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Weekly Notes

The Week In Markets – 28th June – 4th July 2025

“Big, Beautiful Bill”, the major tax and spending legislation demanded by President Trump, is set to be signed into law today, following its narrow passage through the Senate on Tuesday. The bill was approved by the slimmest of margins, with Vice President JD Vance casting the deciding tiebreaking vote. It includes sweeping tax cuts, reductions to social welfare programmes, and increased funding for the military and immigration enforcement—measures that could add an estimated $3.3 trillion to the national debt.

There were several complications in passing the bill, as the Senate vote extended overnight before it was ultimately advanced by a 51–50 margin, with two Republican senators voting against it. Concerns centred on the significant cuts to healthcare programmes, aid for lower-income Americans, and the projected $3.3 trillion increase to the existing $36.2 trillion national debt. The bill would also compel Congress to raise the debt ceiling or risk a default. It proceeded to the House of Representatives on Thursday, where it passed narrowly by 218 votes to 214. The legislation was finalised just in time to meet Friday’s deadline set by Mr Trump, who intended to sign it into law today on US Independence Day.

Another Trump-imposed deadline is fast approaching, as the 90-day freeze on the Liberation Day US tariffs is set to expire in just five days. Speaking earlier this week, President Trump made it clear he had no intention of extending the deadline, though he admitted it had been more difficult than expected to secure new trade agreements. He criticised several countries as being “spoilt from having ripped us off for 30, 40 years”.

The goal of completing 90 trade deals in 90 days was always highly ambitious. So far, only the UK and Vietnam have finalised agreements, while China has agreed to a “framework” towards a broader deal. US Treasury Secretary has expressed optimism, stating he expects a flurry of deals to materialise ahead of the looming deadline.

US Non-Farm Payrolls data for June was released a day early due to the Independence Day holiday. Despite the shift in timing, the underlying trend remained unchanged, with 147,000 jobs added over the month—continuing the pattern of labour market resilience. Markets had forecast an increase of 110,000 jobs, making the figures a positive surprise, particularly the 73,000 rise in government employment, which included a 40,000 increase in government education roles.

In contrast, the federal government shed 7,000 jobs in May, and cuts have continued at an unprecedented pace as the White House pushes forward with aggressive spending reductions. The unemployment rate fell to 4.1%, largely due to a decline in labour force participation.

The US Federal Reserve has kept interest rates unchanged at 4.5% since December 2024, and the timeline for the start of its rate-cutting cycle continues to be pushed back. Markets remain optimistic that the first-rate cut could come in September, followed by a second in December. There is also growing speculation that the cuts may be larger than the typical 25 basis points (0.25%).

There were fierce battles in the House of Commons as Prime Minister Keir Starmer was forced into a U-turn on welfare reform plans put forward by Chancellor Rachel Reeves. Intense political pressure from within the Labour Party saw 49 MPs vote against the government’s welfare reform bill. The proposed changes to Personal Independence Payments (PIP) and Universal Credit were widely criticised as harmful, prompting Starmer to delay any reforms to PIP pending a further review.

The climbdown leaves Chancellor Reeves in a difficult position, facing a £4.8 billion shortfall while maintaining her pledge not to raise income tax or VAT. Headlines across the UK focused on Reeves appearing emotional in the Commons, with speculation mounting after the Prime Minister declined to confirm whether she would remain in her role through to the next general election.

Investors shifted from tariff-driven panic to relief buying, pushing US stock markets back to record highs. The S&P 500 has surged roughly 26% since bottoming on 8 April, and AI poster child Nvidia is poised to become the world’s most valuable company ever as it approaches a $4 trillion market cap. Despite looming trade deadlines, optimism remains that “July Joy” could continue—historically the strongest month for the S&P 500 over the past two decades. Meanwhile, the US dollar posted mixed performance this week, strengthening slightly against pound sterling but weakening against the Swiss franc.

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 – 21st June – 27th June 2025

This week saw NATO Secretary General Mark Rutte host representatives from all 32 member states in the Netherlands for what became the alliance’s largest and most historic meeting to date. As the two-day summit in The Hague concluded, several key takeaways emerged: a renewed commitment to a 3.5% defence spending target, reaffirmed support for Ukraine, and a strong emphasis on collective defence – that an attack on one member is considered an attack on all.

