WeeklyWatch – The US–China trade war escalates

W.24822 Wellesley WeeklyWatch 29.04.25_1420 x 474_HR

29^th April 2025

Stock Take

Stock Take usually provides a comprehensive overview and analysis of equity markets, but with the backdrop of escalations between the US and China, this week we’re exploring what impact the ongoing tariff war between the two nations could have on bond markets and investors.

US bond market faces turbulence

Political tensions are mounting and the trade war between China and the US is deepening. As a result, fluctuations in the bond market have investors feeling concerned.

Bonds are debt securities issued by governments and companies to raise money. Bondholders are effectively providing a loan to the government or company issuing a bond, on which they earn interest, known as the yield.

US treasuries (US government bonds) have typically been viewed as a safe investment. However, with all the volatility that’s been playing out over the last few weeks – the threat of huge tariffs on all Chinese goods entering the US and consequential reciprocation on American goods exported to China – investors are now left scratching their heads when it comes to predicting what’s to come next, both in the short and longer term.

Several investors have opted to vote with their feet, reducing their exposure to US dollar assets, treasuries and equities – resulting in sharp falls in these markets and the value of the dollar. Many of these losses have been recovered by equity markets, but there are major concerns that foreign investors are losing confidence in the stability of the US economy, casting a shadow over the bond market.

The International Monetary Fund (IMF), an organisation made up of 190 countries, monitors global economic stability. Last week, they opted to downgrade their forecast for global economic growth in 2025 to 2.8% – down from 3.3% in January. They also reduced their forecast growth in the US in 2025 by 0.9 percentage points to 1.8%.

All the market turmoil has resulted in a fall in US treasury prices and, therefore, yields have risen. As of Friday 25^th April, the yield on the 2-year US treasury was 3.79%, while 10-year US treasuries stood at 4.28%, although the latter was down from a peak of 4.79% in mid-January.

The reputation of US treasuries as a safe haven is due to the low chance of the government defaulting on its debt. Although highly unlikely, it has happened in the past – the last time being in April–May 1979 when the then US government was unable to repay bondholders for a short period. With the US looking increasingly uncertain now, and the possibility of a recession, the higher yields are indicative of higher risks for investors (even if yields are meant to decline in a recession). However, this may appeal to those prepared to take on more risk for potentially higher rewards.

Are China playing a risky game?

After Japan, China is the next largest holder of US treasuries. If the nation decides to retaliate against Trump’s threatened tariffs by no longer buying bonds – or even trying to sell US bonds – it could have economic repercussions for both nations, as well as on a wider global scale.

Having said this, a sell-off from US treasuries by China would also push up their currency value, making Chinese exports more expensive and further heightening already volatile tensions with the US.

In the latter stages of the previous week, there were indications that President Trump could be reconsidering the size of the levies imposed on China. It has been reported that tariffs on Chinese goods could be around 50% to 65%, but there’s been no confirmation of this.

The Head of Economic Research at St. James’s Place, Hetal Mehta, says:

“From the Chinese government’s perspective, you have to ask what would they gain from selling US treasuries? It could be used as a bargaining chip for a better trade deal.

“Economically, this is an inflation shock for the US if we see tariffs pick up materially and that’s bad for growth. It’s the combination of higher inflation and weaker growth that makes it difficult for the central banks to know how to deal with it.”

Fixed Income Strategist at St. James’s Place Greg Venizelos draws attention to a reduction in appeal for US treasuries. He states:

“From recent auctions of treasury debt, it seems that the non-domestic appetite has decreased and the domestic audience including banks had to increase to take up the slack. And, as assets such as equities have come off in the US, the dollar has also weakened, which is rare as usually when there is a global risk-off there is a flight to the dollar.”

He also highlights that if US growth decreases, tax receipts are also likely to decrease and with planned tax cuts by the US administration coming up, the fiscal risks increase for holders of US treasuries.

“You have seen this reflected in the risk premium that investors should expect, to compensate for this added uncertainty.”

Can Europe reap any benefits from the tensions?

As it stands, the IMF has predicted that growth in the eurozone will slow to 0.8% in 2025, down 0.2%. But the current volatility of the US treasury market has resulted in some positive movements for European bonds.

Venizelos continues, saying:

“Bonds still have a role to play, and we have seen over the past few weeks occasions where yields were rising in the US and retreating in Europe, so there is that divergence. The main issue for investors is market size. The European bond markets are still quite small relative to the US.”

The US treasury index benchmark is close to $17 trillion in face value and the German bond market is around a tenth of this. However, the Italian bond market is the fifth biggest in the world because of the large amount of debt relative to the size of its economy.

What’s the economic outlook across Asia?

It’s an IMF fiscal forecast downgrade for Asia too. Predictions for Japan’s economic growth was reduced to 0.6% from January’s 1.1%.

There’s expected to be a 4% growth for China in 2025, but this is still down by around 0.5% from the forecast in January. Much will depend on the size of the tariffs imposed by the US if/when they arrive, and China’s government has brought in stronger fiscal measures in order to weather the impact.

Are investment opportunities still possible?

Despite the volatility, there are still plenty of opportunities for investors. Mehta goes on to say:

“We shouldn’t be afraid of volatility, it can bring opportunities. However, in order to have resilience you need to be well diversified and this is the focus.”

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 levels and bases of taxation and reliefs from taxation can change at any time. Tax relief is dependent on individual circumstances.

Wealth Check

Securing the lifestyle you want – now and in the future

A successful career often equates to a high standard of living during your working life – but is it possible to sustain this lifestyle when you retire?

