UK equity markets hit new heights in July as the FTSE100 cruised through 9000 despite sluggish GDP growth. President Trump continued to show his more conciliatory side as he delayed tariff deadlines and achieved a relatively soft landing once a deal with the EU was reached.
Whilst we will inevitably see some ups and downs in August as more trade deals are announced, we will hopefully avoid the turmoil of early April as we head towards the deadline for US negotiations with China, which ends on 12th August.
United States
With no sign of firm agreement, and no appetite to trigger another market crash, the 9th July tariff deadline was pushed back by President Trump to allow more time for talks.
US stockmarkets were steady after a trade deal between the US and the EU was announced on 28th July. The deal has apparently pacified financial markets for now, although much of the detail is yet to be decided.
It appears to be a good deal for the US, which will add tens of billions of dollars to the US coffers in import taxes. Trump will have no issues calling this a victory for now. However, as the previous Democrat administration discovered to their peril, it also requires the US people to feel this benefit in their pocket. There will be an inflationary impact on EU products consumed by the US public as the additional 15% tariff is most likely to be added to the price of EU goods.
Inflation, employment and GDP growth data will be heavily scrutinised by US economists and media over the forthcoming months. Whatever the data shows, the ultimate test is US public sentiment. If they see their monthly pay stretched even further, that will resonate louder than statistics alone. Very few US citizens are reliant on income from invested capital, so the market turmoil of early April did not have a direct and immediate correlation to the lived experience of most Americans. Inflation would.
Comparing the EU trade deal to the UK’s deal is more difficult than you might imagine. The headline rate is clearly positive for the UK, as 10% is better than 15%. However, the devil is in the details, as illustrated by the car export tariff.
The UK’s 10% tariff on car exports appears, on the face of it, better than the EU’s 15%. However, the UK’s 10% applies only to the first 100,000 exports. Any further exports are subject to a 25% tariff. The EU’s 15% tariff applies to all exports, and in 2024, it exported approximately 758,000 cars to the US, which was around seven times the number the UK exported. The UK only exports around 100,000 cars to the US anyway, so it looks like a good deal for the UK, but clearly would be far worse for the EU if they took that same deal.
It is also unclear whether the EU’s 15% tariff is the total export-import tariff or, as with the UK’s 10%, it will be added on top of any existing export tariffs. That may have an impact on whether the UK has a commercial advantage in certain sectors.
The lack of clarity on some of the underlying details will cause some concern, but it has also been politically useful. Some form of high-level agreement has been agreed, a trade war has been averted, and financial markets appear well disposed to what stability and certainty it has brought already. This should make further progress easier.
The Fed, unbowed by Presidential pressure, decided on Wednesday, 30th July, to keep rates where they are. It was not a straightforward decision as two members of the rate-setting committee backed a cut. It was the first time since 1993 that two governors had dissented on a rate decision.
Underlying concerns about the US persist as Trump’s domestic policy increases government debt, and his trade war could make inflation sticky. July was a more comfortable month than many expected. August started with a little more turbulence as a slew of revised tariffs were announced, including a 35% tariff on Canada, sending global markets into a bit of a tizzy once again. We will see what the new month brings as it progresses.
UK
The FTSE100 breached 9000 points for the first time in its history, on an intra-day basis on 15th July, and it closed over 9000 for the first time on 21st July. Markets appear to be pricing in further interest rate cuts from the Bank of England.
Headline CPI inflation rose to 3.6 % in June, up from 3.4 % in May and well beyond expectations and the central bank’s 2% target. Figures from the Office for National Statistics released in July showed that the economy slowed in May, for a second consecutive month, suggesting that the growth shown in the first quarter of 2025 may have been a blip.
A lack of growth will increase pressure on the government to fund its plans by other means, and there has been no lack of speculation around what tax hikes might come next.
Chancellor Rachel Reeves has not backed down on plans to bring pensions into Inheritance Tax, and despite a lot of alternative suggestions from the pensions industry, this policy appears to be on course for 6th April 2027. This will be a significant change for many of our clients and will form part of our planning conversations over the next two years.
Some form of wealth tax has been mooted in the press, which Business Secretary Jonathan Reynolds has labelled ‘daft’. He said when interviewed:
“This Labour Government has increased taxes on wealth as opposed to income – the taxes on private jets, private schools, changes through inheritance tax, and capital gains tax.
But the idea there’s a magic wealth tax, some sort of levy … that doesn’t exist anywhere in the world.
Switzerland has a levy, but they don’t have capital gains or inheritance tax. There’s no kind of magic … We’re not going to do anything daft like that.