Interestingly, eight of the 32 NATO member states, including Spain, Belgium, and Italy, are not currently meeting the previous 2% defence spending guideline. This makes it increasingly difficult for them to reach the newly proposed 3.5% target within the next decade. These countries already face tight public finances and competing domestic priorities, such as healthcare and education. Even when funds are allocated, there is often a procurement lag. Building up military capacity and acquiring equipment takes time, meaning that increased spending does not immediately translate into enhanced defence capabilities.

Just last week, we reported that the threat of President Trump appointing a new Chair of the US Federal Reserve had diminished. However, this week he has reignited his criticism of Chair Jerome Powell, describing him as “terrible” and expressing frustration that the Fed has not cut interest rates at all this year. Trump stated he has three or four candidates in mind as potential successors. Jerome Powell responded firmly, defending the Federal Reserve’s commitment to keeping inflation under control. Inflation remains clearly above the 2% target, and policymakers are increasingly concerned that the full impact of President Trump’s tariffs has yet to be reflected in the data. Powell’s message was clear: the Fed is “well positioned” to wait and observe the trajectory of the economy before making any policy adjustments.

US weekly jobless claims fell by 10,000 to 236,000, reflecting a decline in the number of Americans filing for unemployment benefits. The strong labour data will likely validate Powell in his decision not to cut interest rates this year.

In a week dominated by the US, there was positive news flow on the US-China trade deal. A White House official confirmed “the administration and China agreed to an additional understanding for a framework to implement the Geneva agreement”. Trump also hinted there could be another deal coming that would “open up” India. The positive rhetoric around trade deals helped propel equity markets, with the main US market a whisker away from an all-time high close as of yesterday. The market has rebounded an incredible 23% since the 8th   of April lows. While the US equity market has recovered, the US dollar remains weak, reaching its lowest level in nearly four years against sterling. This has been a headwind to sterling-based investors holding US dollar assets, given the dollar is down around 9% against sterling in 2025. It was interesting to see recent US dollar moves; it did not act as a safe haven asset when tensions between Iran and Israel escalated, and quickly sold off on the back of de-escalation, resuming its slide lower.

Here in the UK Prime Minister Starmer appeared to row back on welfare reforms. This is likely to put further pressure on the public finances and could lead to tax rises in the next budget. Staying with the UK, rumours broke on Wednesday that Shell were in early talks to acquire rival BP in what would be a blockbuster deal. Shell has poured cold water on the rumours, but with an activist investor holding over 5% of BP, there is potential for corporate activity to happen.

A fragile ceasefire between Iran and Israel led to weakness in the oil price this week. Absent of any geopolitical shocks, the oil market looks well supplied for the remainder of 2025.

As we enter the second half of 2025, global equity markets are displaying mixed momentum. The Hang Seng Index has led the way, surging 19.3% year-to-date. In contrast, US markets have posted more modest gains, with the tech-heavy Nasdaq up 3.0% and the S&P 500 rising just 1.6% (in USD terms). Looking ahead to next week, investor focus will be on key economic indicators such as UK GDP, Eurozone inflation, and the US Non-Farm Payrolls report.

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 – 14th June – 20th June 2025

The week began with leaders from the G7 gathering for their summit in Kananaskis, Canada. However, geopolitical tensions quickly overshadowed the event. The summit was dominated by the escalating conflict in the Middle East, prompting President Trump to leave early to address the situation. Ukrainian President Volodymyr Zelensky also departed the summit, though he secured new aid from Canada rather than the United States, as the G7 struggled to present a united front in efforts to resolve the ongoing conflict with Russia.

As expected, the US Federal Reserve left interest rates unchanged at 4.5% on Wednesday. There has yet to be a rate cut this year, and Fed Chair Jerome Powell has continued to voice concerns about a potential reacceleration in inflation over the coming months, as President Trump’s tariffs begin to impact prices. It is clear that the Fed will want to see signs of softening in the labour market, which has remained resilient throughout the first half of the year. Markets remain optimistic about the likelihood of two rate cuts in 2025, although expectations have shifted towards a more gradual pace, with just a single 25 bps (0.25%) cut anticipated in both 2026 and 2027.

President Trump has repeatedly made it clear that he wants Fed Chair Jerome Powell to cut interest rates since returning to office in January. While the threat of Trump dismissing Powell has diminished, he has indicated that he will soon nominate Powell’s successor—despite nearly a year remaining in Powell’s term. Such a move would likely cause significant unease in financial markets, particularly if the nominee is perceived as a Trump loyalist.

