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Weekly Notes

The Week In Markets – 26th April – 2nd May 2025

This week marks the beginning of May, but the focus in markets has been on the 100-day milestone of President Donald Trump’s tenure. Trump’s short time in office to date has been eventful to say the least and has been described with terms such as “disastrous”, “chaotic” and “Trumpression” – a Trump led depression. With his approval ratings near record lows, he will be under pressure to ensure the next 100 days are viewed as more positive by the US electorate.

Wednesday was the 100-day mark and coincided with the release of the US Q1 GDP figures. The GDP data showed a decline to -0.3%, the first economic contraction in three years, raising fears of a potential recession and confirming a US economic slowdown. This figure was skewed by an oversized number of imports from American businesses and consumers in anticipation of Trump’s tariffs. Elon Musk, who recently stepped back from his role at the Department of Government Efficiency (D.O.G.E), significantly contributed to the economic pullback as government spending fell by 5.1%.

Trump immediately hit back at any suggestion that the blame should stop at his door, stating that the economy is facing a Biden “overhang”. He asserted that once his tariffs take effect and companies begin to move production into the US, the country’s economy will “boom”. We will have to wait and see if Mr Trump’s plan will succeed, but it seems the jury is out for US consumers as sentiment continues to plummet.

Many will remember the disastrous meeting two months ago between President Trump, Vice President JD Vance, and Ukraine President Zelensky, which left little optimism for any potential deal. However, after months of tense negotiations, the US and Ukraine signed an agreement granting the US access to Ukrainian minerals, which ultimately will fund the country’s reconstruction. A peace deal between Ukraine and Russia has yet to be achieved, but a three-day ceasefire will begin on 8th of May to commemorate the 80th anniversary of the Soviet Union’s victory in World War II. 

It was a busy Wednesday, with the release of the US PCE index for March. The US PCE is the Federal Reserve’s preferred measure of inflation, and it was positive to see inflation fall to 2.3% (year-on-year) from the previous month’s figure of 2.7%. On a month-on month basis, the index remained flat. The US Fed will meet next week to discuss the future interest rate path, and on a positive note, Fed Chair Jerome Powell will lead the meeting despite Trump threatening to fire him. However, there is not expected to be any change to rates this time, as the Fed will wait for “clearer signs”, believing the real impact on the economy, inflation and unemployment from tariffs lie ahead.

As we enter the new month, the first Friday always brings us the US non-farm payrolls report. The data remained positive, showing that 177,000 jobs had been added to the economy, following the revised figure of 185,000 for March. The unemployment figure for March remained at 4.2% for the second consecutive month.

UK retail sales have continued to surprise to the upside with March’s figure of 0.4% coming in against expectations of a -0.4% decline. Clothing and outdoor sales led the way, with the Office for National Statistics (ONS) attributing this to good weather. Although this is positive news, there is still concern that the impact of tariffs, along with energy and council tax bills, will affect April’s data and lead to a slowdown in consumption.

We have the first May bank holiday coming this Monday, which often leads to a spike in takeaways. Just Eat and Uber Eats are the preferred choices for UK consumers, but this may change as US delivery agent DoorDash made a $3.6 billion cash buyout offer for Deliveroo. This move will expand DoorDash’s reach into the UK and across European countries such as France and Italy. Deliveroo shares jumped 17% on the day.

Gold dropped to a two-week low on Thursday, a move we can expect as trade tensions begin to ease. While uncertainty remains, there has been progress with US-China tariff negotiations along with continued hope for a Ukraine and Russia resolution which has led investors towards risk assets and away from safe-havens such as gold. This has also led to strong UK equity performance, with the FTSE 100 on track for its 15th consecutive daily increase, its longest winning streak on record.

Equity markets have continued to rebound from recent lows after heightened volatility at the start of April. There is renewed hope that tariff deals will be struck, and the worst-case scenarios will be avoided. Recent inflation data has been better than expected from most developed markets and this may support further rate cuts, which would be a boost to businesses and consumers.

Nathan Amaning, Investment Analyst

Risk warning:  With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.

The Week In Markets – 18th April – 25th April 2025

Equity markets advanced this week on the hopes that trade deals would soon be announced and that the worst may now be behind us. While nothing official has been announced, the US are engaged with many nations and investors expect positive news flow over the coming weeks.

The US equity market has borne the brunt of the tariff sell-off, with investors questioning whether the premium valuation is now justified. Over recent days we have seen the US market lead equities higher, with the beaten-up technology sector one of the bright spots this week. Equities rallied on news from Trump; firstly that he did not intend to sack US Fed Chair Jerome Powell, and then confirmation of talks with China and that a de-escalation on the elevated tariffs was likely.

We are currently in the thick of earnings season and there were key updates from Tesla and Alphabet (Google), two of the “Mag 7” group. After disappointing earnings from Tesla, CEO Musk said he would be taking a step back from Trump’s cost-cutting team (DOGE) and focus more on the business. Alphabet posted very strong results last night and announced a $70bn buyback plan. While tariff news and uncertainty has the ability to impact future earnings, it’s clear that many companies are still performing well and delivering positive earnings growth.

