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The Week In Markets – 22nd March – 28th March 2025

UK Chancellor Rachel Reeves held her Spring statement this Wednesday, announcing significant cuts to the welfare budget. The Labour Party is determined to halt the rise in sickness-related payments and will introduce additional eligibility requirements benefits. The plan for economic growth has not been smooth sailing for the Labour party, and investors are wary of additional tax hikes in the autumn.

UK inflation figures on the same day proved positive, showing a fall in inflation, down from 3% in January to 2.8% in February. Core inflation (excludes energy and fuel prices) also fell from 3.7% to 3.5%. This fall may be short lived as businesses brace for the increase in costs due to rising employer national insurance contributions and households facing a rise in council tax and energy bills. The Bank of England paused rate changes at their last meeting on Thursday, and the anticipated future rise in inflation will certainly reduce their appetite to cut rates in the upcoming meetings.

UK retail sales data released this morning was positive, surprising markets which predicted a fall due to weakening consumer confidence. Month-on-month, retail sales rose 1% in February, following the revised figure of 1.4% in January. Online retail sales rose 3.3% along with rises in the clothing and household goods sectors. Again, there is a cloud of gloom over such positive numbers as they are expected to be short lived with imminent price increases which create a headwind for consumers.  

Across Europe, France and Spain inflation figures for March deviated from market expectations, signalling to the European Central Bank (ECB) that further rate cuts may be needed. France inflation remained low at 0.8% for the second consecutive month and Spain inflation fell to 2.3%, marking the first decline in six months. The ECB has cut rates six consecutive times, bringing interest rates down to 2.65% in an attempt to address slowing economic growth. The next ECB meeting is 17th April, and several data points will be considered ahead of that meeting. Market forecasts are for two further rate cuts for the year.

2nd  April is a key date for the world as it marks “Liberation Day”, when Trumps tariffs are (finally) set to begin. This week, the announcement of the 25% tariffs on overseas automakers sent markets into disarray. Automaker share prices were hit hard, with Toyota shares falling -2.5% for the week and India’s Tata Motors down -4.5% over the same period. Trump doubled down on his position, stating any reciprocal taxes would be met with further tariffs. US equity markets continued to unwind as the S&P 500 fell -1.1% and the Nasdaq fell -2% on the day. The uncertainty surrounding Trump’s policies continues to create uncertainty, which is now feeding through to business and consumer confidence.

The geopolitical uncertainty provided further support for gold, which off the back of recent all-time highs, advanced further during the week. Other commodities, such as silver and copper, have also seen strong returns recently.

At a portfolio level we continue to be well diversified, spreading risk across a wide range of geographies and asset classes, which has helped us navigate a tricky first quarter.

Nathan Amaning, Investment Analyst

Risk warning:  With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.

 

 

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

It has been a busy week for central banks as monetary policy committee members across the world met to discuss interest rates and the future direction they should take. We saw moves in interest rates both ways; Brazil’s central bank raised rates by 100bps (1%), the Swiss National Bank cut rates by 25bps (0.25%) and both the Bank of England and the US Federal Reserve held rates steady.

We will begin with Brazil, a country we don’t often cover in the weekly notes. This was the third consecutive meeting where committee members voted for a 100bp rise (1%) in interest rates, bringing the current level to 14.25%, a level last seen in 2016. Inflation in Brazil has risen to 5.06%, and Brazil’s central bank has indicated there will be one more hike ahead with the intention of cooling the economy and forcing inflation back towards the 3% target rate. Brazilian equities have performed strongly to begin the year, with the main index up almost 10%.

The US Federal Reserve voted on Wednesday to hold interest rates as Fed Chair Powell described the uncertainty around the US economy as “remarkably high”. US inflation fell in February to 2.8% and the labour market has remained resilient to begin the year. However, the outlook following President Trump’s tariff plans has created a mist of gloom with the potential for slower economic growth, a reacceleration in inflation and a weak labour market. Trump’s tariffs have been mainly threats to date, with the 25% taxes on Mexico and Canada to now begin on 2nd April, so the US Fed are expected to sit on their hands until further potential cuts in summer.

