WeeklyWatch – Sales, tariffs and politics on the menu
3rd December 2024
Stock Take
Let the holiday celebrations and sales commence!
It was a big week for finances in the US last week with both Thanksgiving and Black Friday taking place, with the latter providing insight into the level of confidence in US retail.
Mastercard SpendingPulse revealed an increase of 3.4% in Black Friday sales compared to last year overall.1 Most of the increase was made up of online retail sales, and in-store sales were up just 0.7% according to Mastercard. The statistics reveal that there is a level of confidence in US consumers across the nation; however, it should be highlighted that these figures aren’t adjusted for inflation.
Speaking of inflation…
It was revealed last week by the US Commerce Department that personal consumption expenditures increased by 2.3% in the 12 months leading up to October; these figures were up on the September figures of 2.1%. A rise is significant, and the Fed included these numbers in their interest rate calculations, but it still remains close to the Fed’s 2% target.
Trump reveals more of his financial plans
President-elect Donald Trump has made more of his potential tariff plans public. His first one is to place a 25% tariff on Mexican and Canadian imports.
In 2018, Trump signed the US-Mexico-Canada Agreement (USMCA), which has been highly influential in shaping North American trade since then. With the agreement due for renewal in 2025, these tariff threats could be part of an aggressive negotiation tactic.
Chief Investment Officer at BlueBay Mark Dowding seems to agree. He implies that Trump’s tariff proposals may be being put forth while keeping focus on future immigration arrangements with Mexico and placing pressure on Canadian Prime Minister Justin Trudeau as the country goes into their next election year. Dowding notes:
“The market consensus appears to be that Trump’s bark is worse than his bite and that it’s possible to look through his comments without taking them at face value.”
Trump nominates more officials
Away from tariffs, Hedge Fund Manager Scott Bessent was announced as Trump’s nominee as Treasury Secretary.
Bessent’s background means that he’s being perceived as a market-friendly operator who will likely place a strong priority on economic stability. News of this stance will be well received by those who are wary of the impact of Trump’s economic policies.
This news also helped to boost the S&P 500 and NASDAQ index, which rose 1.06% and 1.13% respectively over the course of the week. But the most significant shift was from the smaller companies’ universe. The Russell 2000 index – the smallest 2,000 companies in the Rusell index) – entered into new record-breaking territory having moved past the level set three years ago.
Uncertainty across French finances and politics
France’s deterioration on the political stage has had a big negative impact on markets. As it stands, Prime Minister Michel Barnier holds a fragile hand of power over parliament while he is bombarded with blocks from both the political left and right. The far-right National Rally party leaders have been calling for several budget concessions in exchange for not supporting a no confidence vote against Barnier’s government. However, if Barnier relies on constitutional powers to push a social security financing bill through, the left-wing members of parliament can put forward a vote of no confidence.
In the midst of so much insecurity, it’s no surprise that French equities suffered over the week. But overall, the MSCI Europe ex. UK did manage to make a 0.3% gain.
The FTSE 100 also rose by 0.3%, boosted by gains in retail and property stocks – the latter enhanced by growing property prices. Nationwide has said that house prices rose 1.2% month-on-month in November and that house prices are just 1% below their all-time peak.
BlueBay is a fund manager for St. James’s Place.
Source
1Mastercard SpendingPulse, 02/12/2024
Wealth Check
Home sweet home
Purchasing your home is likely to be the largest single purchase you’ll ever make – and for many people, it’s their most valuable asset.
As a homeowner, you can access both short- and long-term key tax benefits that help both you and your family. In this section, we’ll explore the tax advantages of home ownership. You may know some, but there may be a few others that you may not have considered.
Stamp Duty Land Tax (SDLT)
As a first-time house buyer, you’ll become eligible for one of the largest tax breaks for homeowners, which is first-time buyer’s relief from SDLT. This applies to the £425,000 of a property’s value if the home is worth £625,000 or less.
- If the asking price for the property is between £425,000 and £625,000, you’ll pay 5% SDLT.
- If the house costs more than £625,000, the normal rate of SDLT will be paid, which is between 5% and 12% of the price.
The 0% stamp duty threshold for first-time buyers will be reduced to £300,000 from 31st March 2025.
Rent a Room Scheme
The current cost of living crisis and continuous increase in prices have resulted in households having to budget more extensively. One of the first things we look to do when budgets are stretched is to find areas where we can save money. A lot of homeowners are considering renting out a room in their main property as an occasional Airbnb, a bed and breakfast or a longer-term let for lodgers.
By using the government’s Rent a Room Scheme, you can reap a good tax benefit.
The Head of Mortgages at SJP, Paul Johnson, says:
“People don’t seem to use, or even be aware of, the Rent a Room Scheme. Not only might you qualify for up to £7,500 tax-free income from renting a furnished room in your home, but some mortgage lenders will also accept it as an income. In general, it’s a little-known – and under-utilised – tax break.”
Please note that the tax allowance is halved to £3,750 if you share the income with your partner or a joint owner.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.
In The Picture
As we explore the S&P 500 through each generation, we can see both the volatility of equity markets and the potential for long-term investment returns.
The Last Word
“If we want to stop the hot stage of the war, we should take under NATO umbrella the territory of Ukraine that we have under our control. That’s what we need to do fast, and then Ukraine can get back the other part of its territory diplomatically.”
–Volodymyr Zelensky, President of Ukraine, as he speaks to Sky News on how NATO could potentially end the current hostilities in Ukraine.
The information contained is correct as at the date of the article. The information contained does not constitute investment advice and is not intended to state, indicate or imply that current or past results are indicative of future results or expectations. Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.
Source: London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). ©LSE Group 2024. FTSE Russell is a trading name of certain of the LSE Group companies.
“FTSE Russell®” is a trademark of the relevant LSE Group companies and is used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.
© S&P Dow Jones LLC 2024; all rights reserved.
Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, endorsed, reviewed or produced by MSCI. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.
SJP approved 02/12/2024