Thanks to continuous discoveries and advancements in medicine, healthcare and better living conditions, life expectancy is increasing. Around one in three children born in the UK today are expected to live to 100.¹

While this is something to be celebrated, have you thought about how you will financially support yourself if you live to 100? Savings may need to stretch over 40 years or more after you stop working, particularly if you wish to maintain the lifestyle you’re accustomed to.

Although no one can know what the future entails, it’s still important to plan for a long retirement that includes considerations for possible care and leaving money to your children or grandchildren.

Using working life to save

Making provisions during your working life is essential in funding your later retirement. It may be tempting just to focus on the present and short term, but this is where a financial adviser can really help.

A financial adviser will help you tailor a comprehensive personalised savings plan that considers how much you earn and how much you can afford to save. The sooner you start, the more time you give your money to grow.

Not only that, but your adviser will help assess your risk profile, giving your invested money the best chance of long-term growth. We’ll balance risk depending on your age and retirement goals.

It’s advisable for everyone to put as much money as possible into a pension. Remember, if you’re employed, your employer will pay in too. Even if you set aside just 4% to 5% of earnings, you can significantly build this up over time through compound growth.

One of the biggest benefits of pensions is the tax relief. Another form of tax-efficient growth can be found in ISAs; our financial advisers will discuss the best options for your situation.

An ideal retirement

One of the most common questions asked once you’ve retired is: “How do I make my money last?”

This will be dependent on the type of pension you have. Defined benefit pensions guarantee an income for life, but most people today will have defined contribution pensions, where income depends on investment performance.

The timing of your pension access is crucial, where you can decide to take your 25% tax-free cash as a lump sum or gradually.

Securing a financially beneficial future

Advisers use cash-flow modelling to plan ahead – we consider inflation and help you work out when and how to utilise income or gift money to family tax-efficiently. This is important in covering potential unforeseen costs like care or nursing fees.

There’s no straightforward solution on how to fund a long retirement. Each individual has different needs, savings and family circumstances to consider. Financial advisers can add immense value in these areas, helping you navigate the future and aiming to ensure that you can cover all you need to maintain your lifestyle and living standards.

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 and are generally dependent on individual circumstances.

Trusts are not regulated by the Financial Conduct Authority.

Source:

¹Office for National Statistics, ‘Past and projected period and cohort life tables: 2020 based, UK, 1981 to 2070’, January 2022

In The Picture

Last week, the US Dollar Index fell to a three-year low. Rising political tensions between the White House and the Federal Reserve are partially responsible for this. Markets had a quick reaction – gold (a traditional safe haven for investors) briefly surged to another new high.

However, this shift was reversed following Trump’s reassurance to markets that he didn’t plan to remove Fed Chair Jerome Powell, subsequently easing concerns surrounding central bank independence. However, the dollar remains down over 8% from the start of the year as concerns surrounding tariffs continue to heavily impact markets.

Mehta explains:

“Movements in the dollar are often about more than economic data – they reflect how investors feel about stability, leadership and risk. Last week’s fluctuations show how quickly confidence can be shaken or restored by political messaging.

“As the world’s reserve currency, the dollar underpins global trade, investment and borrowing. So when its value shifts, it doesn’t just affect the US, it has knock-on effects across international markets.

“Understanding these dynamics helps investors make sense of what can sometimes feel like erratic market behaviour – and reminds us that markets respond not just to numbers, but to the stories behind them too.”

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.

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 28/04/2025

WeeklyWatch – Global markets struggle to find direction

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23^rd April 2025

Stock Take

There was a lot of volatility across the markets last week. The culprits: further escalations in trade tensions, central bank policy moves and renewed concern for investors as they look at the global economy.

Increased pressure for US markets

Political tensions seeped into monetary policy discussions, which caused US equities to struggle. Federal Reserve Chair Jerome Powell faced more public criticism from President Trump who called him a “major loser” as he continued to pressure him into making more cuts to interest rates to give the economy an immediate boost and offset the impact of tariffs on Chinese goods.

On his Truth Social platform, Trump described Powell as “Mr Too Late” in responding to the risks that the US economy currently faces. This also gave rise to new speculation over the Fed’s independence. The President can’t dismiss the Fed Chair, but Trump’s strong language has certainly added to investors’ unease.

Over the week, the S&P 500 fell by 1.5%, the Dow Jones Industrial Average was down 2.7% and the Nasdaq Composite lost 2.6%. Many other sectors also finished the week lower, with healthcare one of the hardest-hit areas. There was a 22% single-day fall for UnitedHealth Group following disappointing earnings – the group’s worst performance since 1998.

Adding to the bad news, the US dollar weakened to a three-year low against major currencies. Investors sought safety, leading to gold prices hitting a record $3,450 per ounce.

And to round it off, economic data revealed that while retail sales remained steadfast, inflation data continued to stay high – this leaves the Fed in a challenging place before its next meeting.

Europe paves its own way

The European Central Bank (ECB) decided to cut their deposit rate by 0.25% to 2.25% after concerns regarding economic growth. As inflation moderated, the policymakers made the decisive move to keep momentum up in the eurozone economy.

ECB President Christine Lagarde revealed next to nothing about the bank’s next plan, only insisting that policymakers would make choices meeting-by-meeting. Some of Lagarde’s colleagues spoke out, saying that the bar for future cuts is low. The new rate cuts provided a much-needed boost, and European markets recovered some ground – the Euro Stoxx 50 finished the week 3.09% higher, overcoming a three-week losing streak.