US Retail sales in February rebounded by 0.2% from a -1.2% fall the previous month. The significant fall at the beginning of the year was associated with poor weather conditions, leading to a -1.5% fall in restaurant and bar sales. February’s print showed there was a 2.4% surge in online store purchases, in addition to a 1.7% rise in health and personal care stores. With US consumer sentiment falling due to the macro environment, it is expected that retail sales will remain soft in the coming months.

We have seen quite the reversal of the Magnificent 7 share prices year to date, and Tesla share prices have been hit hard. The stock is down almost -40% year to date. China rivals, BYD, announced this week that they have developed a new platform that could charge their electric vehicles (EVs) as fast as it takes to fill a tank with fuel. Founder Mr. Chuanfu, stated peak charging speeds of 1,000 kilowatts would enable the car to travel 250miles on a 5-minute charge, alleviating any user charging anxiety.  

The Bank of England (BoE), as many expected, left interest rates unchanged at 4.5%. Policy committee members voted 8-1 in favour of the pause, with one member voting for a 25bps (0.25%) cut. The outlook from the BoE reflected the uncertain macro backdrop we currently operate under, with the BoE halving the UK’s 2025 growth forecast to 0.75%. We are also days away from the Labour government’s implementation of rising taxes on businesses, which could further stunt economic growth. The BoE has not provided any commentary on the future rate path but concluded that “a gradual and careful approach is appropriate”. UK Gilt yields fell on the news.

UK average earnings excluding bonuses have remained robust, rising 5.9% in the three months leading up to January.

Across Europe, Germany’s parliament voted in favour of injecting hundreds of billions into defence spending. New Chancellor, Mr Fredrich Merz led the drive along with the approval from 513 other MPs, for the creation of a €500bn fund in addition to rule changes around constitutional debt. The plans are set to boost economic growth around Germany as the multiplier effect will see investment in infrastructure, sparking job creation and wage growth. This shift in Germany’s approach should not be understated and has the potential to change the outlook for the country, and potentially Euro region over the coming years. A lack of investment has left Europe lagging the US in terms of productivity growth and output, yet this new bold fiscal plan could help address some of the issues that have led to Europe lagging its counterparts over the last 10 years. Mario Draghi published his paper last year on EU competitiveness and it appears that the new Chancellor of Germany has taken this on board.

It was another week of new all-time highs for gold, breaking through $3,000 an ounce. Central banks appear to be moving away from the USD and have been buying up the precious metal.

Volatility remains high in markets, with the US equity market still under pressure. Europe remains the bright spot, with investor flows continuing to move from the US back to Europe. Elsewhere areas such as infrastructure and resources have rebounded well, benefiting from the planned huge investment from Germany.   

Nathan Amaning, Investment Analyst

Risk warning:  With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.

The Week In Markets – 8th March – 14th March 2025

Former central banker, Mark Carney, will be sworn in today as Canada’s 24th prime minister. He previously held the positions of Governor of the Bank of Canada from 2008 to 2013 before being appointed Governor of the Bank of England, serving from 2013 to 2020. He takes power at an extremely precarious time, with trade war tensions between Canada and the US at extreme levels. It’s clear he plans to deal with the challenge head on, stating “my Government will keep the tariffs on until the Americans show us respect”.

If you have been reading the news this week, there have been some very alarming headlines, with the most recent being US President Donald Trump threatening 200% tariffs on wine and champagne from EU countries. This appears to be tit-for-tat following the EU’s retaliatory action against American whisky, due to come into force on the 1st of April. The economics on tariffs is very simple; as companies raise prices on a product due to higher import taxes (costs), consumers will likely turn to cheaper alternatives or consume less of the product. During Trump’s first term, whisky exports to the EU fell by $142million, and markets have growing concerns that such measures across multiple sectors all at once could push the US into a recession.

