WeeklyWatch – New year, new global changes
7th January 2025
Stock Take
As we welcome in 2025, big changes are on the horizon and high expectations closely follow. The implications of the 2024 elections, tariffs, balancing inflation and reducing interest rates will significantly influence the way financial direction will be decided. So, let’s take a closer look at what 2025 has in store for markets…
A vote for change
2024 seemed to be the year of elections! Over half the global population took to the polls, and many nations opted for change.
The Head of Economic Research at St James’s Place, Hetal Mehta, commented on the events of the last 12 months:
“In a year peppered with many notable elections, the global economy was marked by heightened economic uncertainty in 2024. Despite concerns at the start of the year that restrictive monetary policy would weigh on GDP, growth surprised to the upside and recessions in the key developed market economies were avoided. A gradual cooling of labour markets – lower vacancies and lower wage growth without a significant increase in unemployment – combined with progress in taming inflation, has allowed central banks to pivot policy towards gradual rate cuts. But with the major elections behind us, it’s now time for governments to start implementing their policies.”
Tariffs steering the change
Investors will be keeping a keen eye on the potential use of tariffs across 2025. US President-elect Donald Trump frequently talked about his plans for tariffs during his election campaign and continues to do so to this day. Since Trump made his position clear, other nations have threatened to impose their own tariffs in response.
Inflation is generally the knock-on effect of tariffs, due to the way that costs are distributed across the supply chain. Consequently, this puts Central Banks into a tricky position as they decide whether to reduce interest rates and at what speed.
A look back at US finances over 2024
Expectations surrounding interest rate changes in the US slowed in 2024 as they battled to get inflation to 2%.
Federal Reserve policymaker Adriana Kugler spoke at the annual American Economic Association conference in San Francisco last week and said:
“We are fully aware that we are not there yet – no one is popping champagne anywhere.”
Overall, 2024 proved a good year for US shares, despite its inflation challenges. A second straight annual return of more than 20% (in US dollar terms) was secured by the S&P 500. Additionally, the NASDAQ ended the year up over 20% for the sixth time in eight years.
Canada off to an uncertain start
The Canadian political arena is far from stable. Over the weekend, there were numerous reports predicting that Prime Minister Justin Trudeau would announce his resignation – he confirmed the news yesterday (6th January), ending his nine-year stretch as leader. The population will cast their votes in the general election in October, and Trudeau’s Liberal Party are significantly behind in the current polls. Trudeau said he would stay in office until the party can choose a new leader.
European politics far from settled
Germany are also conducting a general election later in 2025. As it stands, the centre-right Christian Democratic Union and its Bavarian sister party, the Christian Social Union, are the current leaders in the polls, followed by the far-right Alternative for Germany.
In France, François Bayrou was named Prime Minister in December, after the resignation of Michel Barnier. He enters a precarious and potentially hostile parliament, which is likely to make passing any reforms a challenge.
Where Germany and France struggled across the year, many of the nations that underwent immense hardship in the eurozone debt crisis and in the fallout of the 2008 Financial Crisis – including Spain and Greece – reported surprising positive economic news over the course of the year.
UK charting rough waters
There have been several questions surrounding the possibility of ‘stagflation’ in 2025 – higher inflation with stagnant economic growth. The Bank of England will be required to put their heads together in order to reduce interest rates to encourage economic growth while ensuring that they’re not overwhelmed by inflationary pressures.
Wealth Check
Optimising your domestic money management
We’re told time and time again that we need to manage our money effectively – and for good reason!
Making a short-term, last-minute, snap or impulsive financial decision can be costly if it results in late payments, lost interest or even monetary penalties. But creating good financial habits can make a huge difference. Getting your house in order and starting regular savings are an excellent practice and can really boost both your financial and emotional well-being.
Wellesley’s top 5 tax-smart tips for your 2025 money management
- Optimise your allowances
Are you aware of how many tax allowances you can access and whether you’re making the most of them? A lot of people remember to top up their ISAs as much as they can before tax year-end, but there are still other allowances that are overlooked and ‘carry forwards’, which can save you money.
For example, in addition to the £60,000 annual pension allowance (or 100% of your earnings, whichever is lower) on which you can get tax relief on pension payments, HMRC will allow you to carry forward unused allowances from the previous three tax years.
- Check the values
Do you frequently check how your pensions are doing? Or the interest your savings accounts or ISAs have earned? Compiling a list of all your assets, including pensions, property and premium bonds, is a great tax-smart start – and with regular reviews, it becomes a smart money habit for the long term. You also may have more than one pension pot if you’ve changed jobs. Additionally, if you have an accessible cash fund for emergencies, a good question to ask yourself is whether there’s enough to keep you and your family afloat for up to six months if needed.
- Refresh and amend your spending
How many memberships and subscriptions are you signed up for? Ensuring that you check on this or whether other family members are still using the service you’re paying for is another smart money habit. Monthly payments add up, and you may want to consider changing to another provider or unsubscribing from the service completely.
- ISAs, savings and pensions contributions
By getting into the practice of regular, monthly payments into your savings or pension is a great tax-smart strategy. By the end of the tax year, you’ll be ahead of the game and avoid the rush to boost up tax-efficient contributions before 5th April. Regular contributions to any investment type helps bring stability in a volatile market.
- Have regular meetings with your financial adviser
Finding an hour per week to check your payments and interest rates saves you time and tax in the long term. Having a financial adviser for support can help you keep your finances on track and assess your trajectory to achieving your long-term investment goals and objectives, which is just as beneficial for your financial health.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
Investing does not provide the security of capital associated with a deposit account with a bank or building society.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.
Savings accounts are not available through St. James’s Place.
In The Picture
Growth has been slow across Europe, and business confidence continues to be weak. In comparison, the US’s statistics show a lot more strength.
The Last Word
“This year we will show Britain can change…politics can be a force for good and we can unite the NHS behind a plan for reform.”
– British Prime Minister Keir Starmer on his government’s plan for the NHS.
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 2025. 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 2025; 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 06/01/2025