While Europe celebrated positive market reaction, caution lingers. Despite the upswing, growth remains fragile and vulnerable to further external risks, such as weaker demand from China – this could deepen slowdown, causing investors to keep a close eye on the situation.

Mixed market signals from Asia

Reports released from China fractionally beat expectations as they showed first-quarter GDP growth of 5.4% year-on-year, with March data revealing that retail sales and industrial output were strong. But the MSCI China Index dropped by 1.8% over the course of the week; this, coupled with continued concerns around US–China trade tensions, fuelled investor worry further.

Heading east, Japan’s Nikkei 225 reported modest gains, celebrating its best week in three months. Investors also became more hopeful that Trump will broker trade deals with some of the region’s top trading partners, which includes Japan.

The world looks ahead

Market behaviour and developments across the week reflect the forces that are shaping current markets: geopolitical uncertainty, inflation pressures and changes in monetary policy. Investors will be monitoring US–China trade negotiations carefully.

Central banks are predicted to be a key focus during this time. Europe has opted for action to support growth while the Federal Reserve tries to balance matters under increased political pressure.

During these times, it’s important to remember the core principles of investing. Chief Investment Officer at St. James’s Place, Justin Onuekwusi, says:

“Emotional decisions can lead to poor investment outcomes. Investors typically have long-term plans to meet their overall goals. Sticking to those plans in periods of volatility is incredibly important.”

Wealth Check

Building your business takes time and hard work, but there comes a time when you may step back and consider selling and realising the value that you’ve created. But sadly, for many businesses that go to market, a successful exit isn’t achieved.

Chief Revenue Officer at Elephants Child, Crawfurd Walker, has worked to assist many businesses get ready for sale. Here, he shares his top advice on how owners can best prepare.

When preparing a company for sale, it’s essential to maximise value, ensure a smooth transition and minimise risks. If you don’t fully prepare, you could find significant gaps between your expectations and a buyer’s perspective on fair markets prices, and could run the risk of losing buyers.

Preparing a business for sale can take years and depends on several factors so it’s important to work with a team of financial advisers who will help you prepare and guide you through the sales process.

The importance of the preparation process:

Business valuation maximised

Potential buyers will pay close attention to financials. By preparing your business properly you have time to improve profitability, sort out inefficiencies and boost value.

Once you’ve resolved outstanding debts and clarified asset ownership, your business will be more attractive as potential financial risks will have been taken away.

Attracting potential buyers

Make sure that your business documents are well-organised, processes are clear and your branding is strong. Buyers also seek certainty, so by having your business well-prepared, you present fewer risks and are far more likely to attract serious buyers, who’ll also be willing to pay a premium.

Do your due diligence

Unresolved issues or missing information can disrupt or even collapse sales. By having the correct documents, records and contracts ready, you can help avoid delays. Additionally, having well-organised records shows transparency, making it easier for buyers to build confidence in your company, plus you’ll increase the likelihood of a smooth and successful transition.

Smooth business continuity during transition

By having guides on operations, customer relationships and staff relationships, you’ll enable a smooth handover to the new company owners. As well as preparing your business, you must also take time to prepare your key employees, making sure that they remain motivated; retaining essential staff preserves important business knowledge and value.

Make the most of tax and legal strategies

Reduce your tax liability by structuring the sale strategically so you can minimise tax consequences and maximise financial outcomes. By preparing for this well in advance, you allow yourself time to seek out expert advice to help you along the way.

Furthermore, making sure that you’re addressing all legal compliance criteria (legal and regulatory issues) will reduce the risk of issues arising during the sale.

Getting the most out of your personal and business goals

Clarifying your personal objectives during your preparation will help you understand exactly what you want from the sale of your business – from financial security to preserving company legacy or a combination of goals.

Achieving the legacy that you want for your business long after its sale is all down to your preparation, which will ensure that it continues under the new ownership.

Are you considering selling your business?

Making sure your business is well-prepared for sale is a way of investing in its future value. By seeking out the right financial advice, you can boost your chances of a sale, achieve a higher price, get a better deal structure and make the transition as smooth as possible, in order to protect your interests and those of the business.

More opportunities with financial advice

By enlisting the help of a financial adviser, you can access the kind of personalised support that will prepare your business for an exit that’s smooth and successful. Get in touch with Wellesley today to get started on your business transition journey.

St. James’s Place works in conjunction with an extensive network of external growth advisers and SME specialists, such as Elephants Child, who have been carefully selected. The services provided by these specialists are separate and distinct from those carried out by St. James’s Place and include advice on how to grow 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.

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.

SJP Approved 22/04/2025

WeeklyWatch – Market behaviour reflects tariff disruption

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15^th April 2025

Stock Take

‘Liberation Day’ and the ongoing repercussions of the US tariffs continued to heavily impact the markets last week. And tariff rumours, pauses and changes didn’t help matters, forcing market behaviour to change on an almost daily basis.

Hitting pause

One such rumour that began to circulate last Monday was that tariffs would be paused for 90 days, but this was quickly quashed by the US administration. By Wednesday, it emerged that President Trump would reduce higher tariffs on a number of countries down to 10% for 90 days, with immediate effect.

With this small window of time in place, it’s likely that many nations will try to negotiate with the US to avoid their initial higher tariff level. But with this pause comes even more uncertainty, and it remains relatively unknown as to what compromises and offers nations will have to put forward in order to satisfy Trump.

