WeeklyWatch – Welcome calm following the Spring Statement

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1^st April 2025

Stock Take

UK Chancellor breathes a sigh of relief

It will have been welcome news for UK Chancellor Rachel Reeves that the markets have not had a big reaction to her Spring Statement last week.

Encouraging news preceded the statement: UK inflation unexpectedly fell from 3% in January to 2.8% in February, with clothing prices – particularly women’s – being the biggest factor in the fall, as noted by the Office for National Statistics (ONS).

That said, economic developments since the Autumn Budget back in 2024 had left Reeves feeling somewhat boxed in, meaning spending cuts or increasing taxes were the most likely options. Ultimately, she opted for spending cuts for the time being and we’ll have to see whether these will be enough in the long term.

The Portfolio Manager at TwentyFour Asset Managers, Jonathan Owen, described the market reaction, saying:

“Gilts began Spring Statement day in positive territory on Wednesday as they were buoyed by an encouraging UK inflation print, but the fairly muted gains reflected market caution around the spending adjustments later announced by Chancellor Rachel Reeves.

“We suspect the Bank of England will use its May 8 [Monetary Policy Committee] meeting as a window to push through another rate cut, but beyond that, markets will need stronger evidence of labour market weakening before pricing in any more [interest rate] cuts for 2025. With growth faltering, fiscal headroom tight and the risk of tariffs looming, the UK is at a crossroads.”

Noteworthy details from the Spring Statement

One of the key statistics from the Spring Statement came from the Office for Business Responsibility, who have downgraded the UK’s expected GDP growth from 2% to 1% for the year, putting it just below 2024’s yearly growth.

Towards the end of last week, the ONS released their Q4 GDP statistics, which revealed a 0.1% growth between October and December, meaning that the UK economy was up 1.1% for 2024.

Despite the large amount of economic information that was thrown their way, the markets remained fairly flat. The FTSE 100 was up just 0.1% over the week.

Who wants to address the elephant in the room?

Of course, a huge factor for economic growth projection is trade policy – specifically policies related to the US.

President Donald Trump looks set to reinforce his objective to increase his tariff usage, calling tomorrow (2^nd April) ‘Liberation Day’. It remains unknown as to what exactly will be announced, but investors are expecting Trump to announce some kind of reciprocal tariffs. The UK and Europe will be keenly focused on how Trump treats VAT as he navigates trade barriers. Emerging markets are also vulnerable to this as they often place higher tariffs on imports.

How are Trump’s policies affecting the markets?

While ‘Liberation Day’ has been demanding the most attention this week, there were some significant developments last week for the US. This included Trump’s announcement of a 25% tariff on cars built outside of the US, which drove car manufacturer share prices down.

The US markets continue to struggle with the policy shifts, exemplified by the Nasdaq which dropped 2.4% and the S&P which dropped 1.5%.

How is the rest of the world adjusting to the tariffs?

The Head of Asia and Middle East Investment Advisory, Martin Hennecke, commented on the potential further challenges caused by the tariffs:

“For all the tariff noise emanating from the US, we should take note that the country’s share of global trade represents only 11% at present, as China overtook the US as the world’s largest trading nation long ago, in 2013 to be precise. As long as the rest of the world sticks to more friendly tariff policies amongst each other, there may be hope of potentially less of a Trump fallout than feared.”

One of Hennecke’s points refers to the recent trilateral talks that have taken place between Japan, China and Korea that have been focused on deepening their trade ties.

Tariffs commonly impact inflation figures. In the previous week, the Bureau of Economic Analysis showed that US core personal consumption expenditures inflation went up to 2.8% in February – an increase from 2.7% in January – which is above expectations.

As more tariffs are likely to be announced over the next few days, the Federal Reserve are looking to face quite the challenge during their next meeting to discuss interest rates.

Wealth Check

Insuring to protect yourself

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What kinds of protection insurance are available?

There are many types of protection insurance, all of which offer different types of coverage and depend on what – or who – requires the protection and for how long. Income protection, life assurance and critical illness cover are the three most widely available forms of protection insurance.

Income protection – This pays a percentage of your income to allow you to cover bills and outgoings if you can’t work as a result of illness. For self-employed individuals, this can be particularly useful as they’re responsible for their own health, welfare and pension.

Life assurance – This form of protection insurance pays out a lump sum after death. If the policy is written in trust, the payout will not be affected by inheritance tax. This significantly helps avoid delays during probate. These policies are also different from life insurance; they’re whole-life policies as opposed to fixed-term policies, which usually makes them cheaper as well.

Critical illness cover – This protection will pay out a lump sum if you suffer a serious illness such as cancer or a heart attack. You can choose whether you want the cover to be in place for a specific period of time or for your whole life. And as life expectancy is increased, this policy could be one of the most significant to have to ensure future financial resilience.

Planning protection insurance with a financial adviser

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