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Weekly Notes

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.

The Week In Markets – 4th January to 10th January 2025

Any hopes of easing into the new year were swiftly dashed, as concerns around inflation re-emerged, leading to a spike in volatility in bond and currency markets. While the sell-off in bonds was global in nature, the UK was hit particularly hard, which will make for unpleasant reading for the Chancellor, Rachel Reeves.

UK government bond yields have been steadily rising over December and spiked this week, with longer-dated bonds selling off the most. This now means long-term borrowing costs for the UK are now at levels not seen since 1998. It seems the sell-off has been driven by dual concerns around sticky inflation and slowing economic growth. The market now only expects the Bank of England (BoE) to cut rates twice this year (due to inflation) and there are also expectations of lower tax revenues due to lacklustre growth. For the Chancellor, there is a now a risk that she will breach her own fiscal rules, and this could lead to either further tax increases or spending cuts, in order to help balance the books. Sterling fell in tandem with government bonds this week, falling to a 14-month low versus the US Dollar. UK large cap equities actually rallied during the week, most likely in reaction to the lower currency, which should boost overseas earnings (when translated back to sterling). The mid-cap index, which is typically more domestically focused, dropped close to 2% on Wednesday, led by consumer stocks. If interest rates stay higher-for-longer, there will likely be a negative impact on the consumer (in part due to higher mortgage rates), who could see disposable incomes dented.

On Monday there were reports that Donald Trump and his team were considering scaling back their tariff plans, however, this was quickly dismissed with Trump tweeting this was “fake news”, causing equity markets to wobble on Monday afternoon. The market views tariffs as an inflationary policy and this has helped to push inflation expectations higher in the US, forcing US government bonds to sell-off this week, approaching levels not seen since November 2023.

With inflation concerns once again coming to the fore, there has been a different equity market leadership in 2025 compared to 2024. Sectors such as oil and gas, mining and financials have led the way, sectors that feature prominently in UK indices, but are light in US indices, which are heavily exposed to technology. If inflation concerns persist, then investors will need to consider their asset allocation. In 2022, when we saw inflation and interest rates rise, the UK large cap index outperformed the US equity index by a staggering 29%. At this juncture, we think diversification in portfolios is important, with inflation strategies, such as resources and gold included in the asset mix.

Inflation is certainly not a concern in Switzerland where prices fell over the month of December and headline inflation is a meagre 0.6%. This low level of inflation has allowed the central bank to cut rates to 0.5%. Deflation seems the biggest concern in the world’s second largest economy, China, with the latest inflation print at 0.1%. There are real concerns that China is going down the same path as Japan did 30 years ago, with similarities being made due to demographics, an ailing property sector and elevated private debt levels. The concerns have led to Chinese equities falling over 5% in 2025.

The gold price proved resilient throughout the weak, despite the increase in real yields. It is back approaching $2,700 an ounce, close to its all-time high. As commented on last week, oil has been moving higher in 2025. Brent crude oil is approaching $80 a barrel and this will feed into the upcoming inflation data.

The week finished with the most important economic data, the US Non-Farm Payrolls data, which showed 256,000 jobs had been added to the economy, while unemployment dropped to 4.1%. Both data points beat expectations, leading to investors believing the US economy is strong, and that the US Fed will likely be very slow and steady in future rate cuts. US government bonds sold off on the news, and US equities look like they will open lower.

The mood music has changed so far in 2025, inflation concerns have bubbled to the surface and the optimism of deep rate cuts in 2025 has diminished. Within the portfolios exposure to resources, which struggled in 2024, are now leading the way, highlighting the benefits of diversification and blending holdings that perform in different environments.

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 – 28th December 2024 – 3rd January 2025

Happy New Year! This week we transitioned into 2025, the year of the snake according to Chinese astrology, which is associated with growth and transformation. Although Chinese New Year doesn’t fall until the end of the month, investors will be hoping for strong growth and positive economic transformation throughout the year.

It has been a truncated week for most major markets, with exchanges being closed in observation of New Years Day. A late santa rally in the US failed to ignite this week, with equities falling throughout the week. Trading volumes are typically thin during holiday periods, and there was potentially an element of profit taking into year-end given the strong gains made during 2024.