And I say to people: ‘Be serious about this.’ The idea you can just levy everyone … What if your wealth was not in your bank account, what if it was in fine wine or art? How would we tax that? This is why this doesn’t exist.”
Despite this, the speculation is unlikely to die down as we await a date for the Chancellor’s Autumn Statement. She will want to give herself and the economy as much time as possible to show positive signs of growth before making any more big decisions.
Europe
The Eurozone’s 2025 bull market continued in July as the trade deal with the US approached.
European business have been successful in 2025 in sectors such as banks and utilities, which are focused on the domestic market, and have struggled in sectors such as automobiles and some luxury goods, which are export-oriented and vulnerable to tariffs and currency.
Germany has also bolstered its economy with its spending on defence and infrastructure.
The response to the US-EU tariff deal, however, has been mixed. Globally, there is relief that an agreement has been reached which provides some clarity, certainty and predictability. Some European leaders have acknowledged that there is a short-term benefit from that certainty.
However, there has been some significant criticism of European Commission chief Ursula von der Leyen and the deal struck. François Bayrou, the French prime minister, called it a “dark day when an alliance of free peoples, united to affirm their values and defend their interests, resolves to submit”.
It should be remembered that whilst products shipped to the US will be hit, EU businesses which invest in US-based factories to manufacture products will have some difficult decisions to make. Closures of US factories on a significant scale would put Trump’s strategy under immediate pressure given his working-class support base.
It is possible that the discrepancies in the details of the trade agreement are used by European politicians to frustrate progress. For example, the promise to purchase US energy, which the US administration describe as the EU purchasing $750bn in US energy, in addition to increasing overall investment in the US by $600bn. The EU version of this includes the caveat that this will happen gradually as Russian gas and oil are phased out. These subtle differences may resurface over the forthcoming months.
China’s manufacturing activity continues to decline. Trade frictions with the U.S. continue to weigh on the world’s second-largest economy, which faces a 30% tariff unless it can agree on a better deal by 12th August, following the 90-day pause previously agreed.
Japan and South Korea saw a similar slump in July, but the data was collected before improved US trade deals were agreed, so it will be interesting to see if there is a rebound during the rest of the summer.
China has shown some economic resilience during the first half of 2025 due to Government policy intervention, which appears to have worked, but may need to continue into the second half of the year to prop up momentum. There is still some considerable enthusiasm for Chinese AI technology, robotics, and electric vehicles, and a belief that China can maintain a healthy rate of growth, but a reluctance to predict how the short-term prospects for China look until a trade deal is announced.
Emerging Markets
The weakening of the US dollar has been a gift to emerging markets on the whole, but tariff announcements can also be punitive.
Mexico escaped the clutches of the trade war for another 90 days as its negotiation deadline was pushed back.
India had no such luck and was hit with a 25% tariff. The sticking point in India’s negotiations was its refusal to open up agricultural markets. As 40% of the voting electorate works in the farming sector, the Indian government has always been keen to protect them. However, economists believe a failure to agree on a trade deal could cause significant damage to the growth of the Indian economy. This has spilt over into political debate. Opposition leader Rahul Gandhi said, “The government has destroyed our economic policy, has destroyed our defence policy, has destroyed our foreign policy.”
Brazil’s tariff rate of 50%, the highest announced to date, includes an additional 40% rate linked to prosecution of former President Jair Bolsonaro. However, some of its key sectors, such as energy, orange juice and aircraft, do benefit from exemptions from that rate, which softens the blow. It is still estimated that around 50% of Brazil’s exports to the US will be hit by the 50% tariff.
Conclusion
August promises to have a few more twists and turns as tariff announcements return to the news.
As we have seen from the first half of 2025, equity markets have performed well despite the volatility in early April and ongoing unpredictability due to tariff negotiations.
There is an argument that the positive performance of equity markets in the UK and Europe is misaligned with the strategic concerns about their underlying economies, and we acknowledge that there is some uncertainty surrounding the second half of the year.
However, it does continue to validate our investment thesis that buying and holding a well-diversified investment portfolio is the most rewarding strategy in the long run, regardless of short-term blips.
And finally…
It really can rain cats and dogs and other animals…
It’s a rare occurrence, but strong winds or waterspouts can suck up small animals like frogs, fish or even spiders, and rain them down elsewhere. This has been documented around the world!
Links
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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August Market Commentary
Introduction
UK equity markets hit new heights in July as the FTSE100 cruised through 9000 despite sluggish GDP growth. President Trump continued to show his more conciliatory side as he delayed tariff deadlines and achieved a relatively soft landing once a deal with the EU was reached.
