This week marks the beginning of May, but the focus in markets has been on the 100-day milestone of President Donald Trump’s tenure. Trump’s short time in office to date has been eventful to say the least and has been described with terms such as “disastrous”, “chaotic” and “Trumpression” – a Trump led depression. With his approval ratings near record lows, he will be under pressure to ensure the next 100 days are viewed as more positive by the US electorate.
Wednesday was the 100-day mark and coincided with the release of the US Q1 GDP figures. The GDP data showed a decline to -0.3%, the first economic contraction in three years, raising fears of a potential recession and confirming a US economic slowdown. This figure was skewed by an oversized number of imports from American businesses and consumers in anticipation of Trump’s tariffs. Elon Musk, who recently stepped back from his role at the Department of Government Efficiency (D.O.G.E), significantly contributed to the economic pullback as government spending fell by 5.1%.
Trump immediately hit back at any suggestion that the blame should stop at his door, stating that the economy is facing a Biden “overhang”. He asserted that once his tariffs take effect and companies begin to move production into the US, the country’s economy will “boom”. We will have to wait and see if Mr Trump’s plan will succeed, but it seems the jury is out for US consumers as sentiment continues to plummet.
Many will remember the disastrous meeting two months ago between President Trump, Vice President JD Vance, and Ukraine President Zelensky, which left little optimism for any potential deal. However, after months of tense negotiations, the US and Ukraine signed an agreement granting the US access to Ukrainian minerals, which ultimately will fund the country’s reconstruction. A peace deal between Ukraine and Russia has yet to be achieved, but a three-day ceasefire will begin on 8th of May to commemorate the 80th anniversary of the Soviet Union’s victory in World War II.
It was a busy Wednesday, with the release of the US PCE index for March. The US PCE is the Federal Reserve’s preferred measure of inflation, and it was positive to see inflation fall to 2.3% (year-on-year) from the previous month’s figure of 2.7%. On a month-on month basis, the index remained flat. The US Fed will meet next week to discuss the future interest rate path, and on a positive note, Fed Chair Jerome Powell will lead the meeting despite Trump threatening to fire him. However, there is not expected to be any change to rates this time, as the Fed will wait for “clearer signs”, believing the real impact on the economy, inflation and unemployment from tariffs lie ahead.
As we enter the new month, the first Friday always brings us the US non-farm payrolls report. The data remained positive, showing that 177,000 jobs had been added to the economy, following the revised figure of 185,000 for March. The unemployment figure for March remained at 4.2% for the second consecutive month.
UK retail sales have continued to surprise to the upside with March’s figure of 0.4% coming in against expectations of a -0.4% decline. Clothing and outdoor sales led the way, with the Office for National Statistics (ONS) attributing this to good weather. Although this is positive news, there is still concern that the impact of tariffs, along with energy and council tax bills, will affect April’s data and lead to a slowdown in consumption.
We have the first May bank holiday coming this Monday, which often leads to a spike in takeaways. Just Eat and Uber Eats are the preferred choices for UK consumers, but this may change as US delivery agent DoorDash made a $3.6 billion cash buyout offer for Deliveroo. This move will expand DoorDash’s reach into the UK and across European countries such as France and Italy. Deliveroo shares jumped 17% on the day.
Gold dropped to a two-week low on Thursday, a move we can expect as trade tensions begin to ease. While uncertainty remains, there has been progress with US-China tariff negotiations along with continued hope for a Ukraine and Russia resolution which has led investors towards risk assets and away from safe-havens such as gold. This has also led to strong UK equity performance, with the FTSE 100 on track for its 15th consecutive daily increase, its longest winning streak on record.
Equity markets have continued to rebound from recent lows after heightened volatility at the start of April. There is renewed hope that tariff deals will be struck, and the worst-case scenarios will be avoided. Recent inflation data has been better than expected from most developed markets and this may support further rate cuts, which would be a boost to businesses and consumers.
Nathan Amaning, Investment Analyst
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