US CPI (inflation) figures for February came in at 2.8%, a slight fall from January’s figure of 3% (year-on-year). Shelter (rent) costs rising 0.3% have been a consistent contributor to rising inflation, but airlines fares falling 4% due to consumers cutting back on spending and fuel prices falling 1% due to cooling demand are seemingly consequences of the economic uncertainty. Falling inflation during the turbulence of a trade war pose questions to the US Federal Reserve, which will meet next week to set monetary policy. It may be too soon to see the impacts that the trade war will have on inflation or the labour market. US equity markets reacted positively to the inflation data on the day but are still the worst-performing market for the year. The main US market is down over 10% in sterling terms for 2025 and is now officially in correction territory having dropped 10% from recent highs.

The Bank of Canada met on Wednesday and cut interest rates by 25bps (0.25%) bringing rates down to 2.75%. This is the seventh consecutive interest rate cut; however, Governor Tiff Macklem stated the committee considered a pause. Once again, the impact of tariffs on the economy is a key concern, as there has already been a shift in business and consumer spending patterns. Mr Macklem has not ruled out an unscheduled monetary policy meeting in the case of a severe shock to the economy.

Here in the UK, GDP figures were released this morning and fell -0.1% over the month of January. Market expectations were for slight growth of 0.1% to follow December’s print of 0.4%. Manufacturing output notably grew 0.7% in December but fell -1.1% in the latest print, in addition to a fall in the construction sector after snow and poor weather held back builders. Negative economic growth to begin the year certainly creates a tall task for Chancellor Rachel Reeves as she is set to make a Spring statement later this month. She doubled down on the plan to increase UK defence spending to 2.5% of GDP by 2027, believing it would “give the economy a lift”. The Bank Of England meet next week, but it is expected that the weak growth numbers will not change their plans of a pause in interest rate cuts.

Gold prices hit a historic $3,000 an ounce for the first time as investors continue to flock towards the safe haven asset amid economic uncertainty. Despite weaker inflation in the US and softer GDP data in the UK, government bond yields have surprisingly risen this week. Following Germany’s fiscal spending plan last week, the German equity market continues to perform strongly this year.  Eurozone equities are around 13% ahead of US equities in 2025, a huge reversal from the previous two years. As the outperformance prolongs, more and more investors are rotating portfolios, with European equities seeing strong inflows, while US equity inflows appear to have stalled.

The volatility in equity markets currently can be unnerving, however, being diversified in exposure has been a good strategy in 2025. Within portfolios, while US equities have been a detractor, areas such as Europe, Japan, infrastructure and gold have all been strong contributors, meaning portfolios have been insulated from some of the drawdowns seen across US and global indices.

Nathan Amaning, Investment Analyst

Risk warning:  With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.

The Week In Markets – 1st March – 7th March 2025

The European Central Bank (ECB) met this week for the second time this year, and oversaw a 25bps (0.25%) rate cut, bringing interest rates down to 2.65%. This marks the sixth consecutive rate cut since June 2024. However, commentary from Governor Christine Lagarde suggests the end of the rate-cutting cycle is near.

Before we discuss the ECB meeting, Eurozone inflation data for February was released at the start of the week. Inflation pleasantly fell from the previous month’s figure of 2.5% to 2.4% although it didn’t quite meet market expectations of 2.3%. Services inflation, the largest component of the Consumer Price Index (CPI), fell from 3.9% in January to 3.7% in February, the lowest level since April 2024, which pleased the ECB.

The ECB concluded their monetary policy meeting in Frankfurt on Thursday and agreed on a further 25bps (0.25%) rate cut, bringing interest rates down to 2.65%. The ECB noted that the decision to reduce rates was based on their updated assessment on the inflation outlook, the dynamics of underlying inflation and the current strength of the monetary policy transmission. Markets observed changes in commentary as Christine Lagarde mentioned “monetary policy is becoming less restrictive” and did not pre-commit to a particular rate cut. This could be viewed as a hawkish shift in policymaker views, as global trade tensions intensify, which has the potential to reaccelerate inflation and weaken economic growth.  The Euro is up over 4% vs the dollar for the week and Euro and German bond yields rose on the news.