Staying with the US, durable goods orders smashed expectations, rising 9.2% month-on-month for March. While the data is very positive, it is likely there was some front loading in orders prior to the tariff announcements.

There was mixed data from the UK as services PMI came in below expectations and below 50, which indicates a contraction. Services has been a bright spot in the economy, so it is a concern to see this deteriorate. The trend was witnessed across Europe with data from France, Germany, and the wider Eurozone showing services PMI below 50. There was more positive news for the UK with strong retail sales released this morning, rising 0.4% over March. The International Monetary Fund (IMF) downgraded its GDP expectations for 2025 from 1.6% to 1.1%, citing trade wars, borrowing costs, and energy prices as the drivers of the adjustment.

BlackRock CEO, Larry Fink, spoke positively about the UK this week, praising Labour’s pro-growth agenda and stating that UK equities were at a “too deep” discount with BlackRock said to be investing in the undervalued equity market. Capital inflows will be needed to help close the valuation gap and so it is pleasing to see BlackRock’s positive stance on the UK. With investors questioning the US market currently, the UK, along with Europe, could be beneficiaries of any reversal in positioning.

It was a mixed week for gold, which hit new all-time highs at the start of the week, rising above $3,500 an ounce. However, as investors adopted a more risk-on stance, gold suffered, falling over 3% from the highs. The US dollar, typically a safe-haven currency, has traded very differently over recent weeks. The currency has sold off along with equities and has now rallied this week given the more positive tariff rhetoric. Sterling went to 1.34 vs the US Dollar at the start of the week, before falling back. We also saw the Euro make three-year highs vs the US Dollar.

After a very tricky April, it has been pleasing to see some relative calm in markets, with equities continuing to move off recent lows. We expect asset markets to stay volatile as we head into May, but there is potential for good news flow, with both the UK and US central banks meeting as well as the prospect for trade deals to be announced. We continue to search for oversold parts of the market that offer attractive entry points.

Andy Triggs, Head of Investments

Risk warning:  With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.

The Week In Markets – 12th April – 17th April 2025

Many investors will be glad of the shortened work week after a bruising April. Thankfully, this week has been calmer than the previous week, although there has still been a raft of data and policy decisions to digest. We saw UK inflation data released, the European Central Bank cut rates for the third time this year, whilst the Bank of Canada held interest rates steady. In the spirit of Easter, here’s an interesting fact: Cadburys factories produce 1.5 million Creme Eggs daily. If stacked, they would reach 10 times the height of Mount Everest!

We begin in the US with Mr Elon Musk, Head of the Department of Government Efficiency (DOGE), announcing shortcomings in his lofty promises. When Mr Musk first took the job, he claimed he would save the US Government $1 trillion, but this week stated he may only cut government spending by $150 billion, a mere 15% of his goal. A range of government contracts and jobs have been cut already, but they may still go further. Meanwhile, the US Treasury department reported that President Trump has spent $155 billion more than the former president did, in the 87 days since his inauguration. The cost-cutting plans of President Trump and Mr Musk are adding up, or should we say, not adding up.

US Federal Reserve Chair Jerome Powell noted that President Trump’s policies are putting the Fed in “uncharted waters”. The policies are likely to derail economic growth, increase unemployment and cause a reacceleration in inflation – a nightmare scenario for the Fed. They are expected to hold off on any rate decisions at the next meeting and analyse further data points for more clarity.

Boeing, the American airline company, is one of the latest casualties in the trade war between the US and China. China has ordered airlines to halt the purchases of Boeing airplanes and jets, causing shares to fall almost 9% year- to-date. This move comes in retaliation after the US government banned the sale of certain Nvidia chips to China. Nvidia, the posterchild of Artificial Intelligence, stated the ban would lead to a $5.5bn hit to revenues. The share price fell 7% on the news.

US retail sales for March were announced on Wednesday and surprised to the upside as they rose by 1.4% (month-on-month), the most significant rise in over two years. Car dealership sales led the way with a 5.3% rise, likely a rush to purchase as President Trump’s automaker tariffs kicked in at the beginning of April. Markets had anticipated a 1.1% rise in retail spending; however, it is likely we may see a reversal in the coming months as sentiment declines. It’s useful to note that retail sales are not real (adjusted for inflation) therefore it’s possible any increase in data points could be a result of goods prices rising.

UK inflation for March was released yesterday, showing a decline to 2.6% for the second consecutive month. Services inflation, which had crept back up to 5% in previous months fell to 4.7%, a positive for the Bank of England. We mentioned in the last weekly that the effects of “Awful April” with price increases across gas, electricity and water prices, are set to impact future data points. The Bank of England (BoE) has projected inflation to rise to 3.6% in the next print and is likely to remain above 3% for the rest of the year. Despite this, the BoE is expected to reduce interest rates at their next policy meeting in early May.

