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Weekly Notes

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

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

It’s the UK’s turn to take centre stage as inflation, wage growth and retail sales data were all released. UK inflation figures were a shock to the system, rising to a 10-month high of 3% against an expectation of 2.8%.

The falling trend in UK inflation at the beginning of 2024 was extremely positive, with inflation dropping from 4% in January to 1.7% in September. However, headline inflation reaccelerated from that point onwards, and despite a brief dip in December, inflation has risen back to 3% to begin this year. A key factor to the rise is attributed to the Labour government, as the price of private school fees increased following the introduction of VAT. The Bank of England (BoE) faces a challenge around how to manage rates and lacklustre economic growth. A bright spot in recent inflation data has been falling services inflation, however, that picked up to 5% this month, something the BoE will be mindful of. Core inflation (excludes food and energy prices) also increased to 3.7% in January from the previous 3.2%.

Average earnings figures for December were released, rising to 5.9% (excluding bonuses), another key component that the BOE are hot on. The retail, hotel and restaurant sectors saw the most significant increase of 6.6%. Unemployment remained at 4.4% and the number of jab vacancies rose by 10,000 to 819,000. The UK labour market is certainly healthier than expected ahead of April, when Chancellor Reeves plans to increase national insurance contributions and implement a 6.7% rise in minimum wage. Governor Bailey spoke following the results, highlighting that inflation could continue to rise over the next six months but would be short lived. He expressed more concern about weakening global demand amid “heightened uncertainty” around the world. These comments were enough to stop a big sell-off in UK government bonds, despite heightened inflation. It seems the BoE are willing to look through short-term data and have one eye on slowing economic growth.

Retail sales were released early Friday morning and were positive for the first time since August. For the month of January, sales rose 1.7% (month-on-month), exceeding market forecasts of 0.3%. This marks the end of a “gloom” that had settled over UK consumers who were worried about the incoming tax rises from the Labour government. The most significant rise came from food shop sales at 5.6%, a level last seen when Covid-19 hit.

European stocks have surged to begin the year, and last week, talks between US President Trump and Russian President Putin raised optimism towards a potential ceasefire between Russia and Ukraine. A peace deal would be positive for countries such as Germany whose economy has been hampered by elevated energy prices. Intriguingly, since the US election on the 5th November 2024, the German Dax (equity index) has outperformed the S&P500 by over 13%. President Trump is not one to mince his words, and by the end of the week, he referred to Ukrainian President Zelenskiy as a “dictator” over disputes over how much the US has sent to Ukraine in aid.

Heading over to the US, the number of American citizens filling for unemployment benefits increased by 5,000 to 219,000. This suggests the US labour market is still moderately resilient, as we have seen over 2024. Since President Trump and Department of Government Efficiency CEO, Mr Musk have been in office, they have fired thousands of federal government workers, and these cost cutting figures have not yet been accounted for in the data. There are 2.3million workers employed by the federal government so there is potential for these cuts to impact unemployment data meaningfully.

It may be time to upgrade your phone (if you prefer iPhone to Android) as Apple announced the latest iPhone 16e model for £599. The slightly smaller model boasts the latest development of Apple intelligence features, including a ChatGPT integration with Siri. Apple is hoping the release of the cheaper model will help improve falling sales in countries such as China – Apple shares are up over 3.5% for the week.

There is rarely a dull week in markets, and the coming week is no exception as the Germans will hold their elections on Sunday. The consensus is that a coalition government led by the conservative party leader, Mr Fredrich Merz, will emerge as Europe’s largest economy strives to revive its stagnant economy. Despite the negative headlines around Germany and wider Europe, European equities have had a very strong start to the year, with countries such as France and Germany rising over 10% in 2025. Pleasingly we have increased European equity exposure in portfolios in the summer of 2024 and at the start of 2025.

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 February – 14th February 2025

We missed the opportunity to begin the weekly round-up with a fact last week, so we will start this week with one! In 2024, France was the most visited country in the world, attracting 100 million visitors. It wasn’t skiing or the Olympics that drew people to France this week, but an artificial intelligence (AI) summit led by French President Emmanuel Macron.

The summit lasted two days and was attended by various global leaders, including US Vice President JD Vance. It concluded with a declaration outlining six main priorities, including promoting AI accessibility, encouraging AI development and ensuring AI is “open, ethical and transparent”. A total of sixty countries including China, France and India signed the declaration. The UK and US stood side by side in refusing to sign the declaration, with Mr Vance stating, “excessive regulation of the AI Sector could kill a transformative industry”. Prime Minster Sir Keir Starmer was not present at the summit but mentioned the UK are open to future revisions of the declaration.    

