WeeklyWatch – Buds of hope for market growth

18^th February 2025

Stock Take

Little boosts mean a lot

There was some good news last week for the British government – the UK economy grew by 0.1% in the three months to December 2024. Growth this small isn’t usually that thrilling, but it exceeded expectations, which had predicted a 0.1% fall rather than a rise.

This growth was spurred by a 0.4% increase in GDP in December, which mostly came about as a result of improvements in the services sector.

In her comments on the latest figures, the Head of Economic Research at St. James’s Place, Hetal Mehta, said:

“Consumer spending was flat, and investment shrank. It is government spending that kept the economy going in the last three months of the year. The slightly better fourth-quarter growth won’t prevent the need for the Chancellor to make some difficult decisions in the coming months.”

The Spring Statement is due to be delivered by Chancellor Rachel Reeves towards the end of March. While this statement isn’t intended to look like a budget, due to the poor economic performance as of late, Reeves may be forced to act.

Hope of peace benefitting markets

The small lift in GDP helped lift the FTSE by 0.4% over the course of the week. Developments in Ukraine also gave markets a boost, due to US President Donald Trump’s pledge to bring about a quick and peaceful settlement.

This hope also extended to and boosted wider European equities. For example, German industrials have been highly affected by the high energy costs that the Ukraine war has caused. If the war were to end, gas prices could drop, reducing costs for companies all across Europe.

The Head of DFM Research at St. James’s Place, Peter McLoughlin, said:

“European markets are showing signs of stabilisation amid mounting optimism over a potential Russia-Ukraine ceasefire agreement. European equities were also supported by improved market sentiment. This was in turn bolstered by easing credit conditions and expectations that the recent euro weakness would moderate.

“Large company stocks continued to lead, while smaller companies are underperforming in the current environment. However, further easing in credit conditions could potentially reverse this trend.”

Even though peace talks are underway, European defence companies are still performing well. With US defence strategy shifting its focus away from Europe and homing in on its own borders and Asia, it’s likely that there will be a natural increase in European defence spending.

The MSCI Europe ex UK finished last week up 2.2%. In the year to date, European equities have performed strongly – the index is currently up over 10% and has outperformed the S&P 500 and NASDAQ so far this year.

US keeping monetary policy on the straight and narrow

Last week, the US received somewhat of a surprise when it was revealed that Consumer Price Index (CPI) inflation had climbed to 3% in January – the highest level recorded in six months. Although the inflation figures were generally high, one of the most notable price surges was in eggs. Prices jumped 15.2% over the course of the month as supply was impacted by avian flu.

In his testimony before Congress on Wednesday, Federal Reserve Chair Jerome Powell said that while positive steps have been made to reduce inflation by the central bank, there’s still a lot of work to do. Consequently, Powell suggested that monetary policy would still be restrictive for the near future.

The prospect of continued elevated US interest rates had little effect on feelings towards US equities. There were rises in both the S&P 500 and NASDAQ over the week and both ended the week within 1.0% of their record highs.

However, January’s inflation figures don’t include the potential effect of Trump’s tariffs. The US President re-emphasised his plans for a 25% tariff on steel and aluminium, as well as his proposal for retaliatory tariffs. It’s likely that these will put more inflationary pressure on the US economy.

Asia continuing a year of growth

It remained a strong start to 2025 for Asia. Chinese equities grew over the week and the Shanghai SE Composite Index is up over 16% this year in local currency. This is a big boost after a weak 2024, which saw a double-digit decline in the index.

Wealth Check 

Why set up a pension if you’re self-employed?

There’s been a large increase in self-employment, people running their own businesses or having portfolio careers – meaning that taking personal responsibility for pensions has never been more important.

Personal pensions are portable and flexible, meaning that whichever career path someone chooses, no matter how many employers you have and however many businesses you launch, your pension can follow too.

Set up your personal pension today

It’s tempting to wait until middle age to start a pension, but the sooner you begin, the more time you give your investments to grow until you reach retirement.

There are many pension options and investment choices and with the help of a financial adviser, they can help you set up a personal pension.

How do I plan for a retirement when self-employed?

Retirement planning is in your hands if you’re self-employed or non-working. Most people in the UK will receive a state pension (depending on National Insurance contributions) but most people still want an additional income and financial freedom for later life.

A tax-efficient way to save for retirement is your pension. All pensions qualify for tax relief – every eligible contribution gets an automatic 20% cash boost from the government. If you’re a higher or additional rate taxpayer, the percentage is higher. At retirement, you can usually take up to 25% tax-free – up to a maximum value of £268,275. Any tax relief over the basic rate is claimed via your annual tax return.

Optimising pension savings and contributions

Many people make monthly payments into their pensions; it can be difficult to motivate saving for old age while you’re still in your 20s or 30s, particularly if money gets tight. But the golden rule remains ‘a little and often’ and starting early is key.

If you get a pay rise, it’s highly recommended that you increase your contributions or adjust them depending on inflation figures.

Accessing and enjoying your pension

Personal pensions can usually be accessed when you turn 55, but this will increase to 57 from 6^th April 2028. When you withdraw your pension, there are also lots of options: a lump sum, a series of lump sums or a regular income.

Ensuring that you’re well set up to enjoy your retirement doesn’t happen overnight, it takes careful planning, and setting up a personal pension is one of the wisest financial plans you can make. Wellesley are here to help – get in touch with our financial advisers today to get started.

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.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

In The Picture

Rising tariffs mean a shift in trade balance – and markets are watching.

US President Donald Trump has announced several tariffs. The chart reveals the US’s trade balance with key global partners. Countries like China, where the US imports more than it exports, are on the left side and nations such as the Netherlands, where the US exports more than it imports, are towards the right side.

Countries that sit on the left side are more likely to have tariffs imposed on them, therefore shifting the trade balance. But why is this important for investors?

Tariffs can cause varying degrees of disruption to global supply chains, raise production costs and possibly slow economic growth in regions or sectors. Tariffs can also result in retaliation and increase market volatility.

Mehta explains:

“Trade imbalances and policies like tariffs can affect global markets, from currency movements to company profits. These are the kinds of shifts we monitor closely to help ensure our clients’ portfolios remain well-positioned in a changing global landscape.”

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.

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SJP Approved 17/02/2025