European markets also had to digest the news that Germany plans to significantly increase spending (and therefore bond issuance) with the announcement of a proposed €500billion special fund to invest in infrastructure and further defence investment, which would be negated from debt rules. While it is pleasing to see Germany launch ambitious plans to help kickstart growth, there are concerns such levels of spending could ignite inflation. European government bond yields all sold off aggressively on the proposal, with German 10 tear yields rising 0.3% in a single day. The news did support equity markets, with defence stocks the main winners. Only a few years ago, many investors saw defence as an uninvestable sector, since then, its performance has been stellar.

The US Manufacturing Purchasing Managers Index (PMI) simply put is a monthly indicator of economic activity within the manufacturing sector. In February, the manufacturing PMI fell to 50.3 from 50.9 in January. January’s figure was the first expansion (a figure above 50) seen in the sector since October 2022, likely reflecting domestic factories front-loading imports to get ahead of tariffs issues. US domestic manufacturers rely heavily on imported raw materials, and there was a slight win for automakers after President Donald Trump agreed to postpone auto tariffs on Canada and Mexico following a phone call with the CEO’s of General Motors and Ford. Markets have swung wildly this week on the tariff news. After a month’s stay of execution, the US slapped tariffs on a range of imports from Mexico, Canada and China, with retaliatory tariffs being placed on US exports by Canada and China.

We’ve entered into March, and on the first Friday, US Non-farm payroll data is released. For the month of February 151,000 jobs were created, rising from the 125,000 created in January. The US labour market has been resilient despite elevated interest rates however, as tariffs have now been implemented, we can expect to see the knock-on effect on hiring and wages. The unemployment rate rose slightly to 4.1%. 

The number of US citizens filing for unemployment benefits fell by 21,000 to 221,000. Markets had forecasted a rise to 235,000, and the drop came as a surprise given the turbulence caused by trade tensions and the deep government spending cuts spearheaded by Elon Musk. The upcoming data should soon reflect these changes, as US employers announced layoff levels of 172,017 in February, with approximately 64,000 coming from government agencies as the Department of Government Efficiency (DOGE) continue to axe government spending, implementing funding freezes and cutting contractors.  

UK-listed Kenmare Resources, one of the world’s largest producers of titanium materials operating the Moma Mine in Mozambique, was subject to a takeover offer by its ex-founder Michael Carvill. The bid approach was 530p a share, a 93% premium to the 275p price it closed at on Wednesday night. Shareholders had called for the consideration of a sale back in February 2024. However, the offer was rejected as the business felt the bid undervalued the company. This is another deal which highlights some of the value available within UK markets – the potential acquirer was willing to pay over 90% more than the listed share price, and seemingly must believe even at a 90% premium there is continued value going forward.

Uncertainty levels around the globe have increased and this has been reflected in higher volatility and some drawdowns in risk assets. The US equity market, unlike recent years, has been the worst performing market with the magnificent seven stocks suffering from large falls over recent weeks. Domestic UK has also been challenged as concerns around stagflation and the imminent National Insurance increases have weighed on investor sentiment. Volatility can be uncomfortable; however, investors must be wary of knee-jerk reactions and one way to help avoid behavioural pitfalls is through a robust decision-making structure and genuine portfolio diversification. While the US equity market is down for the year, European equities are enjoying somewhat of a renaissance. Likewise, assets like gold have continued to deliver strong returns during this period of elevated investor concerns.

Nathan Amaning, Investment Analyst

Risk warning:  With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.t

Sledgehammer

With the current US administration seemingly taking a sledgehammer to established norms, our European Strategist, Jeremy Batstone-Carr considers the potential effects of tariffs, changing international relations, domestic increases in defence spending and more, on investments.

The Week In Markets – 22nd February – 28th February 2025

February has 28 days, and today marks the final day of the month. Last year was a leap year, so we won’t see another 29 days in February until 2028. The short month has been a challenging one for risk assets, particularly US equities. This was highlighted with what appeared to be strong results from Nvidia yesterday, however the share price dropped over 8%, highlighting investor caution.