Sir Kier Starmer will certainly be celebrating the small wins, including positive economic growth figures for Q4 2024. GDP rose from 0% in Q3 to 0.1% in Q4 2024, beating market expectations of a contraction of -0.1%. When we break down the data it was the services and construction sectors that provided the much-needed boost to the economy. It has not been smooth sailing for Chancellor Rachel Reeves since her fiscal plans to increase tax burdens on businesses were highly criticised, and she was not satisfied with the current level of economic growth, which is why she is “determined to go further and faster in delivering growth and improving living standards”.

It was just last week that the Bank of England (BoE) met and reduced rates due to sluggish growth and a recent drop in inflation. Policymaker Catherine Mann, who was one of two who voted for a larger 50bps (0.5%) cut to rates, spoke this week. Despite being viewed by markets as an “uber-hawk”, she believes that there was sufficient evidence of softer consumer demand and the risk of a deterioration in the labour market. This caused her to signal to markets that she had dropped her previous stance of opposition to cutting rates. However, she noted that “50 now does not mean 50 next time” as she maintains an active view on the direction of rates.

Unilever, the parent company of Ben & Jerry’s, dealt a blow to both the UK and US by choosing Amsterdam as the primary listing for the ice cream company. Unilever own various brands, including Dove soap and TRESemmé hair products. However, their earnings report underwhelmed on Thursday, followed by weak forecasts for the first half of 2025, causing a 6% share drop on the day. Chancellor Rachel Reeves did meet with Unilever last September in a bid to convince them that the UK was the correct destination for listing, but did not convince them to have their primary listing in the UK. There is still optimism that the UK will be able to convince fashion retailer Shein to list on the London stock exchange for around £40billion.

US inflation was the most significant data point of the week for markets, and it continues to run extremely hot. If we think back to the September reading, inflation was on the mend and down to 2.4%, but it has since reaccelerated, hitting 3% in January. Core inflation (excluding energy and food costs) rose to 3.3% year-on-year. Standout sector increases include the price of used cars, medical care commodities and airline fares, which have been consistently rising. President Trump has called for the US Federal Reserve to cut rates; however, they are cautious to act as Trump’s tariffs and immigration policies have the potential to be inflationary. Markets have forecast that we will not see the first rate cut until September this year. US equity markets reacted negatively to the news, with the S&P500 falling over 1% on the day, although it recovered these losses by the end of the week.

US Retail sales were released this afternoon, rounding up disappointing data points for the US. Retail sales (month-on-month) for January fell by -0.9%, following a revised December figure of 0.7%. It’s tough to pinpoint the exact cause of such weak sales, as poor weather conditions hit parts of the country and consumers were expected to pull back spending following the Christmas period. US government bond yields fell (prices rose) on the news, as investors digest whether the potentially slowing consumer could force the US Fed to cut rates.

It will be the UK’s turn to hold their breath next week as inflation, wage growth and retail sales figures are all set to be released. Within portfolios, gold has remained a key contributor as market uncertainty continues to drive investors towards the safe haven asset. European equities have also quietly continued to perform this year, as President Trump spoke of a potential peace deal between Russia and Ukraine.

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 – 25th January – 31st January 2025

In a week when the US Federal Reserve and the European Central Bank held their first interest rate meetings of the year, the main topic of conversation wasn’t about interest rates. DeepSeek, a Chinese artificial intelligence chat bot, was not well-known among investors before last Saturday but this week has become the talk of the town.

DeepSeek is a Chinese startup that launched its free AI chatbot last week, and was developed on a fraction of the budget of other competitor AI models. By Monday morning, it had overtaken US rival ChatGPT in downloads from the Apple app store. Questions are now being raised about the future demand for chips and the importance of huge investments into power production to fuel data centres, as DeepSeek has highlighted high-speed AI models can be developed on low budgets with much less power needs. This had a drastic impact on large-cap technology stocks, with $593billion wiped from Nvidia’s market value in a single day, a new record. It seems the barriers to entry in the market are not as great as initially assumed, opening the door for other companies to enter. It has also brought into question the decision of large firms such as Microsoft and Meta to invest billions of dollars into expensive chips and data centres, which ultimately may not be required. It is potentially a pivotal moment with investors previously paying high prices to access the AI chip makers (Nvidia) and users (other Mag 7 companies) believing they had a monopoly over this market and there were high barriers to entry – that narrative is now looking precarious. Given the valuations of these companies, their execution needs to be faultless going forward, so this is definitely something to watch.