As expected, the European Central Bank (ECB) cut interest rates for the third time in 2025, bringing the deposit rate to 2.25% and the interest rate to 2.4%. Speaking at the press conference, ECB President Lagarde stated “the economic outlook is clouded with exceptional uncertainty” and “downside risks to economic growth have increased”. These views are likely shared amongst other central banks, CEOs and consumers, which is weighing on sentiment and, if allowed to persist will likely weigh on consumption and investment.

Gold continued its meteoric rise, pushing higher once again this week, including rising over 3% on Wednesday. Investors continue to shun typical safe-haven assets, such as US government bonds and US Dollars, instead flocking to gold.

After the volatility of last week, it was pleasing to see markets calm a little this week. That being said, we did still see 3% moves in US indices intraday this week. We continue to tread a careful path forward, focusing on diversification to help manage risk. This approach has meant drawdowns of portfolios have been much less than that of world equities.

Nathan Amaning, Investment Analyst

Risk warning:  With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.

The Week In Markets – 5th April – 11th April 2025

It is fair to say this has been an unprecedented week in markets, with tariffs leading to once-in- a-generation moves. On Wednesday, a week after “Liberation Day”, US President Donald Trump announced a surprise 90-day pause in tariffs. This led to a huge relief rally, as we saw US equity markets experience their best trading day since 2008. We will try and unpack what happened in this rollercoaster week below – brace yourself for the regular use of the word “tariffs”!

We wrote about Liberation Day in the last weekly and its impacts on the markets, causing chaos across the globe. We had seen multiple days of US equities selling off and this week there was rising pressure on bond markets and the US Dollar. There really were not many hiding places as Europe, UK and Japan markets also bore the brunt of the pain. With no regard for the markets disarray, Mr Trump began the week stating, “everyone wants to come and make a deal”. He claimed offers had been presented to him that never would have happened but for the moves he made. Ironically, such countries may not have been forced to make such deals if they hadn’t been hit with excessive tariffs.

There were murmurs around the White House on Monday that a 90-day pause could be on the cards; however, these were taken with a pinch of salt. We then saw the big U-turn come on Wednesday as Mr Trump announced that the retaliatory tariffs on countries (excluding China) would be postponed for 90 days. In totality, countries are still dealing with the initial 10% tariffs rate, with the exception of China, but markets reacted positively to the news. By close on Wednesday, the S&P had risen 9.5%, it’s third-best day since 1950. The technology-heavy Nasdaq index rose over 12%, adding $2 trillion in market cap as Nvidia, Apple and Tesla shares all surged over 10%. It looks as though Trump had to backtrack due to pressure from the bond markets. The disorderly sell-off in US Treasuries, if left to continue, would have widespread negative impacts on the US economy, and as such Trump likely bowed to this pressure. Much like Liz Truss found in 2022, you do not mess with the bond market!

While Wednesday’s relief rally was needed, this does not signal the end to the trade war, as Canada and Mexico are still subject to the 25% tariffs rate, and China have been hit the hardest with tariffs increasing to 125%. The Chinese Yuan fell to its weakest level in over 17 years to 7.34 versus the Dollar, causing the Chinese Central Bank to step in. Markets have estimated the impact of the tariffs could lead to China’s exports to the US almost halving in the next few years, a big blow to China’s GDP, which may fall by 1.5%. Mr Trump stated a resolution with China was certainly possible; however, China continue to match Mr Trump tit-for-tat, announcing their own 125% retaliatory tariffs.

The 90-day reprieve is certainly not a time where government officials intend to sit on their hands and do nothing. European Finance ministers have come together to attempt to reach a trade deal with the US. The EU economy is forecasted to grow under 1% this year so the continuation of tariffs poses potential recessionary risks. US tariffs are already in place on the automaker industry and EU officials are ready, to resort to “response mechanisms” if a resolution cannot be found. UK automaker Jaguar Land Rover has initiated a halt in shipments to the US for a month as they consider how to mitigate the costs of tariffs and potential rerouting.

In terms of economic data, it has actually been a positive week. US CPI figures for March unexpectedly fell below market expectations to 2.4%. Consensus forecasts were for a fall to 2.5% amid lower fuel prices. Month-on-month, the inflation rate was -0.1%, again below market forecasts of 0.1%. Core inflation fell below the 3% mark to 2.8% (year-on-year).  Rising airline and hotel prices had been key contributors to the reacceleration in inflation to end last year; however, both sectors fell 5.3% and 3.5% for the month respectively, as we are seeing the turn in consumer discretionary spending driven by weakening consumer sentiment.   

UK GDP figures for February were released this Friday morning, showing the economy grew by 0.5%. Unexpectedly, market forecasts had predicted slight growth of 0.1%, however, there was growth across all sectors, including the manufacturing sector which has been weak of late. There is certainly a lot more for the Labour party to do to continue improving the UK’s economic prospects, as consumers this month face “Awful April” with price increases on energy, water and council tax bills.