Nvidia reported $39.3billion in revenue and $0.89 earnings per share, both above market forecasts and showing significant year-on-year revenue and earnings growth. Nvidia has routinely outperformed market forecasts, but the magnitude of outperformance has narrowed as it becomes tougher to exceed such strong growth each quarter. Despite the exceptional figures and CEO Jensen Huang’s promise that demand for their Blackwell GP’s is “amazing”, the share price is down -10% year to date. This has partly been driven by concerns around the threat of competition following the emergence of Chinese firm DeepSeek.  

After a month-long delay, US President Donald Trump announced that US tariffs on imports from Canada and Mexico would shortly go ahead. It’s almost becoming a case of the boy who cried wolf as Trump leverages the threat of tariffs to negotiate deals. Trump also threatened that 25% tariffs could “very soon” be coming to the European Union (EU), with Trump claiming the EU was formed to “screw with the United States”. The EU announced they would respond firmly against any unjust tariffs. The announcement of tariffs has caused concern for markets, although it is the US that has felt the most pain, falling circa 4% this week, underperforming Europe on the back of the tariff news.

Moving onto Germany politics, Friedrich Merz, leader of the conservative union was elected last Sunday. There are several pressing issues to contend with, including tricky coalition talks with Olaf Scholz’s social democrats who came in third. Other challenges include weak economic growth, a crackdown on immigration and addressing high labour and energy costs for businesses.

UK Prime Minister Kier Starmer met with President Trump this week, with Trump offered a historic second state visit to the UK by King Charles. The trip was not just about festivities, as both leaders discussed the possibility of a Ukraine- Russia peace deal and a possible US-UK trade deal that would exempt the UK from any tariffs. UK equity performance has been mixed; the large cap index is up over 1% for the week while the more domestically focused mid-cap index is down -1.3%.  

In a data light week, US unemployment claims came in higher than expected, which could be a signal of a weaker labour market ahead. The sell off in risk assets seems more sentiment than data driven, with the uncertainty around Trump’s policies causing headaches for investors. When valuations are stretched and investors are paying high premiums to own US equities, anything other than great news can lead to de-ratings and falling share prices.

The US Personal Consumption Expenditures (PCE) price index is the Federal Reserve’s preferred measure of inflation. This afternoon, PCE figures for January showed signs of easing, with the headline rate dropping to 2.5% and Core PCE falling from 2.9% to 2.6%. The Fed will be keen to see inflation fall back towards target, as policymakers have made it clear they need to keep interest rates at current levels until further evidence of inflation cooling.

In a classic risk-off environment government bonds rallied throughout the week, with the yield on the US 10-year government bond falling below 4.25%, highlighting the importance of diversification. Areas such as infrastructure also performed strongly during the week.

Defence stocks have seen their share prices rocket over recent years, driven by geopolitical instability and this week it was confirmed that Chemring had received at least one takeover approach from Bain Capital in recent weeks. There were also rumours circulating that Pets at Home was a takeover target, highlighting that private equity and corporates continue to see tremendous value in listed UK equities and takeover activity remains buoyant.

This week, and indeed this month, it has helped having diversified portfolios, with unloved areas such as infrastructure, Europe and Japanese equities leading the charge, while US equities have lagged in February. Whether or not this is start of a more sustained rotation in market leadership is yet unclear, however, with rising uncertainty on a global scale we believe a valuation sensitive approach with genuine diversification is more warranted than ever.

Nathan Amaning, Investment Analyst

Risk warning:  With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors

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

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

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

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

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

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

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

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

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

Nathan Amaning, Investment Analyst

Risk warning:  With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors

The Week In Markets – 8th February – 14th February 2025

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

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

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

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

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

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

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

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

Nathan Amaning, Investment Analyst

Risk warning:  With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.

