WeeklyWatch – Caught a break? Positivity for UK equities

13^th May 2025

Stock Take

The nation celebrates

There’s been a lot of doom and gloom surrounding the UK and its companies as of late, but is there a plot twist in this narrative?

The Labour government saw some welcome headlines last week, when trade deals were struck with both India and the US. What’s more, the tariffs introduced in March by President Trump have now been removed completely on UK steel and aluminium exports. UK car export tariffs have also been reduced (up to a limit of 100,000 vehicles) from 27.5% to 10% with immediate effect. The UK government says this deal will save up to 150,000 jobs and also claims that the India trade deal will boost the UK economy by around £5 billion by 2040.

Additionally, the Bank of England announced a 0.25% reduction to the Base Rate, which is great news for borrowers. It’s hoped that this will increase consumer confidence and restore much-needed momentum to the UK economy.

On the back of this good news, UK equities rose towards the end of the week. This positive sentiment suggests that investors might be hoping the US–UK trade deal is a firm step towards more concessions and lighter tariffs.

Is the UK back on the hotlist?

At the start of May, the FTSE 100 enjoyed 15 consecutive days of gains, its longest ‘winning’ streak in five years. And it gets better: there are further indications to show that investors are feeling more bullish about the UK.

For several years, UK equities have been considered undervalued. This has particularly been the case when compared to US equities, especially technology stocks such as the Magnificent 7, which includes the giants Nvidia, Amazon and Apple.

But in the first quarter of the year, these big companies in the US tech sector have underperformed, likely exacerbated by the volatility caused by the tariffs.

The Investment Research Director at St James’s Place, Joe Wiggins, says:

“UK equities have been trading at historically depressed relative valuations but there is now some indication of rising corporate activity.

“Although it has been difficult investing in UK equity markets in recent times – particularly relative to the US – low valuations are often a strong indicator of higher returns in the future.”

Even more cause for optimism?

The optimism trend continued with the government-backed plans to ensure more UK investment by pension funds. In 2023, then-Chancellor Jeremy Hunt announced that 11 pension providers had agreed to allocate at least 5% of their assets to unlisted UK equities by 2030. But a ‘landmark’ agreement that would have seen this increased to 10% – this was due to be announced last week – has been postponed. While it still may be announced over the next few weeks, it’s not certain.

The Head of Economic Research at St James’s Place, Hetal Mehta, welcomed the more positive economic news but warns against any widespread expectation of an economic miracle or more significant falls in interest rates. She says:

“While a base rate cut is welcome, the Bank of England (BoE) continues to be hesitant about accelerating the pace of easing, given its persistent concerns about inflation. Growth and inflation forecasts were both revised down by the BoE, and wage growth is expected to moderate, so quarterly cuts are most likely.

“While the UK–US trade deal is a start – and good news for car and steel sectors – there are still quite limited details, with the overall 10% baseline tariff in place leaving tariffs higher than before the US’ so-called ‘Liberation Day’. Negotiations are set to continue but scope and timing is not clear, and the overall impact is limited so far.”

Stepping down the tariffs

News of more progress between China and the US regarding tariffs has been welcomed. Chinese imports have been temporarily reduced to 30% (from 145%) for 90 days, and China will cut tariffs on US goods from 125% to 10%, with further trade talks still to come.

US equities remain expensive in comparison to other developed equity markets. But it’s noteworthy that a large amount of US earnings growth is down to the Magnificent 7.

Positive outlook for Asia

Following the progressive outcomes of the China–US trade talks, there was a lift in Asian stock markets. Plus, the decision by China’s central bank to cut interest rates from 1.5% to 1.4% last week also helped provide a boost. The decision was made with the purpose of stimulating lending and investment and decreasing the negative impact of the ongoing US tariff war. The Shanghai Composite Index ended the week 1.92% higher in local currency.

Additionally, Japan’s Nikkei 225 ended the week 1.83% higher in local currency after the finance minister had to backtrack from the comments made concerning the country’s $1 trillion-plus of US treasuries potentially being used as a bargaining ploy in trade talks with the US.

Benefits felt and reaped across Europe

Further stock market boosts were recorded across Europe following the temporary slash in tariffs between the US and China. On Monday morning, the Stoxx Europe 600 was up 1% and the main stock market indexes in France and Germany rose.

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.

Wealth Check 

Taking time off without taking a hit: smart summer planning for small business owners

As a small business owner, one of the biggest challenges you’ll face is deciding when to take time off. With summer on the way, it’s important that you set aside time to take a break and create the best conditions to ensure that everyone is able to enjoy time off and come back to work feeling refreshed.

HR Consultant at business advisory firm Elephants Child Chloe Carey shares her 10 tips to ensure that your business continues to run smoothly over the summer period.

1. Actively encourage booking time off – As the business owner, you’re required to keep your company running at optimal levels. And you want your workforce to be rested, happy and productive. Make sure you remind them to effectively plan their leave and not leave it all until the end of the year.

2. Make sure that absence policies are clear – Whether it’s extreme weather or travel delays which can lead to unauthorised absences, you need to ensure that your policies are clearly communicated to your workforce.

3. Approach holiday clashes fairly – If several people wish to take time off at the same time, a consistent and fair process must be in place to deal with this.

4. Review your summer dress code – Comfort makes for a happier workforce. In the warmer months, it’s recommended that you relax your dress code.

5. Host a summer team event – Build engagement and bring your team together by organising something fun for you all to get involved with. Consider sharing your photos and comments on social media to give your business a boost at the same time.

6. Offer flexible summer working – When adjusting schedules, consider early starts and finishes or building up extra hours to allow early finishes on Fridays.

7. Discourage work being done during annual leave – Remind both yourself and your colleagues to leave a clear handover so that they switch off properly before going away.

8. Switch off notifications – Encourage people to avoid checking work emails and messaging apps during their time off – lead by example.

9. Set a professional out-of-office message – Agree on a standard format that reflects your business’s tone of voice.

10. Take a break yourself – Stress and burnout are no use to your loved ones or team, so take a well-deserved rest!

Putting preparations in place for summer, and as your business grows, ensures that the right policies and processes are in place to ensure success in the years to come. By implementing good delegation habits and being able to step away every now and then will benefit your business morale hugely. Longer-term, if you wish to exit the business, ensuring you leave behind a company that runs smoothly without you is more attractive to buyers.

Fostering an environment of trust and flexibility creates a culture that values hard work and the importance of rest.

Don’t let it all build up

Ready to embrace a balanced work life? Contact us to find out more about how we can help you empower your business, prepare for the summer season and create and promote a healthy work environment.

We work in conjunction with an extensive network of external growth advisers and SME specialists, such as Elephants Child, who have been carefully selected by St. James’s Place. The services provided by these specialists are separate and distinct to the services carried out by St. James’s Place and include advice on how to grow your business and prepare your business for sale. Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.

In The Picture

More charts, similar message, but still important!

Last week, we took a zoomed-out perspective of the FTSE 100. This week, we’re widening the lens to address global equities over the past 20 years.

The navy bars show the largest market drops within a given year – the worst-moment headlines, most notably 2008 and 2020!

Spot the turquoise line? That’s the long-term trend emerging upwards.

Expect setbacks, be patient with progress and remember that perspective goes a long way.

Past performance is not indicative of future performance. It is not possible to invest directly into the MSCI World Index. The figures shown do not take into account any relevant tax or investment wrapper charges.

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 12/05/2025