We move to news of actual rollercoasters, as Universal Studios announced they will open their first European theme park in England. In a deal set to bring an estimated £50 billion to the UK economy, the theme park will be constructed and open by 2031 in the town of Bedford. Approximately 20,000 jobs will be created during the construction process with a further 8,000 in hospitality once open as 8.5 million visitors are expected within the first year. A win for the Labour party as PM Kier Starmer proudly announced the plan for growth and bringing joy to Britain.

This week will likely go down in history with incredible daily swings in market prices. Trying to trade these markets is fraught with danger, and sometimes the best approach is to do nothing, as difficult as that can be. We’ve already witnessed this week the incredible rallies that can occur on good news, and over the course of the next few months there is the potential for tariff deals to be made, and for central banks to step in and assist.

We’ll finish on a quote from the Democratic political strategist James Carville in 1994 who sums up the power of the bond market:

“I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody.”

Nathan Amaning, Investment Analyst

Risk warning:  With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.

The Week In Markets – 29th March – 4th April 2025

A challenging quarter closed on Monday, with the start to the second quarter starting with a bang, as Trump’s “Liberation Day” created extreme volatility in equity markets, leading to the worst day in five years for US equities.

The start of 2025 has proved challenging for US equities, after two years of exceptional performance. It has been the worst quarter relative to global excluding US equities in over twenty years as investors seemingly became nervous about high valuations, increased global uncertainty and a deteriorating growth outlook. It wasn’t just US equities that struggled, with small and mid-cap equities continuing to face selling pressure. UK mid cap stocks underperformed their large cap counterparts by over 10% in the first quarter.

Economic data took a back seat this week with investors focus firmly on “Liberation Day”, where Donald Trump announced a raft of tariffs aimed at reducing the US trade deficit, raising revenues and supporting American produced goods. The tariffs have been far reaching with a minimum 10% tariff on imports coming into the US. The uninhabited Heard & McDonald Islands were even included in the tariff list. While it has been no secret that Trump was keen to implement tariffs, equity markets took the official confirmation of tariffs badly, with trillions of dollars wiped from markets on Thursday. The impact of Trump’s reciprocal tariffs are hard to know at this stage, and there are likely to be retaliatory tariffs on the US announced in the coming days. There is also the prospect that some nations will negotiate deals with the US, while there are even musings that US courts could potentially look to block the imposing of tariffs. Whatever views are on Trump and his administration’s tariff policy, it seems clear they are serious about tariffs and see them as a mechanism to address their budget deficit through raising external revenues, to stimulate their domestic manufacturing base through the re-shoring of production and potentially strengthening foreign currencies, which they view as too cheap. Their approach seems fraught with danger, and the job will be made harder if economic growth is hit too much, something that must be now a possibility as global growth slows due to tariffs and the associated uncertainties this brings. We have already seen business and consumer sentiment deteriorate over Q1 and this is only likely to continue in the coming months.

Global equity markets sold off heavily on Thursday after Trump’s announcements on Wednesday evening . Ironically it was the US equity market that was one of the worst hit, with the main index falling over 4%, and the tech-heavy and small cap indices falling over 5%. There was over $3 trillion wiped from US equity markets. Historically, risk-off markets have normally seen the US Dollar strengthen, however, we saw the US Dollar fall against a range of currencies, including the Euro, Japanese Yen and Sterling. Here in the UK we saw equity markets fall around 2%, with cyclicals bearing much of the pain. The bright spots in equity markets came from sectors such as utilities and consumer staples which are more traditional defensive sectors, with much less cyclical business models. Weakness in equities spilled over into Friday, with Asian and European markets declining further. The move down was accelerated by the news that China has put retaliatory tariffs of 34% on all US imports, starting 10th April. There is an expectation that we will see a similar response from Europe in the coming days.

While equities declined, fixed income markets offered investors some reprieve, with government bonds rallying. Given tariffs are expected to have a negative impact on global growth, investors are now pricing in increased interest rate cuts in developed markets, which has supported government bond prices. Here in the UK, there is now a 90% probability of a rate cut at the next Bank of England meeting in May. Over in the US there is expected to be 3-4 interest rate cuts in 2025 and this has led to the yield on the 10-year government bond falling below 4%.

Commodities have come under pressure driven by deteriorating growth outlooks. Crude oil has fallen around 7% on Thursday and Friday, falling to $62 a barrel. Lower oil prices should ease some inflationary pressures in the system and help businesses and the consumer over coming months through lower energy and petrol prices.

The week ended with key US employment data, the monthly release of US non-farm payrolls. Data was positive, showing 228,000 jobs had been added to the economy, considerably ahead of consensus. While labour data can be considered a lagging indicator, it will please investors to see such resilience.