Markets try to adapt

The tariff pause did help lift US equities – the S&P 500 and NASDAQ ended Friday noticeably higher than when they started on Monday. But although this sounds like positive news, both indices are still below pre-Liberation Day levels.

One of the big exceptions to the pause in the tariffs was China. Towards the end of the week, the two largest economies gradually increased their protectionist agendas against each other. Tariffs between China and the US are now incredibly high, even though trade volume between them decreased significantly after Trump was elected for his first term as President back in 2016.

Outside of tariff developments

In other economic news, US CPI inflation fell to 2.4% in March – down from 2.8% in February and below the 2.5% that had been anticipated. Included in this data would have been some price changes from the initial US tariff moves, like the 25% import tax on steel and aluminium, but it won’t include any of the more recent and further-reaching tariffs.

This places the Federal Reserve in a tricky situation. As inflation remains relatively low, Trump has encouraged the Fed to reduce interest rates in order to help the economy. However, the ongoing tariff changes and anticipation of higher prices could make cutting interest rates a risky option.

Signs of growth for the UK?

Chancellor Rachel Reeves revealed on Friday that GDP grew more than expected. The UK economy expanded by 0.5% in February, according to the Office for National Statistics (ONS). The news came at the same time that the ONS revised up their January figures from a 0.1% fall to a flat 0.0%.

Monthly GDP figures can be volatile and are often subject to revision, however. And some of the most recent growth may also have been boosted by exporters rushing to beat the US tariffs coming into place.

Despite the positive GDP news, the FTSE 100 index ended the week down 1.13%. There was a spike when Trump announced the temporary tariff reduction, even though the UK are facing a 10% tariff regardless.

Activity across the European continent

The MSCI Europe ex UK Index finished the week up. Shares were boosted after the temporary tariff changes took place on Wednesday.

As this week goes on, the European Central Bank is expected to cut their interest rates as inflation seems to be under a bit more control and growth is threatened by US tariff policy.

Wealth Check

Finish the sentence – “I’ve always wanted to…?”

When you’ve got your mind fully focused on your working life, retirement can seem like a distant dream and difficult to picture…

For the present and the future

When you start thinking about putting money aside, your bucket list should take a valued position in your financial plans – whether it’s taking up new hobbies, visiting friends near and far, going on that big trip or retreating to the countryside.

At the same time, day-to-day lifestyle also needs to be factored into your plans, such as increased healthcare costs as you age. This can feel like a big juggling act, which is why seeking out financial advice can help turn a ‘wish list’ into a realistic, practical and sustainable plan for your retirement.

Putting the retirement plan into action

A good place to start when planning for your retirement is to set aside a regular amount of money in an easily accessible account or Cash ISA for emergencies, acting as an important safety net. Aiming to have enough to cover your outgoings for six months is an advisable practice. You can also set aside further regular monthly amounts into other tax-efficient ISAs or your pension to boost your medium- and long-term financial goals.

There are plenty of options to help you save, including Stocks & Shares ISAs, Cash ISAs, other investments and pensions. Each option has different tax advantages and positive and negative outcomes attached, which makes seeking out financial advice when planning for retirement all the more important in order to find the right plan and solution for you.

Flexibility is key when it comes to stress-free retirement planning. Diversifying your savings options spreads the investment risk and allows you the choice of which pot you take from when you eventually stop working. If one option doesn’t perform so well, you can use another in the short term.

Additionally, turning hobbies or skills into an income during retirement years is a popular choice. Homeowners also may choose to rent out a room in their home before considering downsizing. And many of us will receive a form of State Pension.

The value of a financial adviser

By having regular meetings with your financial adviser, you can make changes to your financial plans as you go and as situations come up. Discussing your aspirations for retirement with someone you trust is highly reassuring, and you know that you won’t be compromising your living standards as you move forward.

An investment in a Stocks and Shares ISA will not provide the same security of capital associated with a Cash ISA.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

Please note Cash ISAs are not available through SJP.

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.

SJP Approved 14/04/2025

WeeklyWatch – Markets in tariff turmoil

8^th April 2025

Stock Take

The markets experienced a highly turbulent week after President Trump’s tariff announcement last Wednesday. In this edition of WeeklyWatch, Justin Onuekwusi, Chief Investment Officer at St. James’s Place, provides his expert assessment of this latest significant global economic development.

A turbulent week in markets

Global markets were left reeling last week, as the US introduced near-blanket tariffs across trading partners.

Speaking on Wednesday, President Trump announced a minimum tariff of 10% on nearly every country, including the UK.

Other countries received substantially harsher terms. For example, imports from EU countries will face 20% tariffs, while those from Japan will face 24%. Chinese imports, meanwhile, will receive an additional 34% tariff on top of the 20% they already face.

These tariffs are due to go live from 9^th April, giving other governments very little time to react. If they go live in their current form, these tariffs will amount to the largest US tax hike in 40 years.

So far, policy responses from other countries have been mixed. Vietnam, for example, offered to remove all tariffs on US imports, according to several sources. On the other hand, China announced that US imports would receive an additional 34% tariff from 10^th April.

The EU is yet to provide its official response, though it is expected to announce new tariffs of its own on various US products.

In the UK, meanwhile, the Prime Minister wrote in the Telegraph that the Government’s position would be to “Keep calm and fight for the best deal.”

Perhaps unsurprisingly, stock markets have taken the threat of a global trade war rather badly. Markets fell on Thursday and Friday, as trillions of dollars were wiped from the stock market. The falls have so far continued (as at the time of writing – Monday 7^th April).

