money from it. This is the difference between an actively traded portfolio run by professional traders, and the stale wealth management model most investors are exposed to.

What we do is very different to the standard Investment Management model. We aren’t saying there isn’t a place for the long term ‘buy and hold’, but that is all it is, and that is their only option. Our actively traded strategies will be underweight, flat, fully invested……whatever works to heighten returns.

Of course, the value of the investment could go down as well as up, and past performance is no guarantee of future results, but what else do we have to go from when investing?

Our portfolios do the talking for us. We have built the future of investment management. If you want proof, just have a look at how our strategies performed in January:

As you can see, it has been a great start to 2025 for the TPP trading strategies. The lower risk products have had the slower start, but this is often to be expected. They will prove less volatile, and more consistent with market performance. The Buffett Tracker comprises the same stock selection held by Warran Buffet himself. A little leverage is then added using Berkshire Hathaway stock so as to capture all of his investments, not just his stock selections.

It has been a steady start for the Oracle of Omaha as always, but one thing he has proven to us all is that he beats his benchmark and is subsequently one of the most respected investors of all time. We could do worse than to track such a world-famous stock picker. He has always said that his favourite holding period is ‘forever’ and so it should be. Pick well and stick with it. Our stock picking strategies are slightly outperforming him for now, but it’s our Futures strategies that have really stood out this month with 3 of them gaining over 10% in January alone.

We’re sure you’ll agree, this is groundbreaking and revolutionary to the world of investing. It's too soon to celebrate but what a great start to the year for TPP and its clients.

This investment platform is available to you and if you would like more information please do contact us.

Disclaimer: The views expressed in this article are the author’s own and should not be considered in rendering any legal, business or financial advice.

Past performance may not be indicative of future results. Therefore, you should not assume that the future performance of any specific investment or investment strategy will be profitable or equal to the corresponding past performance.

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