Many investors will be glad of the shortened work week after a bruising April. Thankfully, this week has been calmer than the previous week, although there has still been a raft of data and policy decisions to digest. We saw UK inflation data released, the European Central Bank cut rates for the third time this year, whilst the Bank of Canada held interest rates steady. In the spirit of Easter, here’s an interesting fact: Cadburys factories produce 1.5 million Creme Eggs daily. If stacked, they would reach 10 times the height of Mount Everest!
We begin in the US with Mr Elon Musk, Head of the Department of Government Efficiency (DOGE), announcing shortcomings in his lofty promises. When Mr Musk first took the job, he claimed he would save the US Government $1 trillion, but this week stated he may only cut government spending by $150 billion, a mere 15% of his goal. A range of government contracts and jobs have been cut already, but they may still go further. Meanwhile, the US Treasury department reported that President Trump has spent $155 billion more than the former president did, in the 87 days since his inauguration. The cost-cutting plans of President Trump and Mr Musk are adding up, or should we say, not adding up.
US Federal Reserve Chair Jerome Powell noted that President Trump’s policies are putting the Fed in “uncharted waters”. The policies are likely to derail economic growth, increase unemployment and cause a reacceleration in inflation – a nightmare scenario for the Fed. They are expected to hold off on any rate decisions at the next meeting and analyse further data points for more clarity.
Boeing, the American airline company, is one of the latest casualties in the trade war between the US and China. China has ordered airlines to halt the purchases of Boeing airplanes and jets, causing shares to fall almost 9% year- to-date. This move comes in retaliation after the US government banned the sale of certain Nvidia chips to China. Nvidia, the posterchild of Artificial Intelligence, stated the ban would lead to a $5.5bn hit to revenues. The share price fell 7% on the news.
US retail sales for March were announced on Wednesday and surprised to the upside as they rose by 1.4% (month-on-month), the most significant rise in over two years. Car dealership sales led the way with a 5.3% rise, likely a rush to purchase as President Trump’s automaker tariffs kicked in at the beginning of April. Markets had anticipated a 1.1% rise in retail spending; however, it is likely we may see a reversal in the coming months as sentiment declines. It’s useful to note that retail sales are not real (adjusted for inflation) therefore it’s possible any increase in data points could be a result of goods prices rising.
UK inflation for March was released yesterday, showing a decline to 2.6% for the second consecutive month. Services inflation, which had crept back up to 5% in previous months fell to 4.7%, a positive for the Bank of England. We mentioned in the last weekly that the effects of “Awful April” with price increases across gas, electricity and water prices, are set to impact future data points. The Bank of England (BoE) has projected inflation to rise to 3.6% in the next print and is likely to remain above 3% for the rest of the year. Despite this, the BoE is expected to reduce interest rates at their next policy meeting in early May.
As expected, the European Central Bank (ECB) cut interest rates for the third time in 2025, bringing the deposit rate to 2.25% and the interest rate to 2.4%. Speaking at the press conference, ECB President Lagarde stated “the economic outlook is clouded with exceptional uncertainty” and “downside risks to economic growth have increased”. These views are likely shared amongst other central banks, CEOs and consumers, which is weighing on sentiment and, if allowed to persist will likely weigh on consumption and investment.
Gold continued its meteoric rise, pushing higher once again this week, including rising over 3% on Wednesday. Investors continue to shun typical safe-haven assets, such as US government bonds and US Dollars, instead flocking to gold.
After the volatility of last week, it was pleasing to see markets calm a little this week. That being said, we did still see 3% moves in US indices intraday this week. We continue to tread a careful path forward, focusing on diversification to help manage risk. This approach has meant drawdowns of portfolios have been much less than that of world equities.
Nathan Amaning, Investment Analyst
Risk warning: With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.