The UK and US have finalised their trade agreement, initially outlined in May. President Trump, who remains unpredictable, expressed clear admiration for Sir Keir Starmer and the UK, which he described as the country’s “ultimate protection”. Under the agreement, all tariffs in the aerospace sector will be removed, while tariffs on the automotive industry will be reduced from 25% to 10%. Both sides also pledged to continue working towards a zero-tariff arrangement on core steel products.

Italian car manufacturer Ferrari has delayed plans to launch its electric vehicle (EV) range from 2026 to 2028, due to a lack of consumer demand. Known for its loyal and passionate customer base, built on exclusivity and racing heritage, Ferrari is using the additional time to further develop its EV offering, particularly to address the challenge of battery technology, which currently lacks the sustained power required for high-performance vehicles. This trend is not unique to Ferrari, other luxury automakers are also adjusting their EV strategies; Lamborghini has postponed its EV launch until 2029, while Maserati has cancelled plans for an electric version of the MC20.

Turning to Europe, and in contrast to the United States, three interest rate cuts were announced within 24 hours. The Swiss National Bank, Sweden’s Riksbank, and Norway’s Norges Bank each trimmed rates by 25 bps (0.25%). Despite the coordinated timing, each central bank is responding to different economic conditions. Switzerland has entered a period of deflation, with inflation falling to -0.1%, largely due to the strength of the Swiss franc. In Sweden, the krona has also appreciated significantly against the US dollar this year, and with inflation nearly flat, Riksbank Governor Erik Thedéen saw room for monetary easing. For Norway, this marks the first interest rate cut since 2020.

The Bank of England (BoE) met on Thursday and, as markets anticipated, held interest rates steady at 4.25%. Notably, three of the nine policymakers voted in favour of a 25bps (0.25%) rate cut, more than initially expected. Following the meeting, BoE Governor Andrew Bailey stated that interest rates remain on a gradual downward path and acknowledged early signs of softening in the labour market. He emphasised that the Bank would continue to adopt a “gradual and careful” approach, citing elevated global uncertainty and ongoing geopolitical tensions as factors that could influence future decisions. Similar to the US, investors have priced in two 25 bps (0.25%) cuts by the end of the year.

The ongoing conflict in the Middle East has put upward pressure on oil prices, with Brent crude oil rising above $77 a barrel this week. If we were to see the Strait of Hormuz shut, then it’s likely oil prices would spike further. Approximately 20 million barrels of oil and petroleum products pass through the Strait of Hormuz daily therefore any closure will lead to severe disruption in the delivery of oil.

For gaming enthusiasts, the Nintendo Switch 2 has officially become the most successful console launch in history, surpassing Sony’s PlayStation 5 release in 2020. The console sold over 1.1 million units in the US and 3.5 million units globally within just four days, setting a new sales record. Nintendo’s shares have surged 40% year-to-date.

 

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 – 7th June – 13th June 2025

It was a busy week in the UK, with key economic data releases including GDP, unemployment, and average earnings figures. London also played host between the US and China as they continued trade talks. While the discussions were initially focused on reaching an agreement regarding rare earth minerals, the final outcome appeared to leave markets uncertain about what had actually been agreed upon.

US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng were both present at meetings this week, as both sides agreed to implement the consensus deal reached during the Trump-Xi phone call last Thursday. The deal included preliminary agreements on export licenses for Chinese rare earth minerals and magnets, while Washington committed to granting an additional 20,000 student visas to Chinese nationals. Although reciprocal US tariffs on Chinese goods remain at 30%, they have significantly decreased from the previous peak of 145%. Chinese exports to the US fell -34.4% (year-on-year) in May, and this downward trend is expected to continue, as trade talks like those held this week appear to merely “kick the can down the road.”

UK wage growth for the three months to April fell to its weakest level in seven months, with average earnings rising by 5.3%, below the market forecast of 5.4%. Meanwhile, the unemployment rate rose to 4.6%, the highest level since August 2021. The Office for National Statistics (ONS) also reported that 9 million people aged 16 to 64 are now economically inactive.

The government faces a dilemma: despite increasing the national minimum and living wages, along with implementing national insurance changes effective from April 1st, measures intended to encourage greater workforce participation, labour market activity remains subdued. Hiring freezes have become more common, driven not only by rising business costs but also by broader economic uncertainty.

