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Weekly Notes

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.

The Week In Markets – 30th November – 6th December 2024

The countdown to Christmas has begun as we entered the final month of the year. The Santa rally has taken off early as the S&P 500 has now notched its 50th all-time high of 2024.

British house prices rose by 3.7% in November (year-on-year) reflecting the largest rise in exactly two years. The Bank of England (BoE) also reported the most mortgage approvals by lenders in the last month since August 2022. The increased housing activity stems from the Labour party’s decision to end stamp-duty reliefs at the beginning of the new tax year in April 2025, bringing forward house buyers purchases and hence boosting house prices in the short term.

In just twelve days, the BoE will meet again for the final time this year to decide whether a pause is needed in their rate-cutting path. Inflation figures for November will be released the day before the meeting, and the BoE will fully consider other leading indicators. Firms are reacting to the national insurance tax rises and may raise prices instead of cutting jobs, which would be inflationary. BoE Governor Andrew Bailey remained coy on their next move stating there was still “distance to travel” to control inflation.

The European Central Bank will meet next Thursday and has already cut interest rates three times since June. Finnish policymaker Olli Rehn has spoken ahead of the meeting, explaining the increased justification he sees for cuts. He pointed out weakening economic growth around the Eurozone and rising inflation, which is still within touching distance of the 2% target.

After the debacle over the French budget last week, it was expected that Premier Michel Barnier would be forced out of parliament. On Wednesday, 331 French members of parliament voted no confidence, forcing Barnier’s resignation. His tenure, beginning only four months ago is the shortest of any premier in 66 years. President Macron must act quickly in his search for a new prime minister, one strong enough to push a new 2025 budget through a deeply divided government.

Across the Atlantic ocean, US services sector PMI’s slowed to 52.1 for November following strong results over the previous months of September and October. A figure above 50 means the sector remains in the expansionary zone, which is certainly a positive reflection on the US economy. On Wednesday the US Fed released the last beige book for the year, which provides insight into economic conditions across the twelve federal districts. The takeaway from the report is that economic growth was stable and growing across most districts; however, businesses were uneasy about the incoming tax and regulation that will be implemented in the New Year as Trump takes the hot seat. 

US non-farm payrolls was released this Friday afternoon with 227,000 jobs added in November. This shows a rebound from the 36,000 jobs in the previous month which was heavily affected by the strikes and hurricane Milton that passed over Florida.

We’ve previously written about the artificial intelligence company Super Micro Computer, as they are late in filing their annual and quarterly earnings reports. Their previous auditors Ernst & Young, resigned in October following this however a special committee announced this week “no findings of fraud or misconduct”. This news led the share price rally of almost 25% over the week, however the company is not out of the woods yet. Super Micro’s new auditor, BDO has yet to certify the company’s earnings, and the company is on the timer to deliver their financial reports or face being delisted from the Nasdaq.

We expect next week to be as busy as this week, with inflation reports from the US and Germany, UK GDP and central bank decisions from the European Central Bank and Canada. A given possibility may be the continued rise of Bitcoin as it breached the $100,000 mark on Thursday, up almost 3% for 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 – 23rd November – 29th November 2024

On Thursday the US celebrated Thanksgiving where it was estimated $983m would be spent on Turkeys alone, slightly down from the $1.2bn spent in 2023. Thanksgiving, combined with Black Friday shopping, should lead to strong consumer spending in November.

Starting the week in the UK, Bank of England (BoE) Deputy governor, Clare Lombardelli made her first speech since joining the committee in July. With UK inflation rising to 2.3% in October, Ms Lombardelli appeared most concerned that inflation may continue to rise above expectations due to the spike in services inflation and persistently strong wage growth. Judging by her commentary it would be hard to see her backing a further rate cut at the next policy meeting. The impact on the economy of imminent Trump tariffs is also set to be discussed during the next meeting.

There was a blow to the London stock exchange with Just Eats’ latest announcement to delist from the exchange at the end of the year and trade in Amsterdam only. They stated their reasons for delisting due to “administrative burden, complexity, and costs” but more worryingly were concerned by “low trading volumes and liquidity”. This is undoubtedly a setback in the Labour government’s attempts to repair UK’s reputation as a business hub. Recent M&A activity has seen a reduction in the number of UK listed companies and this week saw a resurgence in M&A activity. Aviva had a bid rejected for Direct line, while yet another US private equity firm bid for a UK business, offering £338m for Loungers. The bid activity was not over there, with Australia’s Macquerie bidding for UK listed waste firm Renewi. It seems foreign buyers are taking advantage of the recent weakness in sterling, which makes UK companies more attractive, coupled with already depressed valuations.  

Stellantis is a global car manufacturer owning companies such as Alfa Romeo, Peugeot, Fiat and Vauxhall. Vauxhall is set for a reshuffle as they are set to close their Luton factory putting 1,100 jobs at risk. There is also set to be a consolidation at their Ellesmere site, just one hour away from the Luton site, as Stellantis are investing £50m into an electric vehicle (EV) hub. They are currently under pressure to speed up their transition to EVs as 22% of car sales must be purely electric or risk a regulatory fine.