Norway is home to the world’s largest sovereign wealth fund, which reported a record annual profit of 2.51 trillion crowns ($222billion) for 2024. This is the second straight year of record profits and Mr Tangen, CEO of Norges Bank, acknowledged the extraordinary gains, noting almost 50% came from technology stocks, including Nvidia. He warned that such returns will not continue forever, as the bank’s stress test highlighted the risk posed by an AI stock correction, debt crisis or geopolitical shock.

The US Federal Reserve announced their decision to keep interest rates unchanged on Wednesday. Fed Chair Jerome Powell shared his belief that the current policy stance is “well calibrated”. There was a large emphasis on “waiting to see what policies are enacted” as US President Trump’s promises of import tariffs and immigration crackdowns have inflationary implications. The US Fed is also aware of the risks associated with cutting rates too aggressively from the 22 year high of 5.5% we saw in July 2023 to August 2024. President Trump does not seem to be Chair Powell’s biggest supporter, as he claimed the US Fed had taken their eye off the ball and spent too much time on DEI (Diversity, Equity and Inclusion), “green” energy and fake climate change.

560 miles north of Washington DC, is Ottawa, where the Bank of Canada (BoC) met and they continued their rate cutting journey with a 25bps (0.25%) cut, bringing the policy rate down to 3%. The move was widely expected by markets, with the bank now cutting interest rates for the sixth successive time. The BoC did not give any guidance on the future rate path but did express concerns about a looming trade dispute with the US, which would test Canada’s economy resilience in a year they had hoped would be an economic revival.

The European Central Bank met on the Thursday and, as markets forecasted, also cut rates by 25bps (0.25%) bringing rates to 2.75%. This rate cut can be attributed to continued weak growth across the Euro economy. ECB President Christine Lagarde noted that the “economy is still facing headwinds” and believes that tariffs implemented will have a “global negative impact”. Markets are forecasting three more rate cuts over 2025 but acknowledge the pace and magnitude of any further cuts will be data driven.

The most positive news of the week is the strong performance in UK equities. The FTSE 100 closed at a record high, smashing through the 8,600 mark and while the more domestically focused FTSE 250 has lagged behind, it has still risen around 2% throughout the week. Government bond yields have continued to fall this week from recent elevated levels in January which has provided support to equity markets. The Bank of England meet next week and they are expected to deliver a 0.25% cut which should act as support to the UK consumer.

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 January – 24th January 2025

Davos is the highest town in Europe. It’s not only famous for its 300km of ski slopes, but also hosts the annual meeting of the World Economic Forum every January. This year’s theme is “Collaboration for the Intelligent Age” with a large emphasis on the rapid advancements in artificial intelligence, cryptocurrency and blockchain. 

There were 24.6 million watching as US President Donald Trump was inaugurated on Monday afternoon. Mr Trump got straight to work on his first day, signing 46 executive orders and actions, which included policies on border security, energy, gender rights and pardoning the January 6 Capitol rioters. “Trump tariffs” have been trending buzzwords over the last months, but Trump did not sign any orders imposing tariffs on any foreign nations. He did speak remotely at Davos on Thursday, encouraging businesses to “come and make your products in America, and we will give you among the lowest taxes of any nation”.

US initial jobless claims were released on Thursday, and the number of Americans filling for unemployment benefits rose slightly from last week by 6,000 to 223,000. Markets had forecast 200,000 claims but the numbers still seem to be affected by the rampant wildfires that occurred in California. The US labour market was resilient over 2024 and has continued its strength this year. The US Federal Reserve will take all factors in account ahead of their meeting next week. There is not expected to be any change in interest rates with markets projecting the first rate cut to arrive in May.

The highly anticipated Season 2 of The Night Agent was released this week but that’s not the only reason Netflix is in the weekly. Netflix shares soared to an all-time high just under $1,000 as they reported $10.5bn in revenue and added 18.9m users over Q4 2024. This included the streaming of former heavyweight Mike Tyson and influencer Jake Paul’s boxing match, as well as two NFL games on Christmas day. Following the earnings reports, Netflix announced that they will be raising subscription prices by one dollar in the US, Canada and Portugal.

In the UK, wage growth figures for the three months to November 2024 rose in both the private sector and the overall economy. For the private sector, growth increased to 6% from 5.5% in October, while for the economy as a whole it rose to 5.6%. The stubbornly strong wage growth remains an ever-present issue for monetary policy makers. The UK’s unemployment figures for November 2024 were also released and rose unexpectedly to 4.4%. Following the Chancellor’s autumn budget, where it became apparent businesses would bear the brunt of new tax measures, markets expect wage growth figures and job vacancies to dip over December.