The Month In Markets – January 2025

The Month In Markets - January 2025

So much for a quiet start to the year! We’ve had Trump’s inauguration, threats to the artificial intelligence status quo, and quietly flying under the radar, UK large cap equities hitting all-time highs.

January was a month of two halves, with the first part characterised by the reemergence of inflation concerns, putting pressure on fixed income assets, while the second half of the month saw strong performance from a range of assets as softer inflation data supported markets.

As we started 2025, the market had become very pessimistic about the prospect of deep rate cuts in the US and UK. Recent data suggested that inflation could reaccelerate and as a result central banks would have to be mindful of releasing interest rates too soon. While only a few months ago there was talk of up to six interest rate cuts from the US and UK in 2025, by mid-January this had fallen to only one to two cuts. This created a headwind for fixed income assets and more rate-sensitive equities (small cap), leading to a challenging first two weeks of the year. The US inflation story was being driven by a strong economy with robust labour markets and wage growth. Here in the UK, there was less optimism around the strength of the economy, however, there were serious concerns that Labour’s autumn budget would lead to higher inflation as businesses raised prices to compensate for their extra national insurance bill. Companies such as Next and Sainsbury’s made strong statements around pricing, directly linking this to their increased National Insurance costs.

The mood shifted on 15 January when both US and UK inflation figures were released, with both numbers coming in below expectations. Suddenly, interest rate cuts were back on the table, with the view that the Bank of England would now be able to cut interest rates during the first week of February. Importantly, services inflation showed significant progress, something the BoE have been watching closely. Falling interest rates should support the consumer; UK mid-cap equities (which are more domestically focused) had fallen at the start of January but enjoyed a strong recovery in the second half of the year due to increased hope around the consumer. The same story was true in the US; the interest rate-sensitive, small-cap index rallied off the back of weaker inflation data.

By the end of the month, the UK large-cap index was making new all-time highs. It’s hard to say what the main driver behind this was, however, with around 75% of revenues coming from overseas, the index is truly international in nature. The unloved UK market was outdone in January by another unloved market – Europe. Perhaps asset allocators have updated their strategies for 2025 and redistributed capital into these lagging areas, where valuations are extremely depressed and offer attractive potential returns for long-term investors. The European Central Bank (ECB) has certainly been more accommodative than the Bank of England, with the ECB cutting interest rates in January, reducing the main refinancing rate to 2.9% – the rate was 4.5% back in May 2024. The expectation is for monetary policy to remain supportive in the Eurozone, and this has pushed up equity valuations. 

The one-month return for US equities was very strong in absolute returns, yet it lagged behind the UK and Europe. We witnessed incredible volatility in the tech sector towards the end of the month, with the emergence of Chinese artificial intelligence (AI) DeepSeek threatening to shake up the AI stack. Their cutting-edge AI technology was developed on a shoestring budget, leading to concerns about the competitiveness of US firms going forward, including the expected high demand for the latest microchips. AI darling Nvidia, which had earlier in the month reached a market capitalisation of $3.7 trillion, becoming the world’s largest company once again, saw $590 billion in value wiped off in a single day. This was the largest ever one-day loss in terms of company value. It’s hard to know exactly how good DeepSeek is, but it has certainly created an air of uncertainty around AI leadership. Given that many US tech companies are highly valued, the sector can’t really afford any missteps.

It seems amazing to think this all went on and we still haven’t covered Trump’s inauguration! Trump was officially sworn in as the 47th US president on 20 January. He immediately signed a raft of executive orders, focusing on topics such as border security, economic policies and government transparency. Equity and bond markets responded positively to his inauguration, even as concerns around potential tariffs and their inflationary impact increased. Historical stock market returns have shown that the US president has little bearing on returns, although given some of Trump’s unorthodox plans, there could be a higher risk premium attached to the US market going forward.

Gold had a positive month, approaching all-time high prices last seen prior to the US election result. Various factors are supporting gold, including increased demand due to geopolitical tensions, inflation concerns, central bank policies and government budget deficits. We have seen elevated central bank buying of gold throughout 2024 and there is no reason to believe this demand will diminish in 2025.