German headline inflation has risen in November from 2% to 2.2%. Core inflation (excludes energy and food prices) also rose to 3% adding pressure to Europe’s largest economy. German Chancellor, Olaf Scholz, has officially been named as the Social Democrat’s candidate ahead of German elections next February following the collapse of the coalition with the Greens and Democrats earlier this month. He has his work cut out to bring down high energy prices and modernise Germany’s manufacturing heavy economy.

In France, the government coalition is on the brink of collapse as Prime Minister Barnier has suffered blowback from his latest budget proposal. Barnier aimed to rein in the country’s public debt deficit by €60bn through spending cuts and tax hikes but has since backtracked, removing a proposed tax increase on electricity. Marine Le Pen, leader of the far-right National Party is expected to vote for a motion of no confidence which would cause the government to collapse. French equity markets have reacted negatively to the news, down -1.5% for the week.

US PCE is a slightly different measure of inflation and is highly regarded as the US Federal Reserves preferred measure. On Wednesday US PCE (year-on-year) rose to 2.3% for October, reflecting an increase in inflation away from the 2% target. Incoming President Donald Trump spoke earlier this week and spooked markets with his strong vow to implement a 25% tariff on all Mexican and Canadian products followed by an additional tariff on Chinese products. The US Federal Reserve are still expected to deliver a further 25bps (0.25%) cut in their December meeting, but a pause may be on the cards in 2025 in order to assess Mr Trump’s policies.

Next week, we will receive US non-farm payrolls which is expected to bounce back following the surprisingly low 12,000 jobs created in October. In a controversial move, Australia have passed a bill that bans children under 16 from social media apps such as Facebook, Instagram and TikTok with concerns around mental health of young people. It will be interesting to see if any other countries follow Australia’s lead, and what, if any, impact it has on the social media companies revenues.

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 – 16th November – 22nd November 2024

Heading into the week, market predictions were that UK inflation would rise to 2.2% from its current level of 1.7%. Fast forward to Wednesday and UK inflation rose beyond predictions to 2.3%, an unexpected surprise.

With UK headline inflation at 2.3% (year-on-year) for October and core inflation (excludes food and energy prices) rising to 3.3%, inflation rose back to a six-month high and puts the Bank of England (BoE) on alert. The rise from energy prices had been expected with the quarterly energy price cap rising 10% to £1,717 on average and to add to the “triple dose of bad news”, services inflation rose to 5%. Since Labour’s budget the market has become more concerned about inflation, estimating that it will drift higher to end the year. It’s been 15 days since the BoE cut interest rates to 4.75% and the probability of a further cut in the month of December has fallen to 16%.

UK retail sales for October have been released early this Friday morning and again disappointed beyond market expectations. Month-on-month sales were predicted to fall 0.3% but came in at -0.7% and the year-on-year figure falling to 2.4% from the previous 3.2%. In the build-up to last month’s budget and speculation over which taxes may be increased, consumer confidence was certainly affected, and shoppers were more reluctant to spend. Weather conditions have taken a turn this week with extreme colds and snow in parts of the country however we can expect a rebound in retail sales to end the year with Black Friday approaching next week and Christmas spending to begin in December.

Similar to the UK, Eurozone inflation has been on the rise in the last month. Headline inflation rose to 2%, which is in line with the European Central Bank’s (ECB) target. When the ECB met in October, they maintained the belief of a short-term inflationary uptick before a gradual decline in 2025, so we may see a pause in their current interest rate cutting cycle at their next meeting. ECB Vice President, Luis de Guindos is awaiting to hear if incoming US President Trump will impose any tariffs on Europe but has said he expects tariffs to hurt economic growth within Europe rather than be inflationary.

Rising geopolitical activity between Russia and Ukraine has led Gold to have its best weekly gain in over a year. Oil is also back up to $70 a barrel rising 5% for the week as the Euro vs Dollar fell to $1.04, its lowest level since December 2022.

Over in the US, it was expected that 220,000 people would file for unemployment benefits last week however that figure came in at 213,000, a seven-month low. The impact of Hurricane Milton in Florida and strikes certainly distorted job growth figures in October so we are seeing that rebound in hiring activity.

It was Nvidia’s earnings report day on Wednesday as the world’s largest company reported revenue of $35.08bn for Q3, beating expectations of $33.15bn. The company also projected that revenue was set to increase by 70% in the next quarter. The bar has been set extremely high for Nvidia to consistently beat expectations and Nvidia’s outlook on AI chip supply timing and capacity initially disappointed investors. There has since been a mini recovery, and the share price is up 1.2% for the week.

It has been a positive week in markets with equities having a strong end to the week, most notably US small cap. European markets were impacted by political instability in Germany in addition to slower recovery projections for the manufacturing sector. The importance of diversification across regions, asset classes and sectors cannot be overstated as we aim to enhance the resilience of portfolios whilst capturing 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.

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