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.

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 03/03/2025

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.

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 24/02/2025

18^th February 2025

Stock Take

Little boosts mean a lot

There was some good news last week for the British government – the UK economy grew by 0.1% in the three months to December 2024. Growth this small isn’t usually that thrilling, but it exceeded expectations, which had predicted a 0.1% fall rather than a rise.

This growth was spurred by a 0.4% increase in GDP in December, which mostly came about as a result of improvements in the services sector.

In her comments on the latest figures, the Head of Economic Research at St. James’s Place, Hetal Mehta, said:

“Consumer spending was flat, and investment shrank. It is government spending that kept the economy going in the last three months of the year. The slightly better fourth-quarter growth won’t prevent the need for the Chancellor to make some difficult decisions in the coming months.”

The Spring Statement is due to be delivered by Chancellor Rachel Reeves towards the end of March. While this statement isn’t intended to look like a budget, due to the poor economic performance as of late, Reeves may be forced to act.

Hope of peace benefitting markets

The small lift in GDP helped lift the FTSE by 0.4% over the course of the week. Developments in Ukraine also gave markets a boost, due to US President Donald Trump’s pledge to bring about a quick and peaceful settlement.

This hope also extended to and boosted wider European equities. For example, German industrials have been highly affected by the high energy costs that the Ukraine war has caused. If the war were to end, gas prices could drop, reducing costs for companies all across Europe.

The Head of DFM Research at St. James’s Place, Peter McLoughlin, said:

“European markets are showing signs of stabilisation amid mounting optimism over a potential Russia-Ukraine ceasefire agreement. European equities were also supported by improved market sentiment. This was in turn bolstered by easing credit conditions and expectations that the recent euro weakness would moderate.

“Large company stocks continued to lead, while smaller companies are underperforming in the current environment. However, further easing in credit conditions could potentially reverse this trend.”

Even though peace talks are underway, European defence companies are still performing well. With US defence strategy shifting its focus away from Europe and homing in on its own borders and Asia, it’s likely that there will be a natural increase in European defence spending.

The MSCI Europe ex UK finished last week up 2.2%. In the year to date, European equities have performed strongly – the index is currently up over 10% and has outperformed the S&P 500 and NASDAQ so far this year.

US keeping monetary policy on the straight and narrow

Last week, the US received somewhat of a surprise when it was revealed that Consumer Price Index (CPI) inflation had climbed to 3% in January – the highest level recorded in six months. Although the inflation figures were generally high, one of the most notable price surges was in eggs. Prices jumped 15.2% over the course of the month as supply was impacted by avian flu.

In his testimony before Congress on Wednesday, Federal Reserve Chair Jerome Powell said that while positive steps have been made to reduce inflation by the central bank, there’s still a lot of work to do. Consequently, Powell suggested that monetary policy would still be restrictive for the near future.

The prospect of continued elevated US interest rates had little effect on feelings towards US equities. There were rises in both the S&P 500 and NASDAQ over the week and both ended the week within 1.0% of their record highs.

However, January’s inflation figures don’t include the potential effect of Trump’s tariffs. The US President re-emphasised his plans for a 25% tariff on steel and aluminium, as well as his proposal for retaliatory tariffs. It’s likely that these will put more inflationary pressure on the US economy.

Asia continuing a year of growth

It remained a strong start to 2025 for Asia. Chinese equities grew over the week and the Shanghai SE Composite Index is up over 16% this year in local currency. This is a big boost after a weak 2024, which saw a double-digit decline in the index.

Wealth Check 

Why set up a pension if you’re self-employed?

There’s been a large increase in self-employment, people running their own businesses or having portfolio careers – meaning that taking personal responsibility for pensions has never been more important.

Personal pensions are portable and flexible, meaning that whichever career path someone chooses, no matter how many employers you have and however many businesses you launch, your pension can follow too.

Set up your personal pension today

It’s tempting to wait until middle age to start a pension, but the sooner you begin, the more time you give your investments to grow until you reach retirement.

There are many pension options and investment choices and with the help of a financial adviser, they can help you set up a personal pension.

How do I plan for a retirement when self-employed?

Retirement planning is in your hands if you’re self-employed or non-working. Most people in the UK will receive a state pension (depending on National Insurance contributions) but most people still want an additional income and financial freedom for later life.