Midweek, Chancellor Reeves unveiled her first multi-year spending review, allocating over £2 trillion across government departments for the next three years. Defence spending is set to rise to 2.6% of GDP, while the NHS will receive £29 billion annually for day-to-day operations. In contrast, sectors such as foreign aid are expected to face cuts. Reeves also announced a £10 billion investment to build thousands of new homes across England. These spending measures aim not only to stimulate economic growth but also to restore Labour’s reputation, which has faced challenges despite their sweeping victory last July. The Conservatives have criticised the plans as “unachievable,” anticipating that Reeves will be forced to return in the autumn with further tax hikes.

UK GDP data was the most discouraging for markets this week, as the British economy slowed sharply in April. Month-on-month GDP contracted by 0.3%, while year-on-year growth slowed to 0.9%, down from 1.1%. The UK’s dominant services sector shrank by 0.4%, highlighting the breadth of the slowdown. Despite being one of the few countries with a trade deal with the US, the UK is beginning to feel the ripple effects of Trump’s tariffs. British exports to the US fell by £2 billion in April—the largest monthly drop since records began in 1997. Markets believe the door is closed on a rate cut from the Bank of England (BoE) next week, though the likelihood of a cut in August has increased.

Nvidia CEO Jensen Huang is in high spirits after the company reported its tenth consecutive quarter of exceeding earnings forecasts last month. Speaking this week, Huang praised the UK’s growing artificial intelligence ecosystem, highlighting innovative start-ups such as DeepMind, Wayve, and ElevenLabs. Earlier this year, Prime Minister Keir Starmer announced plans to boost the UK’s AI sector, including relaxed planning regulations for new data centres. Huang noted that the UK’s AI infrastructure is the only missing piece and confirmed Nvidia’s commitment to increasing investment starting with the supply of its latest Blackwell GPU chips.

The FTSE 250 has become a hunting ground for larger firms seeking value, and Spectris is no exception. The company, which supplies hardware and software to pharmaceutical and automotive manufacturers, saw its share price tumble ahead of Trump’s “Liberation Day” announcement in April. US private equity firm Advent has since placed a $5.06 billion bid for Spectris, an 85% premium to its share price last Friday, marking the largest takeover in Britain this year.

Spanish multinational clothing retailer Inditex reported a 1.5% rise in Q1 sales to €8.27 billion, falling short of analyst expectations of €8.36 billion. The company, which owns brands such as Zara, Stradivarius, and Bershka, attributed the soft start to both global economic uncertainty—dampening consumer spending—and adverse weather conditions in key markets like Spain, which accounts for 15% of its global sales. Despite the sales miss, Inditex generated a net profit of €1.31 billion. CEO Óscar García Maceiras emphasised the group’s focus on inventory control and investment in store upgrades, noting that these strategies have built resilience and will help the company navigate challenging market conditions.

US inflation data for May was released and bucked the recent downward trend, rising to 2.4%. A positive for markets was that it didn’t climb as high as the expected 2.5%, as Trump’s tariffs gradually begin to feed into the data. The main driver of rising inflation was a 0.3% increase in shelter costs (rent), while food prices also rose by 0.3%, reversing a 0.1% decline the previous month. In contrast, airline fares fell by 2.7%, reflecting the reversal in demand. The US Federal Reserve has remained cautious this year, having not cut interest rates at all, as it continues to assess the impact of Trump’s tariffs. Policymakers are likely to wait not only for inflation to move closer to the 2% target, but also for signs of a softening labour market, which has so far remained resilient.

Oil prices surged by more than $4 a barrel on Friday morning, reaching their highest level in five months amid escalating tensions across the Middle East. Our core message on the importance of diversification within portfolios remains as crucial as ever, and we continue to emphasise the value of long-term investing to capitalise on opportunities created by short-term market movements. We now look ahead to key updates from both the Bank of England and the US Federal Reserve next week.

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 – 31st May – 6th June 2025

The unlikely bromance forged between Donald Trump and Elon Musk seems to have very quickly, and very publicly, broken down. Musk joined Trump’s presidential campaign and served as the head of the newly created Department of Government Efficiency (DOGE). However, recently the relationship has deteriorated with Musk publicly criticising Trump’s proposed tax bill legislation, calling it a “disgusting abomination” and asking lawmakers to “kill the bill”. Trump used his social media platform, Truth Social, to respond, calling out Musk and moving to cut subsidies to a range of his companies, including Tesla and SpaceX.

