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Global Portfolio Manager's Digest Summary

Core Content Overview

This document provides insights and analysis from the perspective of a global portfolio manager, focusing on the UK equity market, German elections, and the potential timeline for US tariff implementations. It also outlines upcoming events and market flows relevant to institutional investors.

Main Points

1. UK Equity Market Decline

• The UK equity market is experiencing a decline in its global market share, falling from 11% in the early 90s to just 3% currently.
• This decline is part of a global trend of de-equitization, but the UK is more affected than the US and Europe, especially in terms of IPO activity.
• The UK's reliance on international investors is a key weakness, as domestic demand is waning.
• The UK government could address this by:
  • Setting goals for DC pensions to encourage investment in UK equities.
  • Developing savings products like the Great British ISA to boost retail equity ownership.
  • Promoting 'junior' listings to capture new UK-focused companies.

2. German Elections Outlook

• The German federal election is scheduled for 23 February 2025.
• Polls suggest a centre-right coalition, likely led by the CDU/CSU, will win.
• Both potential coalitions promise pro-growth reforms, but the future of the debt brake is unclear.
• A relaxation of the debt brake could lead to increased borrowing, potentially pressuring German government bond yields and compressing periphery-Germany spreads.
• A growth-focused coalition could benefit equities and the euro, as investor sentiment has been weak.
• If the debt brake remains in place or is tightened, it would be positive for €IG credit and could continue to weigh on EV production and profitability.

3. US Tariff Timeline

• President Trump did not impose tariffs on day one but outlined a "America First Trade Policy" memorandum.
• The memorandum directs agencies to issue reports by April 1, 2025, which are likely to be the catalyst for new tariff proposals or adjustments.
• The timeline allows time for the Senate to confirm key officials like Howard Lutnick as Commerce Secretary and Jamieson Greer as US Trade Representative (USTR).
• Trump threatened 25% tariffs on Mexico and Canada starting on February 1 and up to 100% tariffs on China if TikTok is not sold.
• Investors should prioritize the April 1 timeline over Trump's verbal comments.

Key Information

• UK Capital Markets: The UK has a historically low share of global equity market capitalization and IPO activity. Domestic demand is waning, and the market is overly reliant on international investors.
• German Elections: A centre-right coalition is expected to win, but the debt brake remains a key constraint on fiscal expansion. Relaxation of the debt brake could lead to bond yield compression and support for the euro.
• Tariff Policy: The Trump administration is expected to introduce new tariffs following reports due on April 1, 2025. These could include a universal tariff and specific tariffs on China, Mexico, and Canada.
• Market Flows: US equity flows surged post-election, while retail investors still favor cash over riskier assets. European equities have seen a strong start to 2025, driven by mega caps and cyclical sectors.

Upcoming Events

Conference Calls & Webcasts

• 27 January:

  • Breaking down inflationary accounting for Türkiye Corporates
  • Healthcare C-Suite Series: Argenx (ARGX)
  • Ecuador electoral trends
  • Kerry Group (KYGA) Chief Science & Technology Officer Fireside Chat
  • Introducing Extra Credit: Mon 27 Jan
  • Barclays Al Call Series: Fireside Chat on Vector Databases with CEO of Weaviate
  • Discussion on the value proposition of biosimilars for US healthcare providers
  • E-Commerce Eastern Europe Dynamics Fireside Chat
  • Semi Matters: monthly call on the key debates in semiconductors and technology hardware
  • Sniffing out the US fragrance market
  • Virtual Fireside Chat to discuss production growth in Argentina's Vaca Muerta shale
  • SMID Software 4Q24 Earnings Preview

• 28 January:

  • Barclays Tuesday Credit Call
  • ECB preview: Tue 28 Jan
  • KOL Call Focused on Breast Cancer
  • FOMC Preview: 28 January
  • AutoTrader Virtual Fireside Chat
  • Discussion with Moody's on the EU Telecoms sector
  • U.S. Power & Utilities 4Q24 Preview

• 29 January:

  • Fireside Chat with Givaudan CEO (GIVN)
  • Panama: Whose Canal Is It, Anyway?
  • Extreme Weather: What to Watch in 2025 with Gavin Schmidt, Director of NASA GISS
  • German election/energy policy Virtual Fireside Chat
  • Machine Learning To Do More With Fewer Quantamental Factors
  • The State of Global Tobacco 4Q24

