WeeklyWatch – S&P 500 bucks trend of weekly falls, but only just!

25^th March 2025

Stock Take

A narrow escape for US markets

At the end of last week, the S&P 500 finished 0.5% above where it started. This brought an end to four consecutive weeks of falls – but only just.

Markets initially enjoyed a boost after Trump’s election at the end of 2024, but US equities have struggled since the start of 2025. This has been largely due to the continuous economic and policy volatility.

As they tried to navigate the uncertainty, the Federal Reserve opted last week to keep interest rates at their current level. They also reduced their economic projections for the year and lifted inflation forecasts. That said, the majority of officials still maintain the belief that there will be two 0.25% reductions in 2025.

The Federal Reserve Chairman, Jerome Powell, did note:

“We do understand that sentiment has fallen off pretty sharply, but economic activity has not yet.”

The measure of economic success

One way in which the economy is showing some resistance is through the jobless claims numbers, which remain relatively low.

Company reports are another metric for assessing US economic health is being assessed. The Head of DFM Research at SJP, Peter McLoughlin, said:

“Earnings season is now largely done, but the last week was a little bit worrying. There were a number of companies that issued profit warnings. At this stage there aren’t signs of this turning into a tidal wave of downgrades, and generally earnings continue to hold up in the double-digit growth range. But it’s still something we want to keep an eye on. Most companies remain cautiously optimistic, but a lot of them do note Washington’s unpredictability isn’t helping matters.”

Are European markets closing the gap?

As US equities struggle, some are looking to other markets for opportunities…

Analyst at Redwheel Filippo Neuimaier stated:

“Europe faces a challenging macroeconomic backdrop. A complex geopolitical environment, risks of an energy crisis and the threat of being squeezed between the tensions of China and the US are all valid reasons to be cautious on the outlook for Europe today. We do, however, see pockets of real value within European equities that, in our view, have been caused by excessive pessimism about the economic prospects for the region.”

He also notes that over the last three years, European banks have outperformed the Magnificent Seven (the seven dominant tech companies) stocks, when claims was on the US overperforming in comparison to Europe.

What’s more, Europe has plenty more reasons to be optimistic. The German parliament passed the huge spending bill last week. Germany’s growth has been stagnant over the last few years, which has been problematic as Europe’s largest economy, but this new bill is now expected to generate growth, especially for the defence sector.

Spending cuts on the horizon for the UK?

Similar to the Fed, the Bank of England (BoE) chose to hold their interest rates and noted an intensifying of global trade policy of uncertainty since their last meeting.

Keeping interest rates the same wasn’t unsurprising, and it had a limited impact on the FTSE 100, which only saw a rise of 0.2% over the course of the week. This has fed economist’s expectations that there will be two interest rate cuts over 2025.

The BoE Governor, Andrew Bailey, added to this narrative, saying:

“We still think that interest rates are on a gradually declining path.”

In addition, UK Chancellor Rachel Reeves is due to deliver her Spring Statement later this week. While she’s not expected to make any significant announcements regarding tax, spending cuts are likely to be at the forefront of the statement.

Investors will have a keen eye on the Office for Budget Responsibility’s updated forecasts. Since the Autumn Budget in late 2024, the UK’s financial situation has increased in complexity, therefore downward revisions to the forecast will impact the summer spending review.

Wealth Check 

When can I afford to stop working?

This is a common question that many of us start asking ourselves once we’re into our fifties or sixties, and many worry that if they haven’t started saving early, it’s too late to save up a significant amount for retirement.

We’d always recommend that earlier is better, particularly when you’re at peak earning capacity (usually around your early 50s); however, it’s never too late to start planning and saving for your retirement regardless of your age.

Efficiently planning for the years ahead

With the years ahead of you, it’s important to work out how you’ll financially support yourself. Having sufficient savings put aside for retirement frees you up to enjoy your hobbies, travel, spend time with your family and live life to the fullest with the peace of mind that your financial future is secure.

One of the most tax-efficient options is your pension. Setting one up, even when you reach 60, can still work in your favour as you make the most of the tax advantages, including tax relief added by the government on eligible contributions.

Our top advice in regard to putting stress-free retirement finances into place is to incorporate many flexible options. Pensions aren’t the only option…

Many choose a variety of sources to fund their retirement. This can include state pension and private pension pots, Stocks and Shares ISAs, earnings and property.

Because money can be withdrawn from each of these in different ways, this can be extremely beneficial to your retirement funds.

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 is generally dependent on individual circumstances.

In The Picture

Drops in the US markets over the last few weeks are certainly not the first time that investors have experienced a shock to the system.

When markets move quickly, whether it’s up or down, the temptation arises to make hurried decisions that are emotive rather than logical. Emotional cycles of investing show that this kind of decision-making can threaten your long-term financial objectives.

The Investment Research Director at St. James’s Place, Joe Wiggins, says that being able to resist emotional financial decisions is becoming more challenging:

“Perhaps it’s the rise of social media, or perhaps it’s the unusually high returns delivered by global equities over the past decade, but investors seem more sensitive than ever to equity market declines.

“Even relatively minor ones like those experienced recently provoke dramatic responses. At times such as these, it is important not to lose sight of the fact that the returns from owning equities over the long run are as high as they are because they are volatile and suffer from intermittent drawdowns. We cannot have one without the other.”

Market boosts and falls are inevitable in an investment journey, but keeping perspective and understanding where you are in the emotional cycle can help you steer the success of your long-term goals.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

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 24/03/2025