A tax-efficient way to save for retirement is your pension. All pensions qualify for tax relief – every eligible contribution gets an automatic 20% cash boost from the government. If you’re a higher or additional rate taxpayer, the percentage is higher. At retirement, you can usually take up to 25% tax-free – up to a maximum value of £268,275. Any tax relief over the basic rate is claimed via your annual tax return.

Optimising pension savings and contributions

Many people make monthly payments into their pensions; it can be difficult to motivate saving for old age while you’re still in your 20s or 30s, particularly if money gets tight. But the golden rule remains ‘a little and often’ and starting early is key.

If you get a pay rise, it’s highly recommended that you increase your contributions or adjust them depending on inflation figures.

Accessing and enjoying your pension

Personal pensions can usually be accessed when you turn 55, but this will increase to 57 from 6^th April 2028. When you withdraw your pension, there are also lots of options: a lump sum, a series of lump sums or a regular income.

Ensuring that you’re well set up to enjoy your retirement doesn’t happen overnight, it takes careful planning, and setting up a personal pension is one of the wisest financial plans you can make. Wellesley are here to help – get in touch with our financial advisers today to get started.

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 depends on individual circumstances.

In The Picture

Rising tariffs mean a shift in trade balance – and markets are watching.

US President Donald Trump has announced several tariffs. The chart reveals the US’s trade balance with key global partners. Countries like China, where the US imports more than it exports, are on the left side and nations such as the Netherlands, where the US exports more than it imports, are towards the right side.

Countries that sit on the left side are more likely to have tariffs imposed on them, therefore shifting the trade balance. But why is this important for investors?

Tariffs can cause varying degrees of disruption to global supply chains, raise production costs and possibly slow economic growth in regions or sectors. Tariffs can also result in retaliation and increase market volatility.

Mehta explains:

“Trade imbalances and policies like tariffs can affect global markets, from currency movements to company profits. These are the kinds of shifts we monitor closely to help ensure our clients’ portfolios remain well-positioned in a changing global landscape.”

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 17/02/2025

11^th February 2025

Stock Take

Breaking down the UK figures

Last week was a positive one for UK investors. The fall in interest rates and FTSE 100 record highs defied the wider negativity surrounding the economy.

The UK’s December GDP figures are predicted to be revealed later this week – with low levels of optimism for growth following the pattern of recent months, where the economy has broadly moved sideways. Indeed, the Bank of England (BoE) revealed on Thursday that it expected the economy to have grown only 0.75% in 2025 – half its previous estimate of 1.5%.

Inflation remains above the BoE’s 2% target. Consequently, the spectre of ‘stagflation’ – the combination of slow growth and increasing prices – has returned. In an attempt to alleviate the threat, the BoE’s Monetary Policy Committee convened last week and opted to cut interest rates by 0.25%.

Looking for the positivity

But it’s not all bad news! The UK economy did show some signs of life. Halifax has recently reported that after a dip in December, the average UK house price reached a new record high in January of nearly £300,000. The figures may have been impacted by a rush in buyers trying to beat the stamp duty increase in April.

What’s more, since the turn of the year, the FTSE 100 has performed impressively and reached another record high on Thursday. It experienced a small drop on Friday, but even that couldn’t stop it from accomplishing another positive return over the week.

The Head of DFM research at St. James’s Place, Peter McLoughlin, said:

“Say it quietly, but there is a recovery taking place in the UK. The FTSE 100 closed at an all-time high on Thursday. Equity investors think so.”

US finances adapting to unfolding tariffs

While the BoE opted to cut their rates, the Federal Reserve decided to keep US interest rates level for now.

At the start of last week, investors had to prepare themselves for the fallout of Mexico and Canada tariffs, but then the announcement came that, after some negotiations, the tariffs would be paused for a month. Trump has since announced 25% tariffs on all imported steel and aluminium and made threats of ‘reciprocal tariffs’ on any countries that place tariffs on the US.

Steady US economic performance

Despite the uncertainty, the US economy is on steady ground at the moment. In the latest job numbers that were released on Friday, unemployment was seen to have fallen to 4% which, according to the Labour Department, is the lowest level in eight months.

Fourth-quarter 2024 earnings season has begun well. Many US companies revealed a reasonably healthy performance. Reports are in from companies representing over half of the S&P 500 market capitalisation, with more than 60% of them having beaten sales predictions and approximately 75% having beaten earnings forecasts.

EU in a tight spot

Around 3% of euro area GDP comes from exports to the US, and with the threat of US sanctions looming over them, the EU finds itself in an uncomfortable position. If they were to receive the same flat 10% tariff that Mexico and Canada are facing, it could mean a reduction in EU GDP of up to 0.5%. Already struggling with a weak economic backdrop, a move like this could place the trading bloc into recession.