One may be surprised that January was such a strong month in markets, given the events that took place. This highlights the challenges of investing and the danger of trying to time the markets. The antidote for us is a well-diversified portfolio with limited risk concentration, which can perform in a wide range of outcomes.

Andy Triggs

Head Of Investments, 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 – 1st February – 7th February 2025

As we enter the month of February, the weekly update would usually begin with an interesting fact about the month. However, this time, we start with a significant announcement made by President Trump over the weekend. Beginning from the 4th of February, a 25% tariff was set to be imposed on all goods imported from Canada and Mexico, and a 10% tariff imposed on all imports from China.

Trump’s tariffs were perceived as strong bargaining chips and by Monday afternoon Trump had gained the upper hand. Following phone calls with both Mexican president Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau, he announced that the tariffs would be postponed for 30 days. Mexico agreed to send 10,000 soldiers to the border to prevent drug trafficking from Mexico to the US. Canada followed suit a few hours later with the implementation of a $1.3billion plan to reinforce the Canadian-US border with new transport, technology and extra personnel in order to stop drug trafficking and illegal migrants.

Markets sold off sharply at the open on Monday morning in response to the initial news with equity markets falling almost 2% and the US Dollar strengthening. Trump also hinted that the EU would be next to face tariffs but did not specify a timeline, while the UK was set to potentially be “spared”. Fund managers have called Trump’s period in power “chaos” but on the other hand, he seems to be fulfilling his promises.

That’s enough Trump talk, but we do remain in the US as Alphabet (Google’s parent company) released their Q4 2024 earnings on Tuesday. Earnings per share rose to $2.15 but fell short on revenue at $96.47billion. Capital expenditure, which leaned heavily towards “technical infrastructure” rose to $14.28billion. Cloud revenue growth disappointed as it decelerated in Q4, rising 35% in Q3 but only 30% in Q4 to $12billion. Alphabet shares fell almost 8% on the day, but CEO Sundar Pichai spoke confidently following the earnings releases about the opportunities ahead, stating capital expenditure would rise by $75billion in 2025 to “accelerate progress”.

We’ve had the first US Non-farm payrolls print of the year, with 143,000 jobs created in January. There were strong payroll figures to end 2024 with 261,000 jobs created in November & 307,000 jobs in December. Market expectations were for a slowdown to 170,000. The unemployment rate also moderated to 4% from 4.1% the previous month. With soft labour figures for the month, the US Federal Reserve will certainly consider the data; however, they have signalled they will act cautiously given the uncertainty around government policies.

It was a unanimous decision on Thursday in the UK as all nine monetary policymakers agreed to cut rates. The Bank of England (BoE) cut rates by 25bps (0.25%) to 4.5%, marking just the third cut since August 2024. Despite a slight resurgence in inflation over Q4, December’s inflation figure bucked the trend, falling to 2.5%. Growth in the UK has been weak, which is why members Catherine Mann and Swati Dhingra favoured a larger cut of 50bps (0.5%) to 4.25%.  Governor Bailey stated that the BoE would “monitor the UK economy and global developments very closely”. Markets reacted positively, with the FTSE 100 up over 1% for the day and the more domestic FTSE 250 up over 1.5%. The large cap index has once again made new all-time highs this week, although more domestically facing equities are lagging, despite a recent resurgence.

In a week full of ups and downs, gold prices rose to a new all-time high of $2,895, driven by safe haven demand following the tariff situation earlier this week. Investors flock to gold as a hedge against market volatility and economic uncertainty. Other safe haven assets such as government bonds have also enjoyed a better time of things of late, in part driven by more dovish positioning from central banks, coupled with increased geopolitical uncertainty, pushing investors to perceived safer assets.

News flow for 2025 has appeared very challenging, yet we have seen a range of equity markets pushing higher. It’s a reminder of the dangers of trying to time markets. Portfolios remain well diversified both at an asset and country level, which we think is the prudent approach over the coming years.

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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