Over the course of the week the FTSE 100 fell 6.97%, with the MSCI Europe excluding UK Index dropping 6.95%. The situation was similar in Asia, where the Japanese Nikkei 225 declined 6.01%. Falls were even worse in the US, where the S&P 500 and NASDAQ ended the week down 9.05% and 10.0%, respectively.

What this means for investors

While market falls can be difficult to live through, it is important to remember they are a feature of investing. Market falls of 10% are not rare occurrences compared to the long history of equities. However, decisions you make when these occur can significantly impact your long-term returns.

Making reactive selling decisions when markets are volatile can be very challenging as these become market timing decisions. Markets can fall and/or rebound faster than we can participate in them. Instead, for investors in already resilient well-diversified portfolios, taking little or no action has often led to better long-term outcomes, based on historical data.

Regardless of the current market topics and noise, markets are driven by behaviours. It’s important to be aware of behavioural biases leading to irrational decisions that stray away from process and principles.

For his part, so far Trump has indicated he plans to stay the course. On Sunday he told reporters:

“I don’t want anything to go down, but sometimes you have to take medicine to fix something.”

Outside the immediate market reaction, these tariffs are likely to lead to an increase in inflation in the US. At the same time, they are likely to reduce GDP growth and push unemployment higher, meaning the tariffs could potentially lead to an increase in stagflation fears.

This will also have an impact on the Federal Reserve’s policy on interest rates. As a result, markets are beginning to price in more interest rate cuts of 2025 than they did previously.

The only certain thing right now is we’re facing uncertainty. We still don’t know how several major economies plan to react, nor do we know how the US will respond to these reactions.

At the moment, any decision that we make should reflect the fact that uncertainty is high. We’re not going to be able to predict our way out of it, nor should we try.

There will be narratives around how different things are now, how the world is changing. It was the same in 2008 and during COVID. It’ll be the same now. But history shows that if you’ve got a good process, then you should be sticking with it.

Trying to make sensible decisions in these environments might be really difficult but will be incredibly important for delivering good outcomes over the long run.

Periods of political and economic uncertainty often test investor resolve, but history has repeatedly demonstrated the importance of diversification, discipline, and a long-term perspective. While short-term market volatility can be unsettling, staying calm and avoiding impulsive decisions is essential – this is when behavioural missteps can be most damaging. Investors who stray from their long-term strategy during turbulent times risk locking in losses and missing out on the recovery that often follows. Our portfolios remain grounded in these core principles, and we continue to monitor market developments closely.

Justin Onuekwusi

Chief Investment Officer, St. James’s Place

Wealth Check

What is the impact of the US tariffs?

According to investment experts at St. James’s Place, the US’s move to implement tariffs on trading partners will likely have widespread and unforeseen effects.

The US Census Bureau state that in 2024, the US imported $4,110 billion of goods and services. Most of these imports will now face an additional tariff of at least 10%.¹

The Head of Economic Research at St. James’s Place, Hetal Mehta, points out that while it was common knowledge that President Trump would issue reciprocal tariffs on key trading partners, no-one knew exactly what it would look like or what effect it would have in practice.

The US has large trade deficits with a large number of the affected countries (meaning the US imports more than it exports to them), many were close geopolitical allies with tight-knit, interwoven economies and supply chains.

Mehta mentions that the tariffs are unlikely to cause as much disruption to supply chains as the pandemic, but they’re likely to alter the relationships between nations. It’s not just a matter of switching suppliers or placing a stronger emphasis on buying domestically. It takes time to build supply capacity from other regions and areas to fulfil current demands. There are also non-tariff barriers with other countries, including things like regulation.

She says:

“You can’t just jump to another supplier that easily. So, will these non-tariff barriers get watered down? Where will the trade get re-rerouted to?”

She adds that the US consumer already buys more than the US can supply, which is why more goods are imported than exported.

“One way or another the US consumer will pay for tariffs – they are on the hook. The impact could be, firstly, higher inflation; secondly, higher interest rates to combat that inflation; and, thirdly, higher taxes for households. The latter is because the intention is to funnel the profits of the imposed tariffs to lower US corporate taxes. If the US were to reverse this action in the future, they may find it difficult and have to turn to consumers to pay that bill.”

Source: ¹US Census Bureau: US International Trade in goods and services, December 2024.

In The Picture

Not since the COVID pandemic in 2020 have we seen such levels of economic uncertainty. However, history teaches us that maintaining a steady course and taking little action when big deviations take place between asset classes often produces positive long-term outcomes.

We focus on diversification as a core principle when creating portfolios, and the choices made by the St. James’s Place investment team over the past year demonstrate this strategic focus.

Past performance is not indicative of future performance.

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.

SJP Approved 07/04/2025

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

Often, to keep our tangible assets safe (cars, contents of our homes, pets and much more), we take out insurance on them. But putting more protection on your standard of living and health can be much more valuable than insuring material possessions.

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

We understand that taking out life assurance or critical illness can be a significant step in your financial planning. Our team of expert financial advisers are on hand to help guide you through the process and provide more information about protection insurance.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

Trusts are not regulated by the Financial Conduct Authority.

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.

SJP Approved 31/03/2025

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

W.24822 Wellesley WeeklyWatch 25.03.25_1420 x 474_HR

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.

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.

SJP Approved 24/03/2025

WeeklyWatch – Markets struggle to flourish amid uncertainty

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18^th 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.”

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.

SJP Approved 17/03/2025

WeeklyWatch – Markets squeezed by further tariffs

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11^th March 2025

Stock Take

Tariffs pile on the pressure

Pressure on the stock markets continued last week as a result of Trump’s ambiguous approach towards tariffs.