But despite this uncertainty, the MSCI Europe finished the week up 0.68%. One of the significant contributions to this was the French Prime Minister, François Bayrou, getting his 2025 budget through in a minority government and surviving a no-confidence vote.

Wealth Check 

Any business is taxed on its profits – the more you make, the more you may pay.

However, the amount of tax that you’ll pay all depends on the decisions made at the very start of the business: how your company is structured and the renumeration for you and your team. While these decisions may not be set in stone, it’s important to set the right tone from the start.

First things first

Before trading commences, you must decide what kind of trading structure you’ll have. A sole trader? A partnership? A limited liability partner? A limited company?

There are tax advantages and disadvantages in each structure, and multiple ways you can extract money from the business and pay people. Although it usually falls to your accountant to explain these different trading structures, involving your financial adviser in these discussions and decisions from the beginning is highly recommended.

Getting set up

If you set up a limited company, you’ll need to consider your remuneration structure – how you and your staff are paid.

It’s salary versus dividend. On the back of a profitable year, you may decide to pay more dividends, as well as or instead of larger bonuses. However, with the recent changes to the rate of Corporation Tax, the increase in dividend tax and reduction in dividend allowance could mean that you’ll want to opt for a fixed salary structure.

Moving money tax efficiently

You also have several options if you wish to take money out of a limited company in a tax-efficient manner.

Ensuring that you’ve selected the most tax-efficient way to pay both yourself and others while also maximising pension contributions is a strong starting point.

The tax deduction benefits of pension contributions are an important consideration. For sole traders and partners, personal pension contributions are eligible for tax relief at their highest rate of income tax. An employer’s contributions are highly tax efficient as they’re usually an allowance expense for Corporation Tax and not a benefit in kind for the employee.

These are just some essentials of a strong tax planning strategy for your business. Involving all your professional advisers – your accountant, tax adviser and financial adviser – in your tax planning is key. Accountants focus on tax years, but financial advisers think in decades to ensure you and your business enjoy a long, successful future.

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 and are dependent on individual circumstances.

In The Picture

Can the hidden opportunities of 2025 be found in smaller companies?

Smaller companies, or small caps, represent the lower end of the global stock market in terms of size and value. As of the end of 2024, they were trading at a 20% discount compared to larger firms (large caps). This marks the widest gap since the late 1990s, just before the dot-com bubble. The current disparity suggests that investors are gravitating towards larger, more established companies, leaving small caps undervalued. For long-term investors, this could present an exciting opportunity.

Past performance is not indicative of future performance.

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 10/02/2025

4^th February 2025

Stock Take

Shaping the month ahead

At the end of January, European equity markets finished at record highs. But with US President Donald Trump’s sweeping tariff announcements at the weekend (albeit being slightly dialled back last night), it looks like February may be a more challenging month…

Trump pivots on (some) tariffs

Over the weekend, Trump confirmed 25% tariffs for Canadian and Mexican goods (excl. Canadian energy imports, which will have a 10% tariff) and 10% for China.

It didn’t take long for the leaders of those nations to respond. Canadian Prime Minister Justin Trudeau announced a 25% tariff on a wide array of US goods, while China and Mexico have promised tariffs of their own will follow, but have yet to reveal them.

However, last night (3^rd February) saw the president agree to postpone Canada and Mexico’s tariff by one month, following talks with Trudeau and the Mexican president, Claudia Sheinbaum.

And it’s not just Canada, Mexico and China that Trump has his eye on – the EU is also part of his future tariff plans, as he told the BBC:

“It will definitely happen with the European Union.”

But when it comes to the UK, Trump has been less explicit. As a result, Prime Minister Keir Starmer will likely be required to strike the right balance of ‘resetting’ the relationship with the EU all while avoiding a reprisal from Trump.

Markets react to potential trade war

The full impact of a possible trade war between the US and the EU, Canada, Mexico and China will take time to unpack, but so far, markets have responded as expected. The FTSE started the week down 1.3% and markets in France, Germany and Japan were down by more than 2%.

Falls caused by the tariffs were reasonably broad-based; however, car manufacturers were hardest hit, with the shares of a number of European car manufacturers falling over 4% on Monday morning.

