WeeklyWatch – Markets struggle to flourish amid uncertainty
18th March 2025
Stock Take
US market confidence rattled
Continued uncertainty surrounding unfolding policies and tariff threats had a big impact on US equities, which continued to fall last week.
In the short term following Trump’s election in late 2024, US equities surged – and investors hoped that he would work to reduce regulations and taxes and therefore help boost growth. But since mid-February these hopes have been more than reversed…
The persistent fears about tariffs and possible emerging trade wars have quelled hopes for economic growth. Trump’s unpredictable leadership style has led to markets being wrongfooted and incapable of predicting any of the President’s actions. As a result, there has been a large increase in uncertainty, which typically doesn’t suit markets.
The Head of Economic Research at St. James’s Place, Hetal Mehta, said:
“The data flow we’ve had out of the US in the last couple of weeks has broadly turned south, from consumer confidence surveys to Purchase Manager Indices (PMIs). So far, this is mainly concentrated in what we call soft data, such as surveys. We still need to see if this sentiment lasts long enough to feed into ‘harder’ economic data though.”
This has fed through to poor performance from US stocks since mid-February. Hetal continues:
“Uncertainty tends to feed into investment decisions. It’s clear the indirect effect of this uncertainty has been quite material.”
This narrative was exemplified at the beginning of last week, when several large companies took a big hit. The S&P 500 fell over 4% by Thursday before a small recovery helped to combat some of the loss – over the week, the index finished more than 2% down. It was a similar case for the Dow Jones and NASDAQ. The latter is down over 10% compared to at the start of 2025.
A lack of spring in the step for the UK
It was revealed by the Office for National Statistics that the UK economy shrank 0.1% in January. Expectations had been for small positive growth.
The Spring Statement is due to be announced next week and will likely highlight exactly what challenges the Chancellor will face across the course of the year, with economic forecasts dependent on growth to form the basis of her calculations.
Where expectations for encouragement from the statement remain low, Partner at TwentyFour Asset Management Felipe Villarroel has suggested looking for opportunities for reforms that focus on the welfare system. He states:
“The positive spin on this situation would be that if the government’s welfare reforms were to result in more people entering the workforce, this could have a positive impact on productivity and wage inflation.”
But there was a glimmer of light among the negativity for the UK. In recent months, the FTSE 100 has been one of better performing markets. The 0.6% fall over the course of the week puts it in good stead compared with other Western markets and means that the UK’s main index is up 5.6% for the year to date. This reflects the notion that markets don’t necessarily perform in accordance with the wider economy.
The go-ahead to rebuild in Europe
Despite markets being down for the week overall across continental Europe, due to widespread geopolitical uncertainty, they still finished the week in a strong position. The German Chancellor-in-waiting, Friedrich Merz, announced on Friday that he’s secured the essential backing of the Greens to give his borrowing plan the go-ahead. As a result, its passage through parliament could be very soon, which in return installed confidence in the market.
Wealth Check
Planning for the hereafter, but don’t overlook the here-and-now!
Findings from the Office for National Statistics – based on data analysis from the 2021 census – estimated that 13.6% of boys and 19% of girls born in the UK in 2020 are expected to live to at least age 100.1 With longer lifespans, this means that people are likely to receive their inheritance later in life, and as a result, inheritances themselves are shrinking, with retirement income being dependent on them for a longer period of time.
We all want to do the right thing for our families and loved ones when we’re no longer around, but don’t forget the actions you can take now!
How can I still make inheritance beneficial for my family?
A lump-sum inheritance can dramatically change a family’s fortunes. Mortgage pay-offs, covering independent school fees or possibly launching a new business are all common uses of this kind of financial income.
When you’re looking to pass money on to your children and grandchildren, it can be difficult to accept that some of your intended money won’t get to them due to Inheritance Tax (IHT) that’s payable on your assets.
By making full use of exemptions, gifting, trusts and other tax-efficient strategies, you’ll be able to mitigate some of what could be payable.
When should I start planning for IHT?
When your savings and assets begin to accumulate, this is the best time to put your IHT plan into action. A strong indicator of this time could be when daily expenses decrease when your children leave home, or you’ve nearly paid off your mortgage. Allowing yourself time to put your plan in place ensures that you avoid compromising your standard of living both in the present and later on.
You also owe it to yourself to make sure you have enough money to feel financially secure as you get older, which is where having a clear strategy comes to the fore.
Where there’s a Will, there’s a way
IHT planning should also be conducted with your family’s pace at its core. Significant life events, such as the arrival of a new grandchild or a new marriage, are good moments to consider updating your Will.
Conversations with your family surrounding inheritance can be challenging, but it’s still better to start the talks now so that you can explain what you want to do while you’re still here and the terms of your Will are informed and understood.
Financial advisers are experts in helping begin these conversations and can explain your financial options and choices. Involving a third party like a financial adviser can help you find common ground quicker and avoid conflict.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.
Will writing involves the referral to a service that is separate and distinct to those offered by St. James’s Place. Wills are not regulated by the Financial Conduct Authority.
Wills and Trusts are not regulated by the Financial Conduct Authority.
Source
1Office for National Statistics website, past and projected period and cohort life tables: 2020-based, UK, 1981 to 2070.
In The Picture
US markets have dominated headlines as a result of their strong performance in recent years. But on closer inspection, the numbers tell a different tale…
Many gains have been lost as a result of the falling values over the course of 2025, meaning that they’ve evened out to be pretty level with the rest of the world over the past 12 months. Market leadership changes, and chasing past winners isn’t always the winning formula.
St. James’s Place Investment Research Director, Joe Wiggins, explains:
“Although blocking out short-term noise is an essential skill for any long-term investor, the recent shift in market performance patterns is a useful reminder of how unpredictable financial markets are, and how quickly prevailing trends and narratives can change. The truth is that the future is inherently uncertain and ensuring we have a well-diversified portfolio that aligns with our long-run goals is the best protection against this.”
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SJP Approved 17/03/2025