Geopolitics continues to dominate the financial news as markets continue to react to Trump’s unpredictable tariff war. In 2024 the US was not just the world biggest economy, it was firing on all cylinders, as Trump returned for a second turn. At the end of the first quarter of 2025 the question on many investors minds is whether the President is willing and able to blow that all up just to prove a point.
Trump will unveil his reciprocal tariffs on ‘Liberation Day’, 2nd April, and global markets are braced for the reaction.
UK
The Chancellor delivered her Spring Statement on 26th March, with no changes to taxation as promised. However low growth and higher borrowing costs have left the Chancellor even more constrained by her own fiscal rules than in October. Without a significant change to economic growth, it is hard not to wonder ‘when’ rather than ‘if’ Reeves will start to course correct, all of which fuels more speculation about what will be announced in the Autumn Statement and greater uncertainty which further hinders investment and growth.
A report from the Office for Budget Responsibility (OBR) was delivered alongside the Spring Statement which added some useful colour to the Chancellor statement.
The OBR has halved the 2025 growth estimate from 2% to 1%
However, the OBR has also upgraded the UK’s economic growth forecast from 2026 onwards. GDP growth is forecast at 1.9% in 2026, 1.8% in 2027, 1.7% in 2028, and 1.8% in 2029.
US trade tariffs are a key geopolitical risk to UK growth with the potential to wipe out any surplus projected in the 2025 budget
The OBR believe debt as a percentage of gross domestic product (GDP) will fall in five years’ time, meeting one of the Chancellor’s key rules
The Chancellor believes the 2% inflation target will be met by 2027. The OBR now thinks inflation in 2025 will average 3.2% before “falling rapidly” to 2.1% in 2026, and reaching the Bank of England’s 2% target from 2027 onwards.
An additional £2.2bn defence spending will be funded by overseas aid cuts, as expected. There was a focus on making the UK a major international player for defence.
Whilst borrowing and debt are more expensive than previously expected, the OBR have stated that they believe the Chancellor’s policy changes, including welfare reforms and cuts to day-to-day departmental spending, will “restore it to the £10bn surplus the chancellor had in October”.
Business confidence appears low. Tariffs and increasing costs for employers through the National Insurance hike and rising minimum wages meant 44% of manufacturers expressed optimism about increasing output in the coming year, down from 56% previously. This was matched by a decline in the S&P Global UK Purchasing Managers’ Index (PMI) for manufacturing, which fell to 44.9 in March from 46.9 in February. This marked its lowest level since October 2023.
UK equities remain volatile and heavily exposed to global volatility, but the FTSE 100 overall gained in the quarter ahead of a difficult few weeks in anticipation of trade tariffs. It is worth noting that the FTSE100 is heavily weighted towards multinational corporations, and so will inevitably be vulnerable to the threat of U.S. trade tariffs.
News on inflation was more positive. In January 2025, the UK’s inflation rate drop to 2.8% from 3% in the previous month.
Europe
Despite a more positive first quarter to the year than many expected, the Organisation for Economic Co-operation and Development (OECD) revised its Eurozone GDP growth forecast for 2025 downward to 1.0%, from the previous 1.3%. This adjustment reflects weak investment and rising geopolitical risks, including trade tensions and policy uncertainties. However, Germany’s DAX index jumped 11.3%, its best quarter since Q1 2023, as European stock markets rallied on defence spending and stimulus hopes.
Inflation within the Eurozone showed signs of easing. In March, the annual inflation rate declined to 2.2%, down from 2.3% in February, approaching the European Central Bank’s (ECB) target of 2%. This deceleration was influenced by a decrease in services inflation, which reached 3.4%, the lowest in nearly three years.
The European Central Bank (ECB) reduced its key interest rate from 2.75% to 2.5% in March. This marked the sixth rate cut in seven meetings, aiming to stimulate growth amid persistent uncertainties. ECB President Christine Lagarde indicated that future rate adjustments would be contingent upon economic developments. However analysts are still anticipating a further 0.25% cut on 17th April.
The manufacturing sector exhibited tentative signs of recovery. The HCOB Eurozone Manufacturing Purchasing Managers’ Index (PMI) rose to 48.6 in March, nearing the 50-point threshold that separates contraction from expansion. Notably, output increased for the first time in two years, suggesting a potential stabilisation in manufacturing activity.
United States
US stocks have taking a thumping in the first quarter of the year, and President Trump is attracting more attention that even he might be comfortable with. Lets take a look at the key US financial indices first:
The Dow Jones was down -1.28%, its worst quarter since Q2 2024
The S&P 500 was down -4.59%, its worst quarter since Q3 2022
The Nasdaq was down -10.42%, its worst quarter since Q2 2022
In addition, the Magnificent Seven, the seven huge stocks which dominate US equities, all fell in the quarter:
Tesla was down -35.8%
Nvidia was down -19.3%
Alphabet was down -18.3%
Amazon was down -13.3%
Apple was down -11.3%
Microsoft was down -9.7%
Meta was down -1.6%
Tesla’s dramatic collapse in value could also be connected to his political activities but there is no question that these big tech stocks all took a battering in both the month and the quarter, and whilst there is an expectation that tech stocks such s Nvidia will always be volatile, there will be considerable investor nervousness should they not correct soon.