The Bank of Japan (BoJ) started the year with a 25bps (0.25%) raise to interest rates, bringing rates to 0.5%, the highest level since the 2008 global financial crisis. Inflation figures for December rose to a staggering 3.6% up from 2.9% in November, the highest reading since January 2023. As a result, the vote was almost unanimous, with eight of the nine policymakers voting to hike. BoJ Governor, Mr Ueda stated the central bank will continue on the rate hike path until they see inflation trend towards the 2% target.

On a positive note, equities have been strong with the S&P 500 and FTSE 100 reaching all-time highs. We expect next week to be as busy as this week, with inflation reports from the US and Germany and central bank decisions from the US Federal Reserve, European Central Bank and the Bank of Canada.

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 – 11th January – 17th January 2025

We are 17 days into the new year and historically the number 17 means the “manifestation of positive outcomes” and “complete victory”. This has definitely been a more positive day and week in markets, and there is certainly the prospect of a positive outcome in ceasefire talks between Israel and Hamas. Economic data this week was mixed however, with some data from the UK particularly underwhelming.

US Headline inflation (year-on-year) was reported at 2.9%, almost 1% above the US Federal Reserve’s target of 2%, aligning with the Fed’s projections for fewer rate cuts over the year. A positive note is that core inflation (excludes food and energy prices) for December dropped to 3.2% after remaining firm at 3.3% for three consecutive months. In just three days, Mr Trump will begin his second stint in the White House, and the continued threat of tariffs on imported goods and mass deportation of immigrants are seen as acts that could further raise inflation. The US Fed will be patient to see how the start of the year unfolds but has already projected a shallower rate cut path, with no rate cut expected in the January meeting.

We will remain in the US where we cover retail sales, which rose 3.9% (year-on-year) in December. Miscellaneous store retailers, which include gifts shops and florists, saw an increase of 4.3% due to the Christmas period, whilst sales of sporting goods, hobby and musical instruments jumped 2.6% and furniture stores sales rose by 2.3%. Continued consumer strength is being driven by strong wage growth, and markets also sense consumers may be rushing to purchase goods in anticipation of the Trump tariffs, which ultimately raise prices for consumers.

You may be reading this report on your Apple iPhone, but if the report reaches China it’s likely they’ve switched their iPhones out for local rivals Vivo or Huawei. 2024 was Apple’s worst year for iPhone sales in almost a decade, as Vivo captured a 17% market share, closely followed by Huawei with 16%. Artificial intelligence certainly played a role – or in Apple’s case the lack of it- as the latest iPhones sold in China have no access to ChatGPT, forcing Apple to negotiate with China’s domestic companies to integrate AI features.

In the UK, inflation (year-on-year) bucked the recent rising trend and fell to 2.5% for the month of December. A significant positive for the Bank of England (BoE) to consider is the fall in services inflation from 5% in November to 4.4%, the lowest level in 33 months. We reported last week that yields had risen as high as 5.47% (long-dated bonds), the highest since 1998, but have since fallen. The steep fall in yields this week has boosted government bond prices and will ease some pressure on Rachel Reeves.

UK GDP figures for November were released the day following the inflation report, showing positive economic growth of 0.1% (month-on-month) after declines in September and October. Market forecasts had predicted a 0.2% rise in GDP, reflecting the continued gloomy mood over the UK economy since Chanceller Rachel Reeves’ autumn budget. Rachel Reeves did speak following the report, pledging she was “determined to go further and faster to kickstart economic growth”.

UK Retail sales for December is the latest data we have, released this Friday morning, and it surprised by falling -0.3% (month-on-month). Market expectations were for a 0.4% monthly increase, especially with a Christmas bounce; however, this did not materialise as consumers pulled back on food spending. Poor retail sales, weaker than expected economic growth, and the fall in inflation, including services inflation, could provide the BoE with an opportunity to cut rates in their first meeting of the year in February. It appears that bad economic news is good news for markets, as UK equities rose this week. The large cap index is now a whisker away from all-time highs and the mid-cap index advanced over 2.5% on Wednesday following the positive inflation data.

At a company level news broke on Friday morning that Rio Tinto and Glencore had held discussions about a potential merger. While talks are no longer active, there is potential for a deal to be done later in the year. Any merger would be the largest ever in the mining industry.

As we look out to next week all focus will be on Trump’s inauguration on Monday. He has promised strong action, from tariffs to tax cuts, to even trying to buy Greenland! It will be interesting to see what he can actually implement, and how markets will react.

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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