After three consecutive rate cuts totaling one percent since September 2024, the Federal Reserve opted to keep its benchmark interest rate steady at 4.25%–4.50% during its January meeting. This marks a shift from the recent easing cycle as the Fed navigates what is expected to be a turbulent economic and political landscape, driven in part by President Trump’s aggressive policy agenda.

The decision reflects a resilient labor market and moderate but persistent inflation. While strong employment and sticky inflation typically reduce the need for rate cuts, the Fed acknowledged that economic growth remains solid. This suggests a more measured approach to monetary policy moving forward.

Simpan’s Views

A Growing Disconnect Between Trump and the Fed

We anticipated tensions between President Trump and Fed Chairman Jerome Powell. Trump favors lower interest rates to spur economic growth, whereas Powell is focused on curbing inflation by maintaining higher borrowing costs. This policy divergence could lead to heightened market uncertainty in the months ahead.

Markets Off to a Volatile Start

January has been a challenging start to the year, with heightened volatility stemming from Trump’s election victory. Emerging markets, including Indonesia, felt the impact as the Rupiah weakened further against the U.S. dollar. Meanwhile, the Jakarta Composite Index (JCI) declined by -1.25% Year-to-Date (YTD), reflecting investor caution.

Despite the broader market weakness, our Sustainable Equity Fund continued to generate positive returns, delivering +1.42% YTD (equivalent to 17.04% annualized). Our performance is driven by a tactical momentum-based strategy, allowing us to capitalize on short-term opportunities rather than relying solely on a buy-and-hold approach.

Looking ahead, we remain committed to navigating market volatility by being proactive while identifying investment opportunities that align with our strategy.