Five charts that matter for investors

DOGE leaving its mark

The US Department of Government Efficiency (DOGE) has been tasked with saving the US taxpayer trillions of dollars. Under Elon Musk’s leadership, the recently introduced watchdog has apparently been making headway. While there are no official statistics available yet, the DOGE’s impact seems to transpire in the data coming from Washington DC. First, headlines suggest that the median home value in the district has dropped 20%, while the number of homes listed for sale has surged. Meanwhile, weekly jobless claims have spiked in recent months (see chart).

Beyond the dramatic headlines, there is a risk that the US labour market could deteriorate as the DOGE slashes overheads. Musk and his team might not repeat what they achieved at X (formally Twitter), when they reportedly fired around 80% of the workforce. But, a lower hiring rate could still have significant implications. Indeed, the US government has added 437,000 jobs in the last 12 months, more than 20% of the two million that the entire US economy created. 

Should the DOGE be successful, the US job data will likely weaken, potentially forcing the market to rethink their view about the US Federal Reserve’s hawkishness.

Initial jobless claims spike in Washington DC

The number of initial jobless claims have surged in Washington DC in 2025

Gold’s real milestone

The price of gold has been on a tear recently, with the precious metal changing hands for close to $3,000 an ounce. While the commodity surpassed its 2020 peak at the end of 2023, on an inflation-adjusted basis this has only recently happened (see chart). 

Seeing the real price of gold hitting an all-time high suggests that the shiny metal provides adequate protection against inflation over the long term. By comparison, the real price of oil is hovering around levels last seen in 2008. During the same period, the real price of gold has doubled.

So, although an investor’s portfolio would not have technically lost purchasing power by buying (and storing) oil for the past 17 years, that ‘investment’ would have produced returns that are far inferior to what gold has generated. This is why, in our view, gold remains an attractive proposition in the context of a diversified portfolio.

Gold prices hit new all-time highs 

Inflation-adjusted gold prices have far outstripped those of oil since 2005

The eurozone is back in vogue

US exceptionalism has taken a backseat so far this year. Indeed, with many pundits calling for the US stock market to maintain its lead over the rest of the world in 2025, Europe is back in the spotlight. The region’s equity markets have significantly outperformed since the US presidential election.

It’s not that European economies are suddenly performing very well. In fact, economic surprises have just turned positive, suggesting that upgrades to economists’ expectations are yet to come (see chart). However, the fact that economic data has been increasingly less disappointing in recent weeks has led investors to scramble to cover their underexposure to Europe. 

Unfortunately for the region, the story is always the same: once the data starts coming in above expectations, investors set the bar too high for further positive surprises. This has been seen in the US since November, and it could happen to eurozone equity markets in the coming months.

Eurozone equity markets rally on "less bad" economic news

The net difference between US and European positive economic surprises, based on Citi’s Economic Surprise Indices, and the outperformance of the region’s Stoxx 50 index against the S&P 500 since November 

VAT in focus as EU tariffs loom

The US administration is considering applying reciprocal tariffs to each of its trading partners. This could be a big issue. Most countries levy little-to-no duties when they import US goods. However, President Trump wants to take into account the value added tax (VAT) that many governments apply to sales on their home soil. In this context, Europe appears to be particularly vulnerable to this policy, given the elevated VAT rates applied in the region (see chart). 

Although EU countries might lower or abolish their tariffs on US imports, it will be difficult – or perhaps impossible – to change the VAT system. This is first and foremost because it is an efficient way to generate significant tax revenues. For instance, more than 15% of total government revenue in the EU was linked to the VAT in 2023.

Even if governments were willing and able to bring down VAT, article 97 of the VAT Directive prevents them from undercutting the EU-wide minimum VAT rate of 15%. The result is that, even in a best-case scenario, the US could still argue that a 15% tariff needs to be applied to any good coming from the EU. In reality, this is highly unlikely to happen and some “amazing deal” between the US and the EU will likely be struck at some point.

EU VAT rates 

The range of VAT rates charged on home sales by many EU governments, flags the potential hit of the reciprocal trade tariffs being mulled over by the US government 

The interest rate pendulum keeps swinging

The anticipated path for US interest rates in 2025 has been volatile this year (see chart). Following stronger-than-expected nonfarm payrolls in December, the market assigned a 30% probability that the US Federal Reserve (Fed) will hold rates for the whole year. However, a cooler-than-expected inflation print the following week meant that the probability was revised to just 10%. Unfortunately, the inflation figures for January were above expectations, pushing the probability of no Fed cuts in 2025 back to 30%, if only briefly. 

This yo-yoing is set to continue until clear momentum is established, one way or the other. The problem is that with the threat of tariffs, it’s unclear when the picture is going to be clear enough for markets to make up their mind. Investors should look at the bigger picture: even at 30%, the probability of the Fed staying put is relatively low, and nine months is a long time. Ultimately, interest rates should come down, and this is what investors must focus on.

To cut or not to cut US rates 

The market’s perceptions, and pricing, of how probable it is that US interest rates will be held throughout 2025, shows just how volatile these expectations can be