We have commented many times before about the indifference of financial markets to politics. What they really want is certainty and predictability, which allows businesses to plan and make informed decisions, which in turn attracts more investment. Trade tariffs have hindered rather than helped US markets so far, in part due to the chaotic and indecisive way they have been handled.
Far East
The Shanghai Composite Index declined by 0.48% since the beginning of 2025, indicating modest investor caution amid ongoing economic adjustments. However despite the slight downturn, foreign financial institutions have expressed confidence in China’s economic prospects, highlighting the nation’s innovation-driven growth and sustainability.
There are concerns about China’s banking sector. The Chinese government injected 520 billion yuan (approximately $72 billion) into major state-owned banks, including Bank of China and China Construction Bank. This move aims to bolster consumer-driven economic growth but also suggests some underlying stress within the sector.
Chinese Electric Vehicle manufacturers reported significant delivery increases. XPeng delivered 33,205 vehicles in March, marking its fifth consecutive month exceeding 30,000 deliveries. NIO and Li Auto also reported substantial year-over-year growth, intensifying competition for foreign manufacturers such as Tesla in the Chinese market.
In Japan, despite corporate earnings being robust, the Nikkei 225 experienced a 4% decline in March. This reflected investor apprehension over potential U.S. trade tariffs and their impact on Japan’s export-driven economy. Business sentiment appears low but this is not the case for non-manufacturing business such as tourism, emphasising the significance of trade tariffs on decision making.
The Bank of Japan (BOJ) maintained its policy rate at 0.50% during its March meeting. The BOJ emphasised the need to assess the impact of recent rate adjustments and monitor developments in consumer spending and U.S. trade policy.
Emerging Markets
Indonesia’s economy has been plunged into uncertainty amidst concerns over policy changes under new President Prabowo Subianto, alongside global economic uncertainties, including the threat of U.S. tariffs. The Jakarta Composite Index experienced a significant decline, falling 7.1% on 18th March in an equity sell off, its worst performance since 2011. Year-to-date, the index has declined by 8%. The Indonesian rupiah also depreciated to a 20-year low.
A rally in India’s Nifty 50 stock index in the first quarter of 2025 helped the index pull back several months of losses. Investors picked up undervalued stocks, there was a return of foreign inflows following a sell off that began in late-September alongside improving economic indicators. Despite this it still finished March well below its September 2024 peak.
Amidst the uncertainty, opportunity also exists. Factors such as potential stabilisation in U.S. interest rates, a weaker U.S. dollar, and policy support in key economies like China could provide tailwinds for some emerging market equities.
Conclusion
US trade tariffs continue to cast their shadow across global markets. They are influencing economic decisions in every major country.
Diversification is critical, as second guessing global markets in these conditional is almost impossible. Fortunately it’s a key tenet of our investment philosophy.
And Finally…
Did you know that the average person has about 60,000 thoughts a day.
Most are repetitive — around 90% are the same as the day before.
If this blog has raised any questions why don't we have a quick chat?
Garry Hale MD & Certified Financial Planner
A brief meeting might be of interest, especially if you’re unsure just how wealth management and financial planning could help you.
It would only require the investment of an hour or so of your time, and the coffee’s not bad either.
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April Market Commentary
Introduction
Geopolitics continues to dominate the financial news as markets continue to react to Trump’s unpredictable tariff war. In 2024 the US was not just the world biggest economy, it was firing on all cylinders, as Trump returned for a second turn. At the end of the first quarter of 2025 the question on many investors minds is whether the President is willing and able to blow that all up just to prove a point.
Trump will unveil his reciprocal tariffs on ‘Liberation Day’, 2nd April, and global markets are braced for the reaction.
UK
The Chancellor delivered her Spring Statement on 26th March, with no changes to taxation as promised. However low growth and higher borrowing costs have left the Chancellor even more constrained by her own fiscal rules than in October. Without a significant change to economic growth, it is hard not to wonder ‘when’ rather than ‘if’ Reeves will start to course correct, all of which fuels more speculation about what will be announced in the Autumn Statement and greater uncertainty which further hinders investment and growth.
A report from the Office for Budget Responsibility (OBR) was delivered alongside the Spring Statement which added some useful colour to the Chancellor statement.
Business confidence appears low. Tariffs and increasing costs for employers through the National Insurance hike and rising minimum wages meant 44% of manufacturers expressed optimism about increasing output in the coming year, down from 56% previously. This was matched by a decline in the S&P Global UK Purchasing Managers’ Index (PMI) for manufacturing, which fell to 44.9 in March from 46.9 in February. This marked its lowest level since October 2023.
UK equities remain volatile and heavily exposed to global volatility, but the FTSE 100 overall gained in the quarter ahead of a difficult few weeks in anticipation of trade tariffs. It is worth noting that the FTSE100 is heavily weighted towards multinational corporations, and so will inevitably be vulnerable to the threat of U.S. trade tariffs.
News on inflation was more positive. In January 2025, the UK’s inflation rate drop to 2.8% from 3% in the previous month.