Whilst we will inevitably see some ups and downs in August as more trade deals are announced, we will hopefully avoid the turmoil of early April as we head towards the deadline for US negotiations with China, which ends on 12th August.
United States
With no sign of firm agreement, and no appetite to trigger another market crash, the 9th July tariff deadline was pushed back by President Trump to allow more time for talks.
US stockmarkets were steady after a trade deal between the US and the EU was announced on 28th July. The deal has apparently pacified financial markets for now, although much of the detail is yet to be decided.
It appears to be a good deal for the US, which will add tens of billions of dollars to the US coffers in import taxes. Trump will have no issues calling this a victory for now. However, as the previous Democrat administration discovered to their peril, it also requires the US people to feel this benefit in their pocket. There will be an inflationary impact on EU products consumed by the US public as the additional 15% tariff is most likely to be added to the price of EU goods.
Inflation, employment and GDP growth data will be heavily scrutinised by US economists and media over the forthcoming months. Whatever the data shows, the ultimate test is US public sentiment. If they see their monthly pay stretched even further, that will resonate louder than statistics alone. Very few US citizens are reliant on income from invested capital, so the market turmoil of early April did not have a direct and immediate correlation to the lived experience of most Americans. Inflation would.
Comparing the EU trade deal to the UK’s deal is more difficult than you might imagine. The headline rate is clearly positive for the UK, as 10% is better than 15%. However, the devil is in the details, as illustrated by the car export tariff.
The UK’s 10% tariff on car exports appears, on the face of it, better than the EU’s 15%. However, the UK’s 10% applies only to the first 100,000 exports. Any further exports are subject to a 25% tariff. The EU’s 15% tariff applies to all exports, and in 2024, it exported approximately 758,000 cars to the US, which was around seven times the number the UK exported. The UK only exports around 100,000 cars to the US anyway, so it looks like a good deal for the UK, but clearly would be far worse for the EU if they took that same deal.
It is also unclear whether the EU’s 15% tariff is the total export-import tariff or, as with the UK’s 10%, it will be added on top of any existing export tariffs. That may have an impact on whether the UK has a commercial advantage in certain sectors.
The lack of clarity on some of the underlying details will cause some concern, but it has also been politically useful. Some form of high-level agreement has been agreed, a trade war has been averted, and financial markets appear well disposed to what stability and certainty it has brought already. This should make further progress easier.
July was also a strong month for equities due to some improved news on corporate earnings in the S&P 500.
The Fed, unbowed by Presidential pressure, decided on Wednesday, 30th July, to keep rates where they are. It was not a straightforward decision as two members of the rate-setting committee backed a cut. It was the first time since 1993 that two governors had dissented on a rate decision.
Underlying concerns about the US persist as Trump’s domestic policy increases government debt, and his trade war could make inflation sticky. July was a more comfortable month than many expected. August started with a little more turbulence as a slew of revised tariffs were announced, including a 35% tariff on Canada, sending global markets into a bit of a tizzy once again. We will see what the new month brings as it progresses.
UK
The FTSE100 breached 9000 points for the first time in its history, on an intra-day basis on 15th July, and it closed over 9000 for the first time on 21st July. Markets appear to be pricing in further interest rate cuts from the Bank of England.
Headline CPI inflation rose to 3.6 % in June, up from 3.4 % in May and well beyond expectations and the central bank’s 2% target. Figures from the Office for National Statistics released in July showed that the economy slowed in May, for a second consecutive month, suggesting that the growth shown in the first quarter of 2025 may have been a blip.
A lack of growth will increase pressure on the government to fund its plans by other means, and there has been no lack of speculation around what tax hikes might come next.
Chancellor Rachel Reeves has not backed down on plans to bring pensions into Inheritance Tax, and despite a lot of alternative suggestions from the pensions industry, this policy appears to be on course for 6th April 2027. This will be a significant change for many of our clients and will form part of our planning conversations over the next two years.
Some form of wealth tax has been mooted in the press, which Business Secretary Jonathan Reynolds has labelled ‘daft’. He said when interviewed:
“This Labour Government has increased taxes on wealth as opposed to income – the taxes on private jets, private schools, changes through inheritance tax, and capital gains tax.
But the idea there’s a magic wealth tax, some sort of levy … that doesn’t exist anywhere in the world.
Switzerland has a levy, but they don’t have capital gains or inheritance tax. There’s no kind of magic … We’re not going to do anything daft like that.