It has been a very challenging week, with the official confirmation of US tariffs sending equities into a tailspin. We are in the eye of the storm presently and making big investment decisions at moments of stress are fraught with behavioural danger. The world can feel very uncertain, but volatility can create opportunities, particularly for long-term investors. Within portfolios, while being unable to avoid drawdowns, we have been able to limit downsides through a diversified approach in our equity bucket (not simply having a one-way bet on the US equity market and US Dollar), and we have exposure to assets that have risen over recent days, such as government and corporate bonds and infrastructure equities. With investor emotions running high, it is important to take a balanced approach to investing and weigh up both potential risks, but equally opportunities. It’s clear that many assets have become meaningfully cheaper over the last 48 hours, however, there are now new risks to consider, which potentially changes the make up of global trade going forward.

Andy Triggs, Head of Investments

Risk warning:  With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.

The Week In Markets – 22nd March – 28th March 2025

UK Chancellor Rachel Reeves held her Spring statement this Wednesday, announcing significant cuts to the welfare budget. The Labour Party is determined to halt the rise in sickness-related payments and will introduce additional eligibility requirements benefits. The plan for economic growth has not been smooth sailing for the Labour party, and investors are wary of additional tax hikes in the autumn.

UK inflation figures on the same day proved positive, showing a fall in inflation, down from 3% in January to 2.8% in February. Core inflation (excludes energy and fuel prices) also fell from 3.7% to 3.5%. This fall may be short lived as businesses brace for the increase in costs due to rising employer national insurance contributions and households facing a rise in council tax and energy bills. The Bank of England paused rate changes at their last meeting on Thursday, and the anticipated future rise in inflation will certainly reduce their appetite to cut rates in the upcoming meetings.

UK retail sales data released this morning was positive, surprising markets which predicted a fall due to weakening consumer confidence. Month-on-month, retail sales rose 1% in February, following the revised figure of 1.4% in January. Online retail sales rose 3.3% along with rises in the clothing and household goods sectors. Again, there is a cloud of gloom over such positive numbers as they are expected to be short lived with imminent price increases which create a headwind for consumers.  

Across Europe, France and Spain inflation figures for March deviated from market expectations, signalling to the European Central Bank (ECB) that further rate cuts may be needed. France inflation remained low at 0.8% for the second consecutive month and Spain inflation fell to 2.3%, marking the first decline in six months. The ECB has cut rates six consecutive times, bringing interest rates down to 2.65% in an attempt to address slowing economic growth. The next ECB meeting is 17th April, and several data points will be considered ahead of that meeting. Market forecasts are for two further rate cuts for the year.

2nd  April is a key date for the world as it marks “Liberation Day”, when Trumps tariffs are (finally) set to begin. This week, the announcement of the 25% tariffs on overseas automakers sent markets into disarray. Automaker share prices were hit hard, with Toyota shares falling -2.5% for the week and India’s Tata Motors down -4.5% over the same period. Trump doubled down on his position, stating any reciprocal taxes would be met with further tariffs. US equity markets continued to unwind as the S&P 500 fell -1.1% and the Nasdaq fell -2% on the day. The uncertainty surrounding Trump’s policies continues to create uncertainty, which is now feeding through to business and consumer confidence.

The geopolitical uncertainty provided further support for gold, which off the back of recent all-time highs, advanced further during the week. Other commodities, such as silver and copper, have also seen strong returns recently.

At a portfolio level we continue to be well diversified, spreading risk across a wide range of geographies and asset classes, which has helped us navigate a tricky first quarter.

Nathan Amaning, Investment Analyst

Risk warning:  With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.

 

 

The Week In Markets – 15th March – 21st March 2025

It has been a busy week for central banks as monetary policy committee members across the world met to discuss interest rates and the future direction they should take. We saw moves in interest rates both ways; Brazil’s central bank raised rates by 100bps (1%), the Swiss National Bank cut rates by 25bps (0.25%) and both the Bank of England and the US Federal Reserve held rates steady.

We will begin with Brazil, a country we don’t often cover in the weekly notes. This was the third consecutive meeting where committee members voted for a 100bp rise (1%) in interest rates, bringing the current level to 14.25%, a level last seen in 2016. Inflation in Brazil has risen to 5.06%, and Brazil’s central bank has indicated there will be one more hike ahead with the intention of cooling the economy and forcing inflation back towards the 3% target rate. Brazilian equities have performed strongly to begin the year, with the main index up almost 10%.

The US Federal Reserve voted on Wednesday to hold interest rates as Fed Chair Powell described the uncertainty around the US economy as “remarkably high”. US inflation fell in February to 2.8% and the labour market has remained resilient to begin the year. However, the outlook following President Trump’s tariff plans has created a mist of gloom with the potential for slower economic growth, a reacceleration in inflation and a weak labour market. Trump’s tariffs have been mainly threats to date, with the 25% taxes on Mexico and Canada to now begin on 2nd April, so the US Fed are expected to sit on their hands until further potential cuts in summer.

US Retail sales in February rebounded by 0.2% from a -1.2% fall the previous month. The significant fall at the beginning of the year was associated with poor weather conditions, leading to a -1.5% fall in restaurant and bar sales. February’s print showed there was a 2.4% surge in online store purchases, in addition to a 1.7% rise in health and personal care stores. With US consumer sentiment falling due to the macro environment, it is expected that retail sales will remain soft in the coming months.