Staying with the US, but shifting to data as opposed to drama, there were signs of some weakness this week, maybe indicative of the tariff turmoil beginning to bite. ISM Manufacturing PMI data came in below 50, and below expectations, highlighting the continued pressure the manufacturing sector is experiencing. Unemployment claims, released on Thursday, came in higher than expected. The weak data put downward pressure on government bond yields (prices rose), with the yield on the US 10-year Treasury falling below 4.4%.

The European Central Bank (ECB) met on Thursday and once again cut interest rates. This was the eighth cut in just over a year and took the main rate to 2%. With Eurozone inflation falling below the 2% target in May (1.9%), and growth still lacklustre, the ECB decided to continue on their rate cutting journey in an effort to boost the economy. With the risk of tariffs looming over Europe, the cut in interest rates should come as a welcome relief. At 2%, interest rates are at their lowest level in over two years and have de-coupled from the US and UK, where rates remain above 4% (for now). European equity markets reacted positively to the news, continuing what has been a very strong 2025 for the asset class.

A range of commodities have performed well over recent weeks, with both copper and oil prices moving higher. Silver, which has been largely overlooked due to gold’s breakout, has quietly been performing very well, and this week broke above $36 an ounce, reaching a 13 year high. It’s still considerably below its all time high of $50, but the precious metal is beginning to appear on investors radars. We have also seen gold and silver miners perform well recently, delivering strong earnings driven by rising revenues and falling energy costs.

The US dollar continued to slide this week against most major currencies. It is down 8% year-to-date versus sterling and has acted as a significant headwind for sterling investors holding US assets. Despite significantly weakening this year, the currency continues to look expensive on a range of metrics.

In what was a quiet week in the UK there was disappointing news for the stock market as fintech darling Wise Plc announced plans to have its primary listing in the US. With the UK lacking market leading tech firms, it is a blow to see Wise move.

The last key datapoint of the week came this afternoon, with US Non-Farm Payrolls data released. It showed more hiring for the month of May than anticipated, with 139,000 jobs added to the economy. Unemployment held steady at 4.2%, while average hourly earnings were higher than expected. The news looks to be well received by equity investors, with the US futures market moving around 1% higher.

Our diversified approach has proved its worth so far in 2025, with portfolios now at, or close to, year-to-date highs. The biggest contributors to performance this year have largely been different to 2023 and 2024 – which was dominated by US equity – with large holdings such as infrastructure (Atlas), global value (Havelock) and specialist Japan (Zennor) delivering strong returns.

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 – 24th May – 30th May 2025

“Absolutely crazy”. Those words could describe many events and individuals over the past week. But this week began with President Trump using them to describe President Putin, following a series of aerial attacks in Ukraine. Trump expressed strong disapproval and hinted at the possibility of imposing further sanctions on Russia. Ukrainian President Zelensky also responded to the attacks, accusing Russia of toying with diplomacy and showing no genuine interest in ending the war. His remarks underscored how far the situation remains from the long-hoped-for peace deal.

Monday marked Memorial Day; a U.S. bank holiday dedicated to honouring those who lost their lives in military service. President Trump appeared to be in good spirits, announcing a one-month extension on an EU trade deal deadline. While we’ve seen Trump use this playbook before, the move came as a welcome surprise. A proposed 50% tariff, set to impact the entire 27-nation bloc starting June 1st, was pushed back to July 9th. European markets responded positively, with the DAX 100 (Germany) closing 1.68% higher on the day. The euro also continued its upward trend against the dollar.

European Central Bank President Christine Lagarde has made it clear that she envisions the euro as a viable alternative to the US dollar as a global reserve and trade currency. Growing uncertainty surrounding US trade policies has prompted investors to reduce their exposure to dollar assets. Lagarde believes that the current geopolitical and economic climate presents an opportunity, one that the euro must “earn”. To seize the opportunity, Europe must reduce reliance on the dollar by promoting the euro as the preferred currency in trade agreements. Additionally, enhancing military and security capabilities will be essential to reassure investors of Europe’s geopolitical stability, an area in which Germany has already taken significant steps. “If Europe succeeded, the benefits would be large,” Lagarde stated. However, this is an ambitious goal. The US dollar still accounts for 58% of global foreign exchange reserves, compared to the euro’s 20% share.