Economic data from the US was very light this week. The Chicago PMI data was weak, however, there was more positive data with finalised manufacturing PMI data higher than expected, as well as better than expected weekly jobless data. Given the holiday period, the monthly non-farm payrolls data will be released next Friday, not the first Friday of the month, which is customary. US bond yields were stable this week, after a difficult December. It has been a strange time for government bonds, behaving very differently in this rate cutting cycle when compared to the past. Yields have been rising, despite the US Fed cutting rates by 1% since September; this is a phenomenon we haven’t really witnessed before. As a result of rising yields, mortgage rates have risen in Q4 and are around 1% higher over the period, with long-term mortgage rates back above 7%. This will continue to act as a headwind to the housing market, where transactions remain extremely low. Construction spending disappointed this week and could be a headwind to GDP growth this year.

UK monthly house price data from Halifax showed prices were up 0.7% for the month. Over the course of 2024, house prices rose 4.7% on average, according to Nationwide, with the average price of a home now £298,000. It is hoped that falling interest rates will provide support to the housing market in 2025, although stamp duty changes, which take effect from April, could be a headwind to pricing.

Sterling started the new year in particularly weak fashion, falling over 1% against the US Dollar and Japanese Yen on Thursday. The weaker currency did give a lift to UK large cap equities, with the headline index rising over 1% yesterday.

Chinese bond yields continued to fall this week, moving out of tandem with most major developed market government bonds. The yield on the 10-year Chinese government bond fell below 1.6% this week, for the first time in history. It has been driven by deflationary pressures and stalling economic growth within the world’s second largest economy. It will be interesting to see what policy measures are implemented this year in order to help kickstart the ailing economy.

Gold moved higher at the start of the year, with investors seemingly believing the strong performance in 2024 is likely to carry on. With elevated geopolitical risks, it is seen as a sensible portfolio hedge, something we wouldn’t disagree with. The oil price has nudged higher this week, with Brent Crude back above $75 a barrel. This is in line with where it traded 12 months ago, although a far cry from the $120 a barrel it reached at the peak of 2022.

After a quiet start to 2025 things will become busier with US non-farm payrolls, inflation data and Trump’s inauguration all coming up over the next few weeks.

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 – 14th December – 20th December 2024

The hope of a Santa Rally was brought to a complete standstill on Wednesday evening following the US Federal Reserve’s meeting. The 25bps (0.25%) rate cut was anticipated by markets; however it was the commentary from US Fed Chair Jerome Powell, that spooked markets.

Wednesday’s meeting marked the final US Fed meeting before Mr Trump’s arrival at the White House. The decision was made to bring interest rates down for the third consecutive meeting to 4.5%. Mr Powell spoke clearly about entering a “new phase”, in which greater caution would be taken regarding further rate cuts, signalling just two cuts in 2025. Discussions around the health of the US economy were positive but caution stemmed from the potential impact of proposed tariffs and policies by Mr Trump. The S&P 500 and Nasdaq fell -2.9% and -3.8%, respectively, on the day. Additionally, Mr Powell shut down talks of a national reserve for cryptocurrencies, triggering a fall in bitcoin, now down -5% for the week.  

It is fair to say the US economy has been resilient over the year, and US retail sales reflect this. In November, retail sales increased more than expected to 0.7%, with motor vehicles sales (2.6%) and online shopping (1.8%) leading the way. Black Friday sales provided the perfect opportunity for an online splurge, but strong retail sales have been underpinned by robust wage growth.

On our home turf, UK wage growth rose more than expected. In the three months to the end of October, average earnings rose by 5.2%. We also had inflation data released on Wednesday, which showed inflation had risen, as expected to 2.6% (year-on-year). The data was released before the Bank of England’s (BoE) meeting and had effectively extinguished any last hope of a pre-Christmas cut.

It was Thursday afternoon when the BoE concluded their final meeting of the year. At the beginning of the year, markets expected four base rate cuts from the 16-year high rates of 5.25% but we have ended the year with just two cuts, leaving rates at 4.75%. Policymakers became more divided as three of the nine Monetary policy committee members – Deputy Governor Dave Ramsden, Swati Dhingra and Alan Taylor – voted for a 25bps (0.25%) rate cut. The BoE has been more cautious than US Fed and European Central Bank, and that cautious approach will not change heading into the new year. Governor Andrew Bailiey stated that the central bank will stick to a “gradual approach” following a recent pick-up in inflation and weakened economic growth. Markets responded negatively, with the FTSE 100 heading for its worst week of the year, down -3% and longer dated UK government bonds yields reaching levels not seen since 1998.