We have seen quite the reversal of the Magnificent 7 share prices year to date, and Tesla share prices have been hit hard. The stock is down almost -40% year to date. China rivals, BYD, announced this week that they have developed a new platform that could charge their electric vehicles (EVs) as fast as it takes to fill a tank with fuel. Founder Mr. Chuanfu, stated peak charging speeds of 1,000 kilowatts would enable the car to travel 250miles on a 5-minute charge, alleviating any user charging anxiety.  

The Bank of England (BoE), as many expected, left interest rates unchanged at 4.5%. Policy committee members voted 8-1 in favour of the pause, with one member voting for a 25bps (0.25%) cut. The outlook from the BoE reflected the uncertain macro backdrop we currently operate under, with the BoE halving the UK’s 2025 growth forecast to 0.75%. We are also days away from the Labour government’s implementation of rising taxes on businesses, which could further stunt economic growth. The BoE has not provided any commentary on the future rate path but concluded that “a gradual and careful approach is appropriate”. UK Gilt yields fell on the news.

UK average earnings excluding bonuses have remained robust, rising 5.9% in the three months leading up to January.

Across Europe, Germany’s parliament voted in favour of injecting hundreds of billions into defence spending. New Chancellor, Mr Fredrich Merz led the drive along with the approval from 513 other MPs, for the creation of a €500bn fund in addition to rule changes around constitutional debt. The plans are set to boost economic growth around Germany as the multiplier effect will see investment in infrastructure, sparking job creation and wage growth. This shift in Germany’s approach should not be understated and has the potential to change the outlook for the country, and potentially Euro region over the coming years. A lack of investment has left Europe lagging the US in terms of productivity growth and output, yet this new bold fiscal plan could help address some of the issues that have led to Europe lagging its counterparts over the last 10 years. Mario Draghi published his paper last year on EU competitiveness and it appears that the new Chancellor of Germany has taken this on board.

It was another week of new all-time highs for gold, breaking through $3,000 an ounce. Central banks appear to be moving away from the USD and have been buying up the precious metal.

Volatility remains high in markets, with the US equity market still under pressure. Europe remains the bright spot, with investor flows continuing to move from the US back to Europe. Elsewhere areas such as infrastructure and resources have rebounded well, benefiting from the planned huge investment from Germany.   

Nathan Amaning, Investment Analyst

Risk warning:  With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.

The Week In Markets – 8th March – 14th March 2025

Former central banker, Mark Carney, will be sworn in today as Canada’s 24th prime minister. He previously held the positions of Governor of the Bank of Canada from 2008 to 2013 before being appointed Governor of the Bank of England, serving from 2013 to 2020. He takes power at an extremely precarious time, with trade war tensions between Canada and the US at extreme levels. It’s clear he plans to deal with the challenge head on, stating “my Government will keep the tariffs on until the Americans show us respect”.

If you have been reading the news this week, there have been some very alarming headlines, with the most recent being US President Donald Trump threatening 200% tariffs on wine and champagne from EU countries. This appears to be tit-for-tat following the EU’s retaliatory action against American whisky, due to come into force on the 1st of April. The economics on tariffs is very simple; as companies raise prices on a product due to higher import taxes (costs), consumers will likely turn to cheaper alternatives or consume less of the product. During Trump’s first term, whisky exports to the EU fell by $142million, and markets have growing concerns that such measures across multiple sectors all at once could push the US into a recession.

US CPI (inflation) figures for February came in at 2.8%, a slight fall from January’s figure of 3% (year-on-year). Shelter (rent) costs rising 0.3% have been a consistent contributor to rising inflation, but airlines fares falling 4% due to consumers cutting back on spending and fuel prices falling 1% due to cooling demand are seemingly consequences of the economic uncertainty. Falling inflation during the turbulence of a trade war pose questions to the US Federal Reserve, which will meet next week to set monetary policy. It may be too soon to see the impacts that the trade war will have on inflation or the labour market. US equity markets reacted positively to the inflation data on the day but are still the worst-performing market for the year. The main US market is down over 10% in sterling terms for 2025 and is now officially in correction territory having dropped 10% from recent highs.

The Bank of Canada met on Wednesday and cut interest rates by 25bps (0.25%) bringing rates down to 2.75%. This is the seventh consecutive interest rate cut; however, Governor Tiff Macklem stated the committee considered a pause. Once again, the impact of tariffs on the economy is a key concern, as there has already been a shift in business and consumer spending patterns. Mr Macklem has not ruled out an unscheduled monetary policy meeting in the case of a severe shock to the economy.