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

“The news of tariffs levied by the US…will inevitably raise questions on how central banks – especially the European Central Bank (ECB) but also the Bank of England (BoE) – should respond should they also be subject to such protectionist measures. It is too late for the BoE to adjust its forecasts and assumptions for global growth, but any further weakness in the euro area economy will likely spill over to the UK. For some MPC members, the case for a pre-emptive cut may be enhanced. Ultimately, the US consumer has been the powerhouse for the economy, and one way or another is now on the hook for paying for these tariffs (higher inflation, higher interest rates or perhaps further down the line, higher taxes).”

US AI dominance threatened

It wasn’t a good start to the week for the US tech sector with China’s DeepSeek AI model making people question whether America’s lead in the field was untouchable. It further raises questions regarding the market value assigned to several AI-related companies.

US tech corporation Nvidia has grown extraordinarily over the last few years, but it recently suffered the biggest single daily drop in stock market history. Close to $600 billion was taken from its value on Monday last week, but there was a slight recovery during the second half of the week and the share price eventually finished down around 15%.

The Head of Asia and Middle East Investment Advisory at St. James’s Place, Martin Hennecke, said:

“Just when it seemed that the US tech/AI rally and dominance would last forever, the news on DeepSeek as a potential industry disruptor hit home hard. There is uncertainty about specific market impacts as yet, and it may still turn out to be less of a bombshell than initially thought. However, it does serve as a timely reminder of the importance of maintaining prudent risk management and diversification at all times.”

UK struggles for consistency

On home soil, there was a 2% rise in the FTSE 100, which meant that the UK index ended the month up over 7%.

But UK market positivity was mismatched with the wider economic performance of the country. We’ve been experiencing a long period of weak economic growth and above-target inflation. What’s more, business confidence has been subdued, and the government have been left with limited financial options to encourage growth.

Many FTSE 100 companies get the most of their income from overseas, however. Currently, the pound is weaker against the US dollar (and other currencies), meaning that earnings that come back to the UK are worth more when converted back into sterling.

Market positivity in Europe

January proved to be a good month for European markets too. Similar to the FTSE 100, the MSCI Europe ex UK hit record levels at the end of the month.

The ECB cut their interest rates last week. Because of the weak economic news from across most of the bloc, the ECB are likely to continue to make interest rate cuts as the year progresses.

February will certainly be one to watch for the EU amid Trump’s tariff comments.

Wealth Check 

Top tips for maximising your ISA returns

“Max out your ISAs,” is something you’ll frequently hear about as we draw closer to the tax year-end. Topping up before 5^th April should be an important annual task for savers and investors. But while it’s important to put as much money into your ISAs as you feel possible, you should still ensure that what you hold is giving you great value for money.

Ensuring your ISAs deliver on your goals

Life goals shift and those changes will invite the need to rebalance your mix of ISAs and their rate of return. If interest rates continue to come down slowly, it’s more important than ever to make sure that your ISAs are ‘earning their keep’.

Cash versus Stocks and Shares ISAs

Many ask which is better. The answer: it’s not an either/or decision. Both investments have their pros and cons, and you can use both of them to your advantage for longer-term financial planning.

Cash ISAs

A Cash ISA is easy to access and can work as a ‘rainy day’ fund to cover unexpected expenses; however, their rate of return is fixed by interest rates. If you’ve had any Cash ISAs for more than five years, then the good source of emergency cash stored up can become a big part of your long-term savings plan.

Long term, you’re unlikely to get the same growth from a Cash ISA as you would from a Stocks and Shares ISA. You may want to consider how much you put into a Cash ISA.

Stocks and Shares ISAs

If you’re saving for longer term goals, which can include retirement or sending children off to university, then Stocks and Shares ISAs may be a good option due to their better potential for growth.

If you have a lot of money in a Cash ISA or savings account, you could be missing out during positive periods in the markets. Interest rates tend to be less ‘reactive’ during these periods of prosperity or stability and Cash ISAs often take longer to ‘catch up’ when it comes to returns.

Always worth bearing in mind…

Markets fall as well as rise, and by choosing to invest solely in Stocks and Shares ISAs, you’re accepting a much higher risk with your investments.

For most people, having a combination of Stocks and Shares and Cash ISAs provides the best balance, as it gives them financial resilience for both the short to medium term and provides more opportunities to create more wealth in the long term.

Make this tax year-end count

Having a regular catch-up with your adviser is always a good plan, but as we come up to tax year-end it’s even more important. Especially if your long-term plans or family circumstances have changed in the last 12 months.