In the last seven days, the US government has levied an extra 10% tariff on Chinese imports, on top of existing tariffs. It was also announced that Canadian and Mexican imports would be taxed at 25%, quickly followed by a declaration of an exemption for goods compliant with the United States–Mexico–Canada Agreement (USMCA) until 2^nd April. The USMCA is a free trade deal that Trump signed during his first term and covers many industries, including automobile and dairy.

The Canadian government then announced their own tariffs on US goods. The Chinese followed a similar pattern by placing tariffs on the US on goods that they’re able to source from elsewhere, including meat and logs.

US finances and markets take a hit

Unsurprisingly, the resulting uncertainty is being reflected in US GDP projections. On Thursday, the Federal Reserve Bank of Atlanta revised its first quarter projections for US GDP to -2.4%, compared to the projection of a -1.5% drop in the previous week and positive projections from earlier in 2025.

The trend was also noticeable in the US markets. Both the S&P 500 and the NASDAQ finished the week down more than 5%.

The Investment Research Director for St. James’s Place, Joe Wiggins, said:

“It is important to remember that financial markets are noisy and unpredictable over short-run horizons, a fact exacerbated by some of the extreme policy uncertainty that surrounds the Trump administration.

“Attempting to make decisions based on the near-term fluctuations of markets is a dangerous and unreliable game, and one that comes with particularly acute risks in the current environment. Taking a long-term view based on fundamentals and supported by sensible diversification is the best way to navigate this backdrop.”

Change in Canada

Over the weekend, former Bank of England governor (2013 to 2020) Mark Carney won the race to become the next Canadian prime minister, replacing Justin Trudeau. As soon as Carney enters office, he’ll need to address two clear areas: managing the tariff disputes with the US and getting ready for the general election, which is currently due on or before 20^th October this year.

As part of his opening address, Carney put forward a strong stance on the US–Canadian situation. He stated:

“We didn’t ask for this fight, but Canadians are always ready when someone else drops the gloves.”

European nations keep their heads down

The UK has been able to avoid the tariff spotlight so far; however, last week the FTSE 100 fell, partly due to concerns surrounding the impact of a trade war and the subsequent impact on the global economy.

Across the rest of the continent, there was a positive tale to be told. Equities had another good week, mostly boosted by defence stocks. Additionally, the German market responded brightly after the announcement of a bumper spending pledge. By overhauling current borrowing rules, it’s hoped that the spending will create a €500 billion infrastructure fund, which will ensure that more defence spending can be carried out.

The Head of Economic Research at St. James’s Place, Hetal Mehta, commented:

“Germany is in the midst of a huge and historic policy u-turn. After many years of espousing fiscal prudence, the spending package announced is unprecedented in size and could amount to as much as 3% of GDP on an annual basis. The path to approval is not easy – the lame-duck government must rush this through while it has a two-thirds majority, and a challenge via the Constitutional Court cannot be ruled out. A key question for investors is whether other countries in Europe can similarly rise to the challenge posed by geopolitical tensions.”

Wealth Check

10 steps to protecting your family and assets

Here at Wellesley, we believe that financial planning and advice is a family affair.

When you have a clear idea of what’s the right choice for you and your family, it becomes a lot easier to create a financial plan that will work for all parties and continues to work after your lifetime.

We’ve created a financial to-do list, which covers the steps you can take to get started on your effective plan to protect your family and its assets.

Consider your long- and short-term plans – Are there immediate goals that you want to save for? A family holiday, a wedding or school fees? Or maybe you’re planning for life events that may seem far away? Reducing your work hours? Need help paying for social care?
Calculate how much you’re worth – Make a list of the amount of pension pots you may have. If you’ve changed jobs, find share certificates and check in on ISAs and savings accounts.
Prepare for emergencies – Ensure you have an easy-to-access cash fund, just in case! This should be enough to keep you supported for six months.
Protect your loved ones, your family home and lifestyle – Taking out an insurance policy could be a huge benefit to your family.
Encourage good money habits early on – Help your children to embrace healthy money behaviours by teaching them to save and budget.
Leave a legacy – What legacy would you like to leave and to which people? Small steps taken early can make a big impact on your family.
Create (or review) your Will – This is particularly important if you have children or there’s a change in your family situation. This legal document is one of the most important you’ll ever write to ensure that your family’s future is secure.
Set up a Power of Attorney (PoA) – This is someone you trust who can make financial or welfare decisions for you should you lose mental or physical capacity.
Think about what’s most important to you and your family – Understanding personal values will help you set clear financial goals.
Get talking! – Make sure you discuss your short- and long-term plans with your family, involving them in decisions and plans going forward.

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.

Will writing and Powers of Attorney involve the referral to a service that is separate and distinct to those offered by St. James’s Place and are not regulated by the Financial Conduct Authority.

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.

SJP Approved 10/03/2025

WeeklyWatch – US red flag prompts Europe defence sector rise

W.24822 Wellesley WeeklyWatch 25.02.25_1420 x 474_HR

4^th March 2025

Stock Take

Getting defensive on the political stage

European defence company shares surged last week following faltering US–Ukraine talks, prompting Europe to rethink its defence strategy.

When the meeting between Ukrainian President Volodymyr Zelenskyy and US President Donald Trump turned sour, numerous European leaders called for a stronger defence policy – one that can stand more independently of the US. As a result, share prices leapt for European defence companies, with Rheinmetall and BAE Systems soaring over 20% on Friday.