Here in the UK, GDP figures were released this morning and fell -0.1% over the month of January. Market expectations were for slight growth of 0.1% to follow December’s print of 0.4%. Manufacturing output notably grew 0.7% in December but fell -1.1% in the latest print, in addition to a fall in the construction sector after snow and poor weather held back builders. Negative economic growth to begin the year certainly creates a tall task for Chancellor Rachel Reeves as she is set to make a Spring statement later this month. She doubled down on the plan to increase UK defence spending to 2.5% of GDP by 2027, believing it would “give the economy a lift”. The Bank Of England meet next week, but it is expected that the weak growth numbers will not change their plans of a pause in interest rate cuts.

Gold prices hit a historic $3,000 an ounce for the first time as investors continue to flock towards the safe haven asset amid economic uncertainty. Despite weaker inflation in the US and softer GDP data in the UK, government bond yields have surprisingly risen this week. Following Germany’s fiscal spending plan last week, the German equity market continues to perform strongly this year.  Eurozone equities are around 13% ahead of US equities in 2025, a huge reversal from the previous two years. As the outperformance prolongs, more and more investors are rotating portfolios, with European equities seeing strong inflows, while US equity inflows appear to have stalled.

The volatility in equity markets currently can be unnerving, however, being diversified in exposure has been a good strategy in 2025. Within portfolios, while US equities have been a detractor, areas such as Europe, Japan, infrastructure and gold have all been strong contributors, meaning portfolios have been insulated from some of the drawdowns seen across US and global indices.

Nathan Amaning, Investment Analyst

Risk warning:  With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.

The Week In Markets – 1st March – 7th March 2025

The European Central Bank (ECB) met this week for the second time this year, and oversaw a 25bps (0.25%) rate cut, bringing interest rates down to 2.65%. This marks the sixth consecutive rate cut since June 2024. However, commentary from Governor Christine Lagarde suggests the end of the rate-cutting cycle is near.

Before we discuss the ECB meeting, Eurozone inflation data for February was released at the start of the week. Inflation pleasantly fell from the previous month’s figure of 2.5% to 2.4% although it didn’t quite meet market expectations of 2.3%. Services inflation, the largest component of the Consumer Price Index (CPI), fell from 3.9% in January to 3.7% in February, the lowest level since April 2024, which pleased the ECB.

The ECB concluded their monetary policy meeting in Frankfurt on Thursday and agreed on a further 25bps (0.25%) rate cut, bringing interest rates down to 2.65%. The ECB noted that the decision to reduce rates was based on their updated assessment on the inflation outlook, the dynamics of underlying inflation and the current strength of the monetary policy transmission. Markets observed changes in commentary as Christine Lagarde mentioned “monetary policy is becoming less restrictive” and did not pre-commit to a particular rate cut. This could be viewed as a hawkish shift in policymaker views, as global trade tensions intensify, which has the potential to reaccelerate inflation and weaken economic growth.  The Euro is up over 4% vs the dollar for the week and Euro and German bond yields rose on the news.

European markets also had to digest the news that Germany plans to significantly increase spending (and therefore bond issuance) with the announcement of a proposed €500billion special fund to invest in infrastructure and further defence investment, which would be negated from debt rules. While it is pleasing to see Germany launch ambitious plans to help kickstart growth, there are concerns such levels of spending could ignite inflation. European government bond yields all sold off aggressively on the proposal, with German 10 tear yields rising 0.3% in a single day. The news did support equity markets, with defence stocks the main winners. Only a few years ago, many investors saw defence as an uninvestable sector, since then, its performance has been stellar.

The US Manufacturing Purchasing Managers Index (PMI) simply put is a monthly indicator of economic activity within the manufacturing sector. In February, the manufacturing PMI fell to 50.3 from 50.9 in January. January’s figure was the first expansion (a figure above 50) seen in the sector since October 2022, likely reflecting domestic factories front-loading imports to get ahead of tariffs issues. US domestic manufacturers rely heavily on imported raw materials, and there was a slight win for automakers after President Donald Trump agreed to postpone auto tariffs on Canada and Mexico following a phone call with the CEO’s of General Motors and Ford. Markets have swung wildly this week on the tariff news. After a month’s stay of execution, the US slapped tariffs on a range of imports from Mexico, Canada and China, with retaliatory tariffs being placed on US exports by Canada and China.

We’ve entered into March, and on the first Friday, US Non-farm payroll data is released. For the month of February 151,000 jobs were created, rising from the 125,000 created in January. The US labour market has been resilient despite elevated interest rates however, as tariffs have now been implemented, we can expect to see the knock-on effect on hiring and wages. The unemployment rate rose slightly to 4.1%. 

The number of US citizens filing for unemployment benefits fell by 21,000 to 221,000. Markets had forecasted a rise to 235,000, and the drop came as a surprise given the turbulence caused by trade tensions and the deep government spending cuts spearheaded by Elon Musk. The upcoming data should soon reflect these changes, as US employers announced layoff levels of 172,017 in February, with approximately 64,000 coming from government agencies as the Department of Government Efficiency (DOGE) continue to axe government spending, implementing funding freezes and cutting contractors.  