All year we have covered the political crisis that the French have been through, and President Macron has now appointed his fourth premier of the year. Mr François Bayrou, the leader of centralist party MoDem, compared the difficulty of his new role to “climbing the Himalayas”. The imminent task he faces include addressing the huge public debt problem and pushing a budget through that pleases all three divisions in parliament.

Until recently mergers and acquisitions in Japan have been muted, however, we have seen a big rise recently, in part driven by the government’s move to improve shareholder returns and force management teams to be more efficient with their balance sheets. The big news this week out of Japan was a potential merger between Nissan and Honda. Together, they would create the third-largest auto group, valued at $54billion behind Toyota and Volkswagen. The firms agreed on a collaboration in electric vehicle development earlier this year, but both have faced struggles. Nissan shares have risen almost 25% for the week while shares of Honda declined 3%.

December has so far been a tough month, with equities and bonds weakening. Volatility and pull backs are normal in markets, especially after a strong period, and we believe provide opportunities to add to favoured areas.

This is the last weekly round-up of 2024. We would like to wish everyone season’s greetings and a happy new year. We very much look forward to working with you through 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 – 7th December – 13th December 2024

Not so long-ago US Inflation was seemingly on the mend, as headline inflation fell to a two-year low of 2.4% in September. However, the latest data released on Wednesday showed an uptick to 2.7% in November, showing the battle against elevated inflation is not yet over.

US core inflation (year-on-year) remains stuck at 3.3% for the fourth consecutive month, a level that just won’t seem to budge. The US Federal Reserve will look at the data reports for positives and see that shelter (rent) and services inflation both rose at their slowest pace in almost three and a half years. Despite the increase in headline inflation, markets are almost certain we will see a 25bps (0.25%) rate cut next week from the US Fed but are forecasting fewer cuts in the new year as Trump takes power. 

Elon Musk, the richest man in the world, has become the first person in history to have a net worth of $400bn. Tesla shares have been on a tear since election day and closed at a record high of $424.77 on Wednesday. The upcoming appointment of Mr Musk to government has been quite powerful as investors believe his mission to cut down on regulatory practices ultimately benefits his businesses in the electronic vehicle (EV) sector (Tesla) and artificial intelligence (AI) sector through his companies SpaceX and Neuralink.

The Swiss National Bank responded to the country’s weak inflation data report and the backward step in economic growth with a surprise 50bps (0.5%) interest rate cut. This takes the base rate to 0.5%, the lowest level since November 2022 and surprised markets as they anticipated a 25bps cut. The Swiss Franc weakened against the Euro after the new Chairman, Mr Schlegel, left the door open for further cuts but ruled out the likelihood of negative rates in the future. The Bank of Canada also cut interest rates by 50bps on Wednesday.

Staying on the topic of central banks, the European Central Bank (ECB) cut rates on Thursday afternoon for the fourth time this year. Interest rates are now down from the 16-year- high of 4.5% in April to 3.15%. Commentary from central banks is highly analysed by markets for insights on the future rate path, and the removal of key reference “keeping rates sufficiently restrictive” seemingly indicates an appetite for further cuts in future meetings. This cut was expected, with recent services PMI data dropping below 50 and continued weakness in economic growth.

The UK market has seemingly stalled since the Labour government took power and there was another blow to the London Stock Exchange (LSE) as equipment rental company, Ashtead, announced plans to shift their primary listing to New York. Ashtead, founded in 1984, has been listed on the LSE for the last 38 years but declared the main reason for the move was due to the US being a more natural home for the company, given that 98% of its profits are derived from the US. Shareholders are set to be consulted, and the final decision will be put to a vote, but the intent certainly highlights concerns over how attractive the UK is to investors.

UK GDP figures for October have been released this Friday morning and for the second straight month GDP shrank by -0.1%. The weak economic growth potentially stems from uncertainty over the Labour government’s Autumn budget, as the services sector flatlined and the manufacturing sector continued to decline. Chancellor Rachel Reeves admitted the GDP figures were “disappointing” but maintained the view that Labour has put policies in place “to deliver long term economic growth”.

Markets will certainly not take their Christmas break early as both the US Fed and Bank of England meet next week. We continue to emphasise the importance of diversification within portfolios, as this allows us to avoid being caught out by short term volatility and benefit from long term opportunities.

 

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 Month In Markets – November 2024

The Month In Markets – November 2024

November may have been the most important month of the year, as on the 5th, US voters chose between Republican Donald Trump and Democrat Kamala Harris for the presidency. Ultimately, Trump won, amassing 77 million votes the second-highest tally in American history.