Although talks have begun between European governments, they still face significant pressure before being able to implement these plans. Economic growth across the continent is still low and many nations are facing many fiscal challenges. To effectively increase defence spending, it’s highly probable that cuts will need to be made elsewhere.

UK defence plans

One of the ways in which the UK government is trying to allocate for this is by reducing the foreign aid budget. In addition, Chancellor Rachel Reeves announced plans to change the remit of the National Wealth Fund to free up more money to spend on defence. Further reports have also come to light indicating that money that’s been budgeted for ‘green’ projects will be redirected for defence spending.

In the short term, this is likely to help boost defence stocks, but the same can’t be said for the long term. The Head of Economic Research at St. James’s Place, Hetal Mehta, notes:

“Defence spending is less likely to be economically productive for an economy’s long term output potential. This might be hard to measure in the near term, but if we’re still talking about the productivity puzzle in years to come, this could serve to make the situation worse.”

German election yields good market response

Even before the rises in defence companies, there were some pockets of brightness across the continent. There was positive market reaction to the German election results from the prior weekend and saw Friedrich Merz’s conservative Christian Democratic Union (CDU) party gain the most seats – but not enough to gain a majority. Merz is still in the process of trying to form a coalition government with the centre-left Social Democrat party.

The Fund Manager for European Equities at Schroders, Martin Skanberg, commented on the results, saying:

“There has been consensus building for some time that Germany needs reforms to increase its competitiveness, although the specifics of this will take some time to be negotiated. Merz’s CDU has indicated an intention to drive through reforms and pursue a pro-growth agenda, which should be good for German corporates.

“German equities had been underperforming the rest of Europe in recent years, but that pattern changed in late 2024 and the stronger performance of German equities has continued into 2025. Hopes of reform could lead to an increase in positive sentiment towards German equities, and Europe more broadly.”

US tariffs time

In the UK, it was a positive five days for the FTSE 500 following seemingly productive talks between Prime Minister Keir Starmer and Trump. It seems that the UK may avoid US tariffs, which could stand us in good stead over the next four years.

However, this wasn’t the case for other nations as Trump has continued to outline his plans for Mexico, Canada, China and the EU over the past week. The tariffs for Mexico, Canada and China came into effect today.

US markets struggle

Thursday was a day the tech stocks would rather forget… Nvidia dropped over 6% and there were further small falls across the rest of the Magnificent Seven. Although Nvidia had posted fairly strong results that day, investors still spotted a slip in margins.

Overall, US markets continue to be wary of the talks surrounding tariffs and the weakening economic data. The latter of which included an unexpected drop in consumer spending in January as well as surveys indicating a fall in consumer sentiment.

Wealth Check

Using pensions and ISAs to reduce your tax bill

Increased tax bills are likely to be the case for many of us this year. With the personal allowance frozen until 2027/28 and the additional rate threshold having dropped to £125,140, more people will find themselves in the higher tax band – particularly if they receive a pay rise or a bonus.

Additionally, the Autumn Budget announced that the £40 billion ‘black hole’ in the nation’s finances will be addressed by increases in Capital Gains Tax, Inheritance Tax and employee National Insurance contributions for businesses.

How you can balance investments with taxes

Due to the changes in taxation, you’re likely to need to invest more money in order to maintain your long-term financial goals. Now’s the time to ensure that your financial plan optimises your pension and ISA allowances so that every penny counts.

Pensions

Of the two options, pensions are the most tax-efficient option for long-term investments. The basic-rate tax relief guarantees a 20% cash boost from the government on the contributions you make (subject to certain limits). A powerful persuader for why a pension should be part of your overall long-term financial planning!

A £60,000 annual allowance for pension contributions is in place and covers any personal and employer contributions. Furthermore, tax relief on personal contributions is limited to the higher 100% of your earnings in the tax year or £3,600 – but it remains a fantastic tax incentive. Personal pensions can be accessed from the age of 55, but bear in mind that this is set to rise to 57 in 2028.

ISAs

These offer a tax-efficient, simple and flexible way to save money. You don’t pay tax on the interest from a Cash ISA or capital gains from a Stocks and Shares ISA, so you’re not required to declare them on your tax return.

You’re allowed to invest a maximum of £20,000 per year in an ISA or combination of ISAs. You could put half in a Cash ISA and half in a Stocks and Shares ISA. In comparison to pensions, ISAs have no age restrictions limiting you on when you can access your money. This means that you’re granted a better degree of flexibility with your finances – cash can be ready for rainy days or covering immediate spends like holidays or a new car.

Explore more with pensions and ISAs with Wellesley

Using a combination of pensions and ISAs is a smart way to plan your finances for both the short term and long term. Get in touch with our financial advisers today and we’ll guide you through the process.

An investment in a Stocks and Shares ISA will not provide the same security of capital associated with a Cash ISA.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

Please note that Cash ISAs are not available through 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.

SJP Approved 03/03/2025

WeeklyWatch – Will the German elections turn the economic tide?

25^th February 2025

Stock Take

Germany’s results are in – is this the start of tensions easing?

The German election results brought some ease to the political uncertainty over the weekend, resulting in the country’s equities to open the week higher.

The biggest party to emerge was Friedrich Merz’s conservatives, which placed Merz as the next chancellor. The far-right Alternative for Germany (AfD) also had a strong night, winning a record number of seats and finishing second. Olaf Scholz and the Social Democrat Party (SPD) faced disappointment by coming in third.