UK-listed Kenmare Resources, one of the world’s largest producers of titanium materials operating the Moma Mine in Mozambique, was subject to a takeover offer by its ex-founder Michael Carvill. The bid approach was 530p a share, a 93% premium to the 275p price it closed at on Wednesday night. Shareholders had called for the consideration of a sale back in February 2024. However, the offer was rejected as the business felt the bid undervalued the company. This is another deal which highlights some of the value available within UK markets – the potential acquirer was willing to pay over 90% more than the listed share price, and seemingly must believe even at a 90% premium there is continued value going forward.

Uncertainty levels around the globe have increased and this has been reflected in higher volatility and some drawdowns in risk assets. The US equity market, unlike recent years, has been the worst performing market with the magnificent seven stocks suffering from large falls over recent weeks. Domestic UK has also been challenged as concerns around stagflation and the imminent National Insurance increases have weighed on investor sentiment. Volatility can be uncomfortable; however, investors must be wary of knee-jerk reactions and one way to help avoid behavioural pitfalls is through a robust decision-making structure and genuine portfolio diversification. While the US equity market is down for the year, European equities are enjoying somewhat of a renaissance. Likewise, assets like gold have continued to deliver strong returns during this period of elevated investor concerns.

Nathan Amaning, Investment Analyst

Risk warning:  With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.t

The Week In Markets – 22nd February – 28th February 2025

February has 28 days, and today marks the final day of the month. Last year was a leap year, so we won’t see another 29 days in February until 2028. The short month has been a challenging one for risk assets, particularly US equities. This was highlighted with what appeared to be strong results from Nvidia yesterday, however the share price dropped over 8%, highlighting investor caution.

Nvidia reported $39.3billion in revenue and $0.89 earnings per share, both above market forecasts and showing significant year-on-year revenue and earnings growth. Nvidia has routinely outperformed market forecasts, but the magnitude of outperformance has narrowed as it becomes tougher to exceed such strong growth each quarter. Despite the exceptional figures and CEO Jensen Huang’s promise that demand for their Blackwell GP’s is “amazing”, the share price is down -10% year to date. This has partly been driven by concerns around the threat of competition following the emergence of Chinese firm DeepSeek.  

After a month-long delay, US President Donald Trump announced that US tariffs on imports from Canada and Mexico would shortly go ahead. It’s almost becoming a case of the boy who cried wolf as Trump leverages the threat of tariffs to negotiate deals. Trump also threatened that 25% tariffs could “very soon” be coming to the European Union (EU), with Trump claiming the EU was formed to “screw with the United States”. The EU announced they would respond firmly against any unjust tariffs. The announcement of tariffs has caused concern for markets, although it is the US that has felt the most pain, falling circa 4% this week, underperforming Europe on the back of the tariff news.

Moving onto Germany politics, Friedrich Merz, leader of the conservative union was elected last Sunday. There are several pressing issues to contend with, including tricky coalition talks with Olaf Scholz’s social democrats who came in third. Other challenges include weak economic growth, a crackdown on immigration and addressing high labour and energy costs for businesses.

UK Prime Minister Kier Starmer met with President Trump this week, with Trump offered a historic second state visit to the UK by King Charles. The trip was not just about festivities, as both leaders discussed the possibility of a Ukraine- Russia peace deal and a possible US-UK trade deal that would exempt the UK from any tariffs. UK equity performance has been mixed; the large cap index is up over 1% for the week while the more domestically focused mid-cap index is down -1.3%.  

In a data light week, US unemployment claims came in higher than expected, which could be a signal of a weaker labour market ahead. The sell off in risk assets seems more sentiment than data driven, with the uncertainty around Trump’s policies causing headaches for investors. When valuations are stretched and investors are paying high premiums to own US equities, anything other than great news can lead to de-ratings and falling share prices.

The US Personal Consumption Expenditures (PCE) price index is the Federal Reserve’s preferred measure of inflation. This afternoon, PCE figures for January showed signs of easing, with the headline rate dropping to 2.5% and Core PCE falling from 2.9% to 2.6%. The Fed will be keen to see inflation fall back towards target, as policymakers have made it clear they need to keep interest rates at current levels until further evidence of inflation cooling.

In a classic risk-off environment government bonds rallied throughout the week, with the yield on the US 10-year government bond falling below 4.25%, highlighting the importance of diversification. Areas such as infrastructure also performed strongly during the week.

Defence stocks have seen their share prices rocket over recent years, driven by geopolitical instability and this week it was confirmed that Chemring had received at least one takeover approach from Bain Capital in recent weeks. There were also rumours circulating that Pets at Home was a takeover target, highlighting that private equity and corporates continue to see tremendous value in listed UK equities and takeover activity remains buoyant.

This week, and indeed this month, it has helped having diversified portfolios, with unloved areas such as infrastructure, Europe and Japanese equities leading the charge, while US equities have lagged in February. Whether or not this is start of a more sustained rotation in market leadership is yet unclear, however, with rising uncertainty on a global scale we believe a valuation sensitive approach with genuine diversification is more warranted than ever.

Nathan Amaning, Investment Analyst

Risk warning:  With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors

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