A few months ago, Donald Trump boldly declared his intention to restore the United States to a golden age of manufacturing. This vision faces several clear challenges, including the need to build or refit factories, address workforce shortages, and reduce the country’s dependence on global supply chains. Global corporations are increasingly responding to the pressures created by Trump’s policies, with some beginning to reshore operations. For instance, BMW has announced plans to increase output at its South Carolina plant by up to 80,000 units. Similarly, Honda has stated their intention to relocate parts of car production from Mexico and Canada to the United States.

US PCE inflation for April eased to 2.1%, down from 2.3% in March. Core PCE (excludes food and energy) came in at 2.5% year-on-year, marking the lowest level since March 2021, which will please the Federal Reserve. Services inflation, one of the more persistent components of overall inflation, also showed signs of softening, easing to 3.3%. The Fed has indicated it remains “on the sidelines” as they continue to monitor how recent tariffs are filtering through to the data. The next Fed meeting is scheduled for 18 June, and unless there is a significant shift in the data, another pause in rate changes appears likely.

Nvidia reported strong first-quarter earnings on Wednesday, with revenues of $44.06 billion surpassing expectations. This marks the tenth consecutive quarter in which the company has exceeded earnings forecasts. There had been concerns that trade tensions between the US and China might disrupt this trend. Looking ahead, Nvidia expects to generate approximately $45 billion in chip sales in the next quarter. However, the company has accounted for an estimated $8 billion in lost sales due to US restrictions on the export of its H20 chips to China. Nvidia shares have risen by over 5% this week, bringing them back into positive territory for the year following notable underperformance in March and April.

German retail sales data released early this morning came as a surprise, showing a decline of 1.1% for April. This was well below market expectations, which had forecast a 0.2% increase, continuing the positive trend seen earlier in the year. The drop has been attributed to weak consumer confidence, driven by ongoing economic uncertainty, which particularly affected online retail and the food sector. Despite the disappointing figure, market reaction has been muted, largely due to a significant upward revision of March’s retail sales, from an initial -0.2% to +0.9%, a stark contrast.

This week brings a close to May – a month which has been strong for risk assets. The old adage of “sell in May and go away” has not worked, as equity markets have responded positively to what is perceived to be advances in trade and tariff negotiations. The summer months will prove interesting as the impacts of tariffs begin to be felt. So far it has only showed up in soft data, which has been very weak. Given this normally leads hard data by a few months there is the potential for some weakness, as such it makes sense to be diversified across a range of assets.

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 – 17th May – 23rd May 2025

UK inflation took centre stage this week, with headline CPI coming in above expectations at 3.5%. In a double blow to Rachel Reeves, public sector net borrowing was higher than expected for April, despite the fact receipts were higher, in part due to an increase in National Insurance.

Taken at face value, the UK inflation data released on Wednesday made for painful reading with both headline and core CPI above expectations. Digging a little deeper into the data, it looks as though the bigger than expected rise in inflation was driven by several one-off factors, including water and energy bills, as well as the timing of Easter, so there is the potential for inflation to trend lower later in the year. The market it appeared took the data at face value, with UK government bond yields rising (prices falling) on the news. The yield on the 10-year UK government bond rose above 4.7%, heading towards the top of a recent trading range. After a period of strong performance, UK equities also came under pressure.

It wasn’t just UK yields rising this week with both US and Japanese yields, particularly at the long-end, pushing higher. A US 20-year Treasury auction on Wednesday had weak demand, which led to bond yields pushing higher. The yield on 20-year US debt is now above 5.1%, which will put further pressure on their fiscal position. Over in Japan, 30-year debt rose above 3%, posing a serious issue to a country with extremely high debt levels.

UK retail sales data for April was released early this morning, showing a 1.2% month-on-month increase. The Office for National Statistics (ONS) attributed the surge to sunny weather throughout the month, which boosted footfall in stores and led to a rise in purchases of outdoor goods. March’s figure was revised up to 0.1%, confirming the fourth consecutive month of positive growth in retail sales. The last time we saw a similar streak was in 2020, as consumer spending rebounded following the first lockdown.

Assets such as gold and bitcoin seemed to be the beneficiaries of weaker government bonds, with prices rising throughout the week. After a mini pull-back, gold climbed back through $3,300 an ounce, just shy of all-time highs. Bitcoin has risen above $110,000, a new all-time high and is up over 50% since Trump rowed back on proposed tariffs on 8th April.