Term two of Trump’s presidency could be unpredictable, as he declared he pulled off “the greatest political movement of all time”. The presidential inauguration will be held on 20th January 2025. However, Trump got straight to work nominating cabinet picks for the Senate and appointing White House advisors. A high-profile selection is hedge fund manager Scott Bessent, who will serve as Treasury Secretary and execute his 3-3-3 plan: cutting the budget deficit to 3% of GDP, boosting GDP growth to 3% through deregulation, and increasing US energy production by 3 million barrels of oil a day. Later in the month, Trump set markets on alert as he stated his intention to impose 25% tariffs on Mexico and Canada as well as additional tariffs on China. Markets believe this strong stance is a ploy to prioritise America in trade talks but if imposed the tariffs will likely have inflationary impacts.

While the US election took centre stage, there was a raft of economic and corporate data during November. The US Federal Reserve’s preferred measure of inflation, personal consumption expenditure (PCE) increased 0.2% (month-on-month) and rose to 2.3% (year-on-year). Core PCE (excludes food and energy costs) showed an even stronger reading at 2.8% (year-on-year). Inflation is still within reach of the 2% target and as such, bets are still on that the US Fed will continue its rate-cutting path when they meet for the final time this year in December.

It was corporate earnings season as Nvidia, the world’s largest company, showcased impressive growth. They announced record revenues of $35bn and net profit margins of 55%, up 7.9% from the previous year. The continued strong performance highlights Nvidia’s dominance in artificial intelligence (AI). However, markets were slightly concerned with the delayed timing and performance of their new Blackwell GPU chips, which were rumoured to be overheating. The company quickly addressed these worries, stating all design issues had been resolved and that demand for the chips has exceeded their expectations.

In the UK, the Bank of England (BoE) cut interest rates by 25bps (0.25%) to 4.75%, marking its second cut of the year. The decision was almost unanimous among policymakers with an 8-1 vote in favour of the cut. The decision was driven by the positive fall in inflation to 1.7% in September. Inflation figures for the previous month revealed an expected spike to 2.3% following the increase in the energy price cap by 10% to £1,717 on average. Given the recent pickup in inflation and the expected inflationary impact of the Autumn Budget, the market is not anticipating a rate cut at the next BoE meeting.  

The Labour governments budget was announced on the 30th of October, but the effects were felt before and after as speculation over which taxes would be increased led to UK businesses and consumers to hold back on spending. UK businesses will bear the brunt of increased national insurance tax. Retail sales suffered in the build up to the budget as they fell to -0.7%, however we can expect to see a rebound as consumers took advantage of Black Friday shopping on the last Friday of the month.

Over the month, Japan’s economy showed signs of a modest recovery. Q3 GDP was positive at 0.2%, the second consecutive positive quarter and inflation fell to 2.3% (year-on-year). The Japanese government also announced a significant stimulus package worth $140bn which includes energy & fuel subsidies in addition to cash handouts for low-income households. Japan’s Prime Minister, Mr Shigeru Ishiba, who has only been in power since 1st October, has made a bold promise to spend 10 trillion yen through to 2030 to boost Japan’s semiconductor and artificial intelligence sectors, helping the nation regain its technology edge.

Bitcoin made the most remarkable move over the month, gaining nearly 40% and closing at highs of $99,000. The rally was kickstarted by Trump’s strong views on deregulation and also his comments on potentially creating a bitcoin reserve. A new DOGE team has been created, not the cryptocurrency but the Department of Government Efficiency, led by the richest man in the world, Elon Musk. The primary goals are to reduce wasteful government spending and eliminate unnecessary regulations.

To summarise the month of November there was a range of political and economic developments that shifted markets. US equity markets benefitted the most as Russell 2000 (US Small Cap) rose almost 11%. The US Federal Reserve and Bank of England both cut rates, but markets are split on whether both central banks (or just one) will make the final rate cut of the year in December.

Nathan Amaning

Investment Analyst, Raymond James, Barbican

 

Appendix

5-year performance chart

Risk warning: With investing, your capital is at risk. Opinions constitute our judgement as of this date and are subject to change without warning. Past performance is not a reliable indicator of future results and forecasts are not a reliable indicator of future performance. This article is intended for informational purposes only and no action should be taken or refrained from being taken as a consequence without consulting a suitably qualified and regulated person.

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