There’s still time to make some tax-smart tweaks to your ISAs and investments – your family will feel the benefit. Discover our dedicated tax year-end portal here:

The value of an ISA 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 you invested.

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

The favourable tax treatment of ISAs may not be maintained in the future and is subject to changes in legislation.

Please note that Cash ISAs are not available through St. James’s Place.

In The Picture

The Nasdaq-100 turns 40!

For over four decades, the Nasdaq-100 index has been tracking some of the most innovative companies globally, including tech giants Apple, Microsoft and Nvidia and even big presences in the consumer and healthcare sectors.

The index was launched in 1985 and is weighted by market capitalisation – which means that the biggest companies have the biggest influence.

The below chart reveals the Nasdaq-100’s performance from its beginning to the present day.

Past performance is not indicative of future performance.

Please note it is not possible to invest directly into the Nasdaq-100 and the figures shown do not take into account any charges applicable to the appropriate investment wrapper or any relevant tax charges.

The Last Word

“I wouldn’t say there’s a timeline, but it’s going to be pretty soon.”

– US President Donald Trump talking about when potential EU tariffs might come about.

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 03/02/2025

28^th January 2025

Stock Take

Trump already making his mark

Last week, Donald Trump returned to the White House to take up the role as the 47^th President of the United States. He hit the ground running with the announcement of several executive orders, from declassifying files concerning the assassination of President John F. Kennedy to rolling back diversity, equity and inclusion initiatives.

Market commentators focus on tariffs

Trump’s attitude towards tariffs has been of keen interest to market commentators. During his first term as President, he made notable use of tariffs and there’s been an expectation that the same will be the case this time around.

First up, Canada and Mexico

Last week, for example, Trump called for 25% tariffs on Canadian and Mexican goods to be enforced from the beginning of February. If these tariffs are enacted, this could have a big impact on US consumer finances as they will likely foot some of the bill.

The two nations are two of the US’s biggest trade partners, and according to federal trade data, they accounted for almost a third of the value of all goods imported into the US in 2024.

Not so rash after all?

But as it stands, tariff fears haven’t yet been fully realised. After initially opting for a hardline stance on Chinese tariffs, Trump seems to have softened. During his election campaign, there was widespread speculation that 60% tariffs on Chinese imports would be imposed, but last Wednesday, the President revealed his team were now discussing a possible 10% tariff.

Addressing the possible effect that tariffs could have on investments, the Chief Global Market Strategist at Invesco, Kristina Hooper, said:

“When tariffs were implemented in 2018, they caused the S&P 500 Index to experience higher volatility and end the year lower. They caused even more damage to other markets. However, this time around seems like it could be different – there may be more use of tariff threats as a tool to achieve other policy goals and less implementation of actual tariffs. In any event, tariffs had a very temporary impact on the stock market in 2018, so I would not expect new tariffs to impact investors beyond very short time horizons.”

Tariff impacts on global ties and markets

As well as affecting global finances, Trump has been using tariffs as bargaining tools within the international arena. Over the weekend, he threatened Colombia with tariffs to encourage them to take back deportees, but since then, a resolution to the situation seems to have been reached.

George Curtis, Portfolio Manager at TwentyFour Asset Management, commented on the nature of tariffs:

“Tariffs are noise. That doesn’t mean markets wouldn’t react to a tariff-driven increase in prices, but we view the potential inflationary impact of tariffs more as a one-off level shift that could delay the underlying downward trend in inflation rather than disrupting it in the longer term.”

In terms of markets, it’s worth bearing in mind that Trump was only sworn into office a week ago. Since then, US markets have been encouraged, signified by both the S&P 500 and NASDAQ ending the week up.

The Federal Open Market Committee are due to meet later this week to continue discussions on interests, but the expectation is that they will choose to keep them level.

Artificial intelligence’s place in Trump’s plans

Trump has also started to lay out his artificial intelligence (AI) action plan, which has been designed to try and keep the US at the forefront of developments. Optimism surrounding AI boosted several tech company values to reach record highs in 2024.

Having said this, there was surprising news at the end of last week when a relatively small group of developers in China released their AI model, called DeepSeek R1. The model has the ability to compete against US AI models, including ones from Meta and OpenAI, despite costing a fraction of the cost to develop.

Interest-rate cuts on the horizon for Europe?

At the annual World Economic Forum in Davos, various European Central Bank (ECB) policymakers delivered presentations and journalist interviews. They seemed to suggest that interest rate cuts would be happening – and soon. They’re most likely to be announced as early as Thursday when the ECB next meets.