And I say to people: ‘Be serious about this.’ The idea you can just levy everyone … What if your wealth was not in your bank account, what if it was in fine wine or art? How would we tax that? This is why this doesn’t exist.”
Despite this, the speculation is unlikely to die down as we await a date for the Chancellor’s Autumn Statement. She will want to give herself and the economy as much time as possible to show positive signs of growth before making any more big decisions.
Europe
The Eurozone’s 2025 bull market continued in July as the trade deal with the US approached.
European business have been successful in 2025 in sectors such as banks and utilities, which are focused on the domestic market, and have struggled in sectors such as automobiles and some luxury goods, which are export-oriented and vulnerable to tariffs and currency.
Germany has also bolstered its economy with its spending on defence and infrastructure.
The response to the US-EU tariff deal, however, has been mixed. Globally, there is relief that an agreement has been reached which provides some clarity, certainty and predictability. Some European leaders have acknowledged that there is a short-term benefit from that certainty.
However, there has been some significant criticism of European Commission chief Ursula von der Leyen and the deal struck. François Bayrou, the French prime minister, called it a “dark day when an alliance of free peoples, united to affirm their values and defend their interests, resolves to submit”.
It should be remembered that whilst products shipped to the US will be hit, EU businesses which invest in US-based factories to manufacture products will have some difficult decisions to make. Closures of US factories on a significant scale would put Trump’s strategy under immediate pressure given his working-class support base.
It is possible that the discrepancies in the details of the trade agreement are used by European politicians to frustrate progress. For example, the promise to purchase US energy, which the US administration describe as the EU purchasing $750bn in US energy, in addition to increasing overall investment in the US by $600bn. The EU version of this includes the caveat that this will happen gradually as Russian gas and oil are phased out. These subtle differences may resurface over the forthcoming months.
Far East
Asian equity markets posted strong results in July once President Trump extended the trade negotiation deadline to 1st August for some and 12 August for China. Negotiations with China are of huge global interest. Taiwan’s initial rate of 32% dropped to 20% whilst Japan and South Korea came down to 15%.
China’s manufacturing activity continues to decline. Trade frictions with the U.S. continue to weigh on the world’s second-largest economy, which faces a 30% tariff unless it can agree on a better deal by 12th August, following the 90-day pause previously agreed.
Japan and South Korea saw a similar slump in July, but the data was collected before improved US trade deals were agreed, so it will be interesting to see if there is a rebound during the rest of the summer.
China has shown some economic resilience during the first half of 2025 due to Government policy intervention, which appears to have worked, but may need to continue into the second half of the year to prop up momentum. There is still some considerable enthusiasm for Chinese AI technology, robotics, and electric vehicles, and a belief that China can maintain a healthy rate of growth, but a reluctance to predict how the short-term prospects for China look until a trade deal is announced.
Emerging Markets
The weakening of the US dollar has been a gift to emerging markets on the whole, but tariff announcements can also be punitive.
Mexico escaped the clutches of the trade war for another 90 days as its negotiation deadline was pushed back.
India had no such luck and was hit with a 25% tariff. The sticking point in India’s negotiations was its refusal to open up agricultural markets. As 40% of the voting electorate works in the farming sector, the Indian government has always been keen to protect them. However, economists believe a failure to agree on a trade deal could cause significant damage to the growth of the Indian economy. This has spilt over into political debate. Opposition leader Rahul Gandhi said, “The government has destroyed our economic policy, has destroyed our defence policy, has destroyed our foreign policy.”
Brazil’s tariff rate of 50%, the highest announced to date, includes an additional 40% rate linked to prosecution of former President Jair Bolsonaro. However, some of its key sectors, such as energy, orange juice and aircraft, do benefit from exemptions from that rate, which softens the blow. It is still estimated that around 50% of Brazil’s exports to the US will be hit by the 50% tariff.
Conclusion
August promises to have a few more twists and turns as tariff announcements return to the news.
As we have seen from the first half of 2025, equity markets have performed well despite the volatility in early April and ongoing unpredictability due to tariff negotiations.
There is an argument that the positive performance of equity markets in the UK and Europe is misaligned with the strategic concerns about their underlying economies, and we acknowledge that there is some uncertainty surrounding the second half of the year.
However, it does continue to validate our investment thesis that buying and holding a well-diversified investment portfolio is the most rewarding strategy in the long run, regardless of short-term blips.
And finally…
It really can rain cats and dogs and other animals…
It’s a rare occurrence, but strong winds or waterspouts can suck up small animals like frogs, fish or even spiders, and rain them down elsewhere. This has been documented around the world!
Links
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.