• 30 January:

  • Xccy and Money Markets: 2025 outlook

• 31 January:

  • Heat Pump Expert Call
  • KOL Call: AI breakthroughs in Imaging
  • Satellites expert call. Assessing the impact of LEO constellations - Fireside chat with Kim Larsen
  • State of European Fashion with Dr Achim Berg, Fashion & Luxury Industry Expert
  • European TMT Equities Best Ideas Call

Conferences & Special Events

• 30 January: Biotech Private Company Day (Virtual)
• 2–4 February: Securitized Products & Loans Conference (Avon, Colorado)
• 3 February: Water Splash Seminar (London)
• 19–20 February: Industrial Select Conference (Miami)
• 25 February: Communications and Content Symposium 2025 (New York)
• 4–6 March: Investment Grade Energy & Utilities Corporate Days (New York)
• 5–6 March: US Hybrid and Preferred Capital Seminar (New York)
• 6 March: Industrial Energy & Infrastructure Corporate Access Day (New York)
• 10 March: Leisure, Transport & Business Services Conference (London)
• 11–13 March: Global Healthcare Conference (Miami)
• 1 April: Seizing Transition Opportunities: Investing in Innovation and Resilience (New York)
• 1–3 April: New York Sustainable Finance Conference (New York)
• 8 April: Barclays BDC Credit Forum (New York)
• 30 April: Securitized Products Conference (New York)
• 6–7 May: Americas Select Franchise Conference (London)
• 19–20 May: Emerging Payments and FinTech Forum (New York)
• 19–21 May: Leveraged Finance Conference (Austin, Texas)
• 21 May: Quantitative Portfolio Strategy (QPS) FICC Americas Advisory Council (New York)
• 22 May: European Leadership Conference (London)
• 22 May: Quantitative Portfolio Strategy (QPS) Equity Americas Advisory Council (New York)
• 28 May: High Grade Consumer Retail Conference (New York)
• 29 May: High Grade Healthcare Credit Conference (New York)
• 4–5 June: London Sustainable Finance Conference 2025 (London)

Replays from the Past Week

• 24 January: Latincast: Quick takes on Trump's inauguration
• 23 January: Revisiting the Venture and Tech landscape with expert Tim Tully
• 23 January: What does alternative data tell us about the state of the UK consumer?
• 22 January: Barclays Tuesday Credit Call: Inflation Relief Rally
• 22 January: BoJ preview: Wed 22 Jan
• 22 January: European fixed income: Rates and credit into 2025
• 21 January: Industrials Weekly Conference Call
• 21 January: What's Happening on the Ground in China Beauty: A Conversation with Wendy Liu
• 17 January: U.S. Multi-Industry 4Q24 Preview
• 16 January: Aerospace & Defence Expert Call: Commercial-aerospace supply chain turbulence

Equity Research Highlights

• European Equity Strategy: EU equities are performing well, with a strong start to 2025. Mega caps and cyclical sectors are driving the performance. The catch-up trade with the US is supported by Trump's tariff policy and stabilization in rates.
• UK Capital Markets: The UK has a low share of global equity capitalization and IPO activity. There is a risk of continued US dominance in IPO activity. The UK government should focus on nurturing domestic demand.
• Equity Euphoria Indicator (EEI): A new indicator launched by Barclays to gauge investor sentiment through derivatives flow and option data. It shows that despite recent weakness, the EEI is stretched, suggesting caution.

FICC Research Highlights

• Economics & Rates Strategy: The document discusses the implications of the German election on the Eurozone's growth and the FX market.
• Credit Strategy: The potential impact of fiscal expansion on German government bonds and the benefits of a tighter debt brake for €IG credit.
• FX & EM Macro Strategy: The German election's effect on the euro and the broader Eurozone's economic outlook.

Public Policy Highlights

• Tariff Timeline: The April 1, 2025, deadline for tariff reports is crucial for investors to monitor. The Trump administration is expected to act after these reports are released.
• US Tariff Policy: The memorandum outlines a potential blueprint for future tariffs, including a universal tariff and targeted tariffs on China, Mexico, and Canada.

Conclusion

The document emphasizes the need for the UK to stimulate domestic investment in equities and highlights the potential for growth in the EU, particularly if a pro-growth coalition emerges in Germany. It also outlines the likely timeline for US tariff changes and the importance of monitoring these developments for market participants.