Europe
Despite a more positive first quarter to the year than many expected, the Organisation for Economic Co-operation and Development (OECD) revised its Eurozone GDP growth forecast for 2025 downward to 1.0%, from the previous 1.3%. This adjustment reflects weak investment and rising geopolitical risks, including trade tensions and policy uncertainties. However, Germany’s DAX index jumped 11.3%, its best quarter since Q1 2023, as European stock markets rallied on defence spending and stimulus hopes.
Inflation within the Eurozone showed signs of easing. In March, the annual inflation rate declined to 2.2%, down from 2.3% in February, approaching the European Central Bank’s (ECB) target of 2%. This deceleration was influenced by a decrease in services inflation, which reached 3.4%, the lowest in nearly three years.
The European Central Bank (ECB) reduced its key interest rate from 2.75% to 2.5% in March. This marked the sixth rate cut in seven meetings, aiming to stimulate growth amid persistent uncertainties. ECB President Christine Lagarde indicated that future rate adjustments would be contingent upon economic developments. However analysts are still anticipating a further 0.25% cut on 17th April.
The manufacturing sector exhibited tentative signs of recovery. The HCOB Eurozone Manufacturing Purchasing Managers’ Index (PMI) rose to 48.6 in March, nearing the 50-point threshold that separates contraction from expansion. Notably, output increased for the first time in two years, suggesting a potential stabilisation in manufacturing activity.
United States
US stocks have taking a thumping in the first quarter of the year, and President Trump is attracting more attention that even he might be comfortable with. Lets take a look at the key US financial indices first:
In addition, the Magnificent Seven, the seven huge stocks which dominate US equities, all fell in the quarter:
Tesla’s dramatic collapse in value could also be connected to his political activities but there is no question that these big tech stocks all took a battering in both the month and the quarter, and whilst there is an expectation that tech stocks such s Nvidia will always be volatile, there will be considerable investor nervousness should they not correct soon.
We have commented many times before about the indifference of financial markets to politics. What they really want is certainty and predictability, which allows businesses to plan and make informed decisions, which in turn attracts more investment. Trade tariffs have hindered rather than helped US markets so far, in part due to the chaotic and indecisive way they have been handled.
Far East
The Shanghai Composite Index declined by 0.48% since the beginning of 2025, indicating modest investor caution amid ongoing economic adjustments. However despite the slight downturn, foreign financial institutions have expressed confidence in China’s economic prospects, highlighting the nation’s innovation-driven growth and sustainability.
There are concerns about China’s banking sector. The Chinese government injected 520 billion yuan (approximately $72 billion) into major state-owned banks, including Bank of China and China Construction Bank. This move aims to bolster consumer-driven economic growth but also suggests some underlying stress within the sector.
Chinese Electric Vehicle manufacturers reported significant delivery increases. XPeng delivered 33,205 vehicles in March, marking its fifth consecutive month exceeding 30,000 deliveries. NIO and Li Auto also reported substantial year-over-year growth, intensifying competition for foreign manufacturers such as Tesla in the Chinese market.
In Japan, despite corporate earnings being robust, the Nikkei 225 experienced a 4% decline in March. This reflected investor apprehension over potential U.S. trade tariffs and their impact on Japan’s export-driven economy. Business sentiment appears low but this is not the case for non-manufacturing business such as tourism, emphasising the significance of trade tariffs on decision making.
The Bank of Japan (BOJ) maintained its policy rate at 0.50% during its March meeting. The BOJ emphasised the need to assess the impact of recent rate adjustments and monitor developments in consumer spending and U.S. trade policy.
Emerging Markets
Indonesia’s economy has been plunged into uncertainty amidst concerns over policy changes under new President Prabowo Subianto, alongside global economic uncertainties, including the threat of U.S. tariffs. The Jakarta Composite Index experienced a significant decline, falling 7.1% on 18th March in an equity sell off, its worst performance since 2011. Year-to-date, the index has declined by 8%. The Indonesian rupiah also depreciated to a 20-year low.
A rally in India’s Nifty 50 stock index in the first quarter of 2025 helped the index pull back several months of losses. Investors picked up undervalued stocks, there was a return of foreign inflows following a sell off that began in late-September alongside improving economic indicators. Despite this it still finished March well below its September 2024 peak.
Amidst the uncertainty, opportunity also exists. Factors such as potential stabilisation in U.S. interest rates, a weaker U.S. dollar, and policy support in key economies like China could provide tailwinds for some emerging market equities.
Conclusion
US trade tariffs continue to cast their shadow across global markets. They are influencing economic decisions in every major country.
Diversification is critical, as second guessing global markets in these conditional is almost impossible. Fortunately it’s a key tenet of our investment philosophy.
And Finally…
Did you know that the average person has about 60,000 thoughts a day.
Most are repetitive — around 90% are the same as the day before.
If this blog has raised any questions why don't we have a quick chat?
MD & Certified Financial Planner
A brief meeting might be of interest, especially if you’re unsure just how wealth management and financial planning could help you.
It would only require the investment of an hour or so of your time, and the coffee’s not bad either.