Now that he’s officially the leader of the largest party, Merz will be looking to form a coalition government. He’s ruled out working with the AfD, meaning that it’s probable that he’ll seek out a coalition with the SPD. With their results combined, the two parties will have a small majority, having 328 out of the 630 parliamentary seats.

How will the German political results impact national and international markets?

While the immediate focus will be on coalition negotiations, a possible consequence could be an increase in European defence spending. This was implied in Merz’s victory speech, where he stated:

“Step by step, we can really achieve independence from the US.”

However, the reality of being able to make impactful fiscal changes in Germany – and influencing the wider European market – may be quite limited due to Germany’s sluggish economic performance. Plus, Merz’s conservative party and the SPD don’t have the two-thirds majority required to overturn the constitutionally enshrined debt brake, giving the government little fiscal flexibility.

UK deflated by latest inflation figures

Last week, January’s CPI inflation figures were released and revealed a 3% increase in prices over the previous 12 months – this was up from 2.5% in December.

Since September, UK inflation has been steadily rising, and January marked the first time CPI inflation hit 3% since March 2024. The cost of living continued to increase as a result of rising food prices, plane fares and the introduction of 20% VAT on public school fees, which was brought in at the start of 2025.

There has been little to no economic growth in the last few months, prompting fears of possible stagflation (a period of high inflation alongside weak growth). Commenting after the data was revealed, the Governor of the Bank of England, Andrew Bailey, said:

“It’s quite hard to work out to what extent the weaker growth story is a result of supply-side weakness or supply-and-demand-side weakness.”

As the government contemplate the situation and form their response, Chief Investment Officer at BlueBay Mark Dowding sees the UK’s current economic position as rather bleak:

“As it stands, we would assess the UK is already at risk of breaching its OBR rules on the budget, and this assessment itself is heavily dependent on eye-wateringly optimistic projections for rapid productivity growth. Consequently, this leaves the government with little room for manoeuvre or scope to massage the calculations to paint a rosier picture.”

With the likelihood of higher inflation figures on the horizon, it came as little surprise that the FTSE 100 fell 0.84% last week.

Uncertainty in the US

US equities struggled significantly last week. The S&P 500 suffered its worst day of the year on Friday when it dropped by 1.7%. In sterling terms, the S&P 500 was down 1.8% by the end of the week, and there was a fall of 2.65% for the tech-heavy NASDAQ Composite.

The USA’s own markets suffered from weakened business sentiment, which came about as a result of disappointing inflation figures from the previous week. Plus, the continuous uncertainty surrounding possible tariffs fuelled concerns about the nation’s economic strength.

Continued Chinese market success

China started the year off strongly and have sustained it. The Shanghai Composite rose by 0.96%, with tech and auto companies leading the rally.

The Head of Asia & Middle East Investment Advisory at St. James’s Place, Martin Henecke, commented on the figures. He said:

“The China tech stock rally serves as a good reminder that unpopular markets can experience turnarounds swiftly. The stars aligned for this sector last week, from Xi Jinping taking a more supportive stance – and meeting executives including Jack Ma – to strong earnings reports. However, investors might be well advised to manage concentration risk carefully by considering opportunities beyond just technology and AI.”

Wealth Check

Balancing present and future financial plans

We always want to ensure that we’re making the right financial decisions that will benefit our loved ones – both now and later in life when we’re no longer around. Later-life and legacy planning can often make you feel like you’re being pulled in multiple directions! While it’s important to plan ahead for the future, we also need to focus on the present.

Assisting loved ones when there’s more pressure on household budgets is great, but this needs to be balanced with ensuring that you have enough money yourself to be financially secure as you get older.

This can feel like a bit of headache, but with diligent planning and advice, you may be surprised at how much can be achieved.

Adapting to make your financial plans a reality

As part of the Autumn Budget, it was announced by the Chancellor that unspent pensions pots are now proposed to be counted as part of an estate and taxed. For many, they had planned to pass these on tax-free and as a result could face higher Inheritance Tax bills than they first thought.

But there are still ways you can leave your money to younger generations. Here are our tips:

Take advantage of your annual gifting allowance. You can gift up to £3,000 per year (£6,000 for couples) tax-free, which can help reduce the size of your estate over time.
You can make a gift of over £3,000, but be aware that if you pass away within seven years of the gift, it may still be considered part of your estate.
Regularly support your loved ones. Contributions to help with childcare or school fees gifted from disposable income can be Inheritance Tax-free.
Take out a Lifetime Assurance policy. This can help cover any eventual Inheritance Tax bill.
Utilise trusts. These not only offer tax advantages, but they also allow you to maintain control and protect family wealth from risks like divorce, bankruptcy or irresponsible spending.

Many are exploring regular gifting as a way to move money across generations. This type of ongoing gifting is a thoughtful, practical way to help out during your lifetime, while reducing the size of your estate.

Getting support and advice from a financial adviser can help you feel confident you’re making the right decisions – for now and the future.

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.

Trusts are not regulated by the Financial Conduct Authority.

In The Picture

Increased inflation and pint price. Are your savings keeping up?

Inflation dropped in 2024, but now it’s increasing again – the effect of which means that over the past 20 years, household items have more than doubled in price.

During this period, it’s unlikely that cash ISA interest rates have kept up with inflation, meaning that the purchasing power of your savings may be fading away.

Investing in a diversified portfolio of assets, including equities and bonds, has shown to be the best way to outpace inflation over longer periods of time. But it’s always key to remember that investing comes with risk.

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.

SJP Approved 24/02/2025