Markets start the year with broad gains

This was by no means a given in light of recent geopolitical tensions. The arrest of Venezuelan President Nicolás Maduro, followed by statements from the US administration and international reaction, drew significant attention at the beginning of the week. However, this has so far played only a minor role in capital markets.

While plans by the US government to potentially utilize Venezuela’s vast oil reserves could have noticeable long-term implications for market dynamics, the implementation would likely take years, not least because the necessary infrastructure needs to be built. US energy companies, particularly equipment suppliers, responded positively to these considerations. Venezuela has 17% of the world’s oil reserves. But despite holding the world’s largest portion of reserves, Venezuelan oil most recently accounted for only about 1% of global trade.

Instead, markets were focused on the broader macroeconomic environment and growth themes. The monetary policy backdrop is favourable for capital markets. Recent economic data point to stability, with some room for further easing. As a result, markets entered the new trading year in a renewed “risk-on” mode, with a strong focus on growth sectors, supported in part by expectations of potentially lower energy prices.

Information technology and related sectors posted a solid start to the year, aided by positive news from the artificial intelligence space. Large parts of the healthcare sector also rebounded and outperformed their benchmark indices in the first trading week. The defence sector likewise emerged as a winner, benefiting from more attractive valuations, recurring geopolitical tensions and rising government spending, after coming under pressure late last year. Consumer staples lagged on both sides of the Atlantic, as increased risk appetite led to portfolio rotations away from defensive holdings.

At the corporate level, several market-moving announcements stood out this week. Particular attention was paid to the keynote address by Nvidia CEO Jensen Huang at the CES technology fair in Las Vegas. Central to his presentation was the new “Vera Rubin” chip generation, which delivers a three-fold increase in AI training performance and a five-fold improvement in inference. Another focus was autonomous driving and robotics. With the open-source Alpamayo platform for “Physical AI,” Nvidia is lowering entry barriers for automakers through partnerships, such as with Mercedes-Benz, and has even hinted at potential robotaxi applications from 2027 onwards.