Manufacturing has been in the doldrums over recent years and purchasing managers index (PMI) data from the UK and Europe came in below 50, highlighting the sector as being in contraction. Trade wars, high energy costs and supply chain disruptions have been sighted as some of the major headwinds facing manufacturing. Within Europe, Germany’s bold fiscal stimulus measures could see somewhat of a renaissance in manufacturing over the coming years.

Novo Nordisk has announced that CEO Lars Jørgensen will be stepping down. Having served in the role for the past eight years, Jørgensen stated he would remain in the post for a short period to support a smooth transition to new leadership. Once Europe’s most valuable company, Novo’s shares have fallen by 30% since the start of the year. The incoming CEO will certainly face a significant challenge—not only in closing the gap with rival Eli Lilly, but also in navigating President Trump’s planned tariffs on pharmaceuticals.

The US dollar’s safe haven status continues to be questioned in 2025. The greenback currency weakened throughout the week, rising above 1.34 vs GBP.

US equities were the laggard this week, having rebounded strongly since the April lows. Concerns around the US deficit led to pressure on bonds, equities and the US dollar. We continue to favour a diversified approach in portfolios that is not simply a one-way bet on US equities and the US dollar.

 

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 – 10th May – 16th May 2025

Shortly after Liberation Day, equity markets bottomed on 8th April. Following on from Trump’s tariff reversal we have seen extreme retail buying, a decision that so far has paid off handsomely. US markets have surged, buoyed by President Trump’s global tour to secure new trade deals. The S&P has climbed back into positive territory for the year (in USD terms), and the tech-heavy Nasdaq index entered a bull market since the April low.

US inflation data has remained a key focus over the past couple of years, though more recently it has been overshadowed by ongoing tariff discussions. In the twelve months through April, US CPI came in at 2.3%, falling below market expectations of 2.4% and marking the lowest level in over four years. Shelter costs (rent) continued to be a leading contributor to inflation, rising 4% in April. In contrast, airline fares, which had surged through Q4 2024 into early 2025, extended their decline, falling 2.8% as US consumers pulled back on travel.

These inflation figures may give the US Fed confidence that inflation is under control, however, it is clear that the effect of tariffs are yet to be felt in pricing, and the Fed seems keen to wait for more data points before cutting rates further.

US retail sales for April, released on Thursday, slowed sharply to 0.1%, down from a revised 1.7% gain in the previous month. March’s spike in spending was largely attributed to front-running tariffs, as consumers rushed to make purchases ahead of Liberation Day. That effect has now faded, and we’re seeing the expected pullback in consumer activity. Sales at auto dealerships, which led the way in March with a 5.5% increase, dipped to just 0.1% in April. Meanwhile, sales of sporting goods, hobby, and musical instrument stores slumped by 2.5%.

US equity markets had a strong week, surging on news that the US and China had reached a trade agreement. China had been the only country excluded from the initial 90-day tariff pause announced by President Trump. Under the new deal, tariffs on Chinese imports will be reduced from a staggering 145% to 30% for the next three months. In return, China has agreed to scale back its countermeasures on US imports to 10% and restore access to rare minerals and magnets critical for GPU chip production.

US Treasury Secretary Scott Bessent, who was on hand in Geneva to sign the agreement, acknowledged that while the deal marks a significant step forward, it will take years to fully repair the US-China relationship. However, he noted that there is room for further negotiations.

Trump began a trade tour in the Middle East this week, securing major deals across defence, energy, and technology. In Saudi Arabia, he finalised defence and energy agreements, while in the United Arab Emirates, a joint US-UAE initiative was announced to build the largest AI data centre outside the United States. The most significant deal came in Qatar, where the US secured the sale of 210 Boeing jets valued at $96 billion.

As optimism around global trade improves and risk sentiment rises, safe-haven assets have taken a hit—gold prices fell 4% this week amid the wave of trade announcements.

There was positive news in the UK as Q1 data showed the economy growing at its fastest pace in a year, despite concerns that Labour’s tax policies and Trump’s tariffs might hamper growth. GDP rose by 0.7% between January and March, beating market expectations of 0.6%. Growth was recorded across several sectors, including retail, computer programming, car leasing, and advertising. It’s a welcome boost for Chancellor Rachel Reeves. Although business and consumer sentiment have declined in recent months, Reeves maintains that the Labour Party has made the right choices—highlighting four interest rate cuts, two trade deals, and a rise in the minimum wage since the election.

