We share our latest observations on global asset markets in relation to T8 Energy Vision

All movements are expressed in United States (US) dollar terms, unless otherwise stated.

Key points

• Global equities rebounded after cooler than expected inflation data triggered a reversal in bond yields.
• T8 Energy Vision posted a positive return and outperformed its benchmark notwithstanding markets and future energy stocks being rattled by multiple left field factors (US presidential executive orders, DeepSeek and tariffs).
• The most important factor in energy markets at the present time is that for the first time in 20 years the US has increasing demand for electricity, driven by the boom in data centres.
• We have continued to upgrade our outlook for electricity demand growth following President Trump’s inauguration and notwithstanding the uncertainty created by DeepSeek, tariffs and some executive orders.
• We are very constructive on the fundamentals of the electricity generation industry as well as transmission and distribution grid infrastructure and all of the associated supply chains (from critical minerals, to transformers and cables, to the latest nuclear reactor technology).
• Falling interest rates (100 basis points of cuts so far) are yet to have a material impact on our focus area of the electric energy sector and its supply chains (which have historically displayed very high sensitivity to interest rates). We believe that this lag is explained by uncertainty following the US election and will prove temporary.

Market update

Global equities rebounded after cooler than expected inflation data triggered a reversal in bond yields. The strong performance came notwithstanding markets being rattled by multiple left field factors (US presidential executive orders, DeepSeek and tariffs – which we have covered in a separate paper) which created a challenging environment for future energy stocks (the energy complex has the potential to be exposed to these factors both positively and negatively). T8 Energy Vision posted a positive return and outperformed its benchmark.

Macroeconomic data

Inflation and unemployment data reported during the month painted a mixed picture. While the data didn’t result in a change to the US Federal Reserve’s outlook for interest rates (while interest rates remain ‘meaningfully’ above the neutral rate, there is no urgency to cut rates based on persistent inflation and a strong labour market), it was enough to trigger a reversal in the rapid ascent of bond yields in recent months.

The data catalysing this reversal appears to have been the Producer Price Index (PPI) and Consumer Price Index (CPI). PPI (excluding food and energy) at 3.5% remains elevated but much lower than the 3.8% which had been anticipated and CPI (excluding food and energy) at 3.2% was also cooler than the 3.3% forecast.

The US Federal Reserve’s preferred measure, the Core Personal Consumption Expenditures Price Index (Core PCE), was steady at 2.8% and in line with market expectations. A stronger labour market with unemployment 10 basis points lower month-over-month at 4.1% and US gross domestic product (GDP) weaker at 2.3% quarter-over-quarter annualised relative to consensus at 2.6% and the prior reading of 3.1%, added to the complex and mixed picture which was devoid of decisive signals.

Market impacts

Treasury yields reversed their upward trajectory with 2-year, 5-year and 10-year US Treasuries ending the month 4, 5 and 3 basis points lower month-over-month (at 4.20%, 4.33% and 4.55% respectively) and the Global Aggregate Bond Index (+0.6%) followed treasuries higher.

The US dollar also took a breather from its recent upward trajectory (US Dollar Index -0.1% to 108).

Within commodities, the majority of metals finished the month higher, rebounding from a soft end to the year. Precious metals, gold (+6.6%) and silver (+8.3%), outperformed key industrial metals, copper (+3.2%) and aluminium (+2.6%).

Global equities (+3.5%) rebounded with US value stocks (+4.5%) and Europe (following an interest rate cut of 25 basis points) leading the way (Germany +9.2%, France +7.7%, United Kingdom +6.1%). South Korea (+4.9%) was the standout in an otherwise sluggish Asia.

Within the mega-cap technology stocks, the most significant mover was Nvidia (-10.6%) which fell following the above mentioned DeepSeek announcement.

At sector level, information technology stocks (-2.9%) were the worst performers, and the only sector weaker month-over-month, which was the result of Nvidia’s drop. The standout was communication services (+9.0%) which counts mega-cap technology stocks Meta (+17.7%) and Google (+8.0%) as constituents.

At factor level, value stocks (+4.5%) outperformed growth stocks (+2.0%) and large caps (+3.1%) outperformed small caps (+2.6%). The performance of the equally-weighted small cap index (+0.9%) indicates that smallest stocks were a key laggard in an otherwise buoyant global equity market.

Future energy stocks

The Clean Energy Index (-1.5%) underperformed global equities in line with US small caps. The sector was also under pressure most likely as a result of negative sentiment which was amplified by executive orders pausing disbursements of funds from the Inflation Reduction Act and beginning the process of withdrawing from the Paris Climate Agreement. The general perception is that these actions change the fundamental outlook for industries such as renewables, energy storage and energy efficiency. While we accept that these actions have had a negative impact on market sentiment, we do not believe they will change fundamentals, especially over the medium to longer term.

While the perception that renewables are under pressure and the future of electricity will be all nuclear and gas-fired (Donald Trump’s ‘drill, baby, drill’ comments), our research indicates that an ‘all nuclear and gas’ scenario is implausible. We recently published a short summary of our expectations for the future energy mix in the US.

Within the benchmark, the biggest segment detractors were energy storage (-10.0%) detracting 63 basis points, biofuel (-10.3%) detracting 45 basis points, wind (-5.8%) detracting 40 basis points and hydrogen (-9.8%) detracting 36 basis points.

These declines were partially offset by contributions from utilities (+1.5%) contributing 42 basis points, enabling technology (+2.7%) contributing 24 basis points and critical materials (+3.5%) contributing 21 basis points.

From a stock specific perspective, there were two particularly notable company developments:

• Solar axis tracking specialist NEXTracker (+38.0%) reported quarterly financial results which were materially ahead of market expectations at the top and bottom lines. It also reaffirmed full year revenue guidance, raised the full year profit outlook and reported a record order backlog, indicating strong demand across all key regions. This is a very good example of a solar company prospering in the current environment, notwithstanding considerable negative sentiment towards the industry.
• Rare earths producer MP Materials (+40.8%) which reported commercial production of neodymium-praseodymium (NdPr) metal at its Independence facility in Texas and trial production of neodymium-iron-boron (NdFeB) magnets at the same facility. These are significant milestones on its journey to produce permanent magnets in the US using NdPr mined at its Mountain Pass operation located in California and thereby create a fully integrated rare earth magnet supply chain in the US.

Looking ahead, we have a very optimistic outlook for electricity demand (the US has increasing demand for electricity for the first time in 20 years driven by data centres) and the fundamentals of the electricity generation industry as well as transmission and distribution grid infrastructure and all of the associated supply chains (from critical minerals, to transformers and cables, to the latest nuclear reactor technology).

We have continued to upgrade our outlook for electricity demand growth following Trump’s inauguration and executive orders and notwithstanding the uncertainty created by DeepSeek and tariffs (we have reported on these issues in a separate paper).

We reiterate that falling interest rates are yet to have a material impact on our focus area of the electric energy sector and its supply chains (which have historically displayed very high sensitivity to interest rates). We believe that this lag is explained by recent policy uncertainty (especially up to and following the US election) which has temporarily obscured the impact of this significantly positive catalyst.