Markets have recovered in near record time, with retail investors almost trained to buy the dip. While tariff news has certainly improved, it still seems highly likely that a level of tariffs will remain in place, and this is likely to make trading conditions challenging. With risks and uncertainty still at elevated levels we think it makes sense to tread a careful path with asset allocation.

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 – 3rd May – 9th May 2025

“Be fearful when others are greedy, and be greedy when others are fearful,”, are wise words from the great investor Warren Buffet, who announced his retirement at Berkshire Hathaway’s annual shareholders meeting last weekend. A man whom thousands of investors have looked up to over his 70-year investment career will hand the keys over to Vice President Greg Abel at the end of the year.

Warren Buffet has been vocal in opposing the trade war initiated by President Trump, stating, “Trade should not be a weapon”. Canadian Prime Minister Mark Carney shared this view during his meeting with Trump in the Oval Office on Tuesday. Canada is the US’s second largest trading partner after Mexico, with over $760 billion worth of goods flowing between the two countries. Carney mentioned that progress was made during the meeting as he attempted to push back on the tariffs set by the US; however, further talks may be necessary for President Trump to reconsider his position.  

The US Federal Reserve met on Wednesday and held rates steady at 4.5%, just as markets had forecast. Fed Chair Jerome Powell continues to be criticised by Trump for “acting too late”. However, Mr Powell stood firm stating, “the scale, the scope and the persistence of the tariff effects are very, very uncertain”. It was noted that GDP fell in the first quarter as households and businesses attempted to front run tariffs. The term used for the Fed at this point in time is “sidelined”, until it is clear through data points which way the economy will pivot. The data points that the US Fed rely on are backward-looking, which in turn means that as the Fed react to data, they may truly be behind the curve in making cuts.

Donald Trump is certainly a busy man as he works his way through trade negotiations with several countries. He reiterated the need for a Russia/Ukraine peace deal via the Truth Social platform and suggested a 30-day ceasefire, warning both countries would face further sanctions if it wasn’t respected. Ahead of his re-election, he boasted he would end the war in 24 hours, however, over 100 days later there is still no plausible agreement.

There was a lot of talk regarding a breakthrough deal that the US and UK had made, as Prime Minster Kier Starmer labelled Thursday, a “fantastic, historic day”. The US agreed to cut the 25% tariffs on British steel and aluminium down to 0%, a huge boost for the sector. In addition, car export tariffs fell from 27.5% to 10% on a quota of 100,000 British cars, approximately the number the UK exported last year. The UK is the first country to strike an agreement with Trump during the 90-day liberation day pause, however, it seems the US has heavily won this trade deal. British beef farmers received a tariff free quota on 13,000 tonnes of meat but PM Starmer is still pushing against tariffs affecting the pharmaceutical, tech and film/tv sectors.

The Bank of England met on Thursday, cutting rates by 25bps (0.25%) to bring interest rates to 4.25%, in line with market expectations. Of the nine policy committee members, five voted to cut rates by 25bps, two voted for a larger cut of 50bps (0.5%) and two voted for no change. Easing inflation figures were the driving point behind the rate cut and bringing inflation back towards the 2% target is a top priority. We can expect to see a “gradual and cared approach” to the future rate cutting path as the impact of tariffs on data begins to feed in. Over 600,000 homeowners have a tracker mortgage, so the rate cut will have a positive impact on their monthly repayments.

Over in Germany, conservate leader Fredrich Merz was elected Chancellor on Tuesday. It wasn’t as smooth sailing as expected; he initially failed to win the first round of voting with just 310 votes, six shy of an absolute majority. The second round of voting was completed 24 hours later, and he then won 325 votes. There is certainly heightened mistrust between the coalition government of the conservatives and social democrats. Germany is Europe’s largest economy and political stability is crucial for the country to rejuvenate economic growth.

You may have noticed more adverts from Chinese fast fashion retailors Shein and Temu this week as they pivot from the US towards Europe. Both companies experienced extraordinary growth in the US over the last few years, as consumers could purchase clothing as cheap as $12 and accessories as cheap as $5. There has been a significant shift in digital ads spending towards the UK and France and the companies will now attempt to undercut heavyweights such as Zara, GAP and H&M. If you haven’t seen their adverts yet, you will soon!

Rumours of trade negotiations advancing with multiple nations helped support equities this week. Small and mid-cap equities have been under pressure since 2022, lagging their large cap peers, however, we have witnessed steady outperformance over the last month, which continued throughout the week.

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 – 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.

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