This news, coupled with encouraging business activity numbers, boosted the MSCI Europe ex UK by 1.5%.

The UK presses on

After the gilts stir at the beginning of the year, the UK had a quieter week, with the FTSE 100 flat. Keir Starmer’s government remains in a sticky situation as it tries to generate growth for the nation. Later this week, UK Chancellor Rachel Reeves is expected to give a speech which outlines her ideas; these could include cutting back planning rules and announcing a new runway at Heathrow Airport.

Wealth Check 

Active vs passive investing – does it have to be ‘either/or’?

The investment industry has argued over whether active or passive investing is better. But what if the answer is both?

When it comes to active investment management, the basic argument is that skilled managers are able to identify winners and losers in stock markets. As a result, they should be able to deliver a better return than the market. However, proponents of passive management argue that following the market eliminates the risk of human error and is more cost-effective.

The Head of Investment Specialists at St. James’s Place, Dr Sarah Ruggins, says the argument is dated, adding that a world of investment techniques exists between the two poles, stating:

“We’re unnecessarily constraining our opportunities if we limit ourselves to all active or all passive.”

Is there a sweet spot in the middle ground?

Ruggins argues that both active and passive management and everything in between can be effectively utilised. She identifies that a spectrum exists between the most basic passive, low-cost strategy that uses hybrid options up to the most active managers, who opt to invest without considering indices.

She continues:

“While the first decade of the millennium saw active funds generally outperform, the past few years have favoured passive investing, thanks to the performance of just a few companies dominating market returns.”

Choosing the approach befitting of the market

Investor sentiment is similar to markets in the way that it’s cyclical. When something becomes popular, money gravitates towards it, finding its way there. Ruggins goes on to state:

“It’s unsurprising passives have done so well of late, given the popularity and rise of the largest tech stocks in the world. Investing is for the long term, and success doesn’t come down to last-minute changes. Being disciplined and diversified are key to sustainable performance over the medium to long term across all market conditions. If we fall into the either/or trap around active and passive, you won’t be truly diversified.”

Blending different types of passive and active funds means that Wellesley can create diversified investment portfolios and solutions for you.

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.

Past performance is not indicative of future performance.

In The Picture

The UK borrowed £17.8 billion in December 2024, exceeding predictions and marking the highest December borrowing in four years.

Increased borrowing in 2025 could have significant implications for the economy. We monitor the fiscal policy and Bank of England’s reaction to borrowing and inflation trends. By doing this, we can adapt to changes in conditions and create well-informed investment decisions for you which will help you achieve your long-term financial goals.

The Last Word

“It could be Saudi Arabia, it could be UK. Traditionally, it’s been the UK.”

– US President Donald Trump talking about where his first international trip of his second term might be.

Invesco and TwentyFour are fund managers for SJP.

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 27/01/2025

21^st January 2025

Stock Take

Positive markets make for happy investors

Several major markets posted positive numbers last week, including the FTSE 100, which grew 3.1% – a new record high. The news gave investors much to smile about!

A number of factors supported this rise, including the slight fall in the UK’s inflation numbers from December. While a 2.6% to 2.5% drop may not seem like a large change, the headline figure concealed a bigger fall in services inflation. Services inflation – including hotels and travel – was persistent for the majority of 2024. But in December, the sector saw a fall from 4.9% to 4.4%, which was more than expected. Notable influences on these figures included the significant drop in airfare prices – but given that these are notoriously unpredictable, some of the drop could be temporary.

Stagflation fears persist

The UK GDP figures for November were also released last week and revealed a 0.1% growth. The UK had started 2024 strongly, but the economy struggled to grow as the year went on. By the end of November, the UK GDP was smaller than it was in May.

In her analysis of the numbers, the Head of Economic Research at St. James’s Place, Hetal Mehta, said:

“The November 2024 GDP data are the first positive growth print since August, but only just. The UK economy has grown by a mere 1.8% over the past three years; after the initial post-pandemic recovery, the trend has been much flatter relative to the 2014–2019 period. Consumers are cautious, as evidenced by the upward trend in the savings ratio and weaker business sentiment. Overall, this paints a picture of stagflation.”

As a result, the Bank of England (BoE) is predicted to gradually reduce interest rates over the course of 2025 – this could include a cut next month. However, as Mehta notes:

“The monetary policy response is not straightforward as it is the supply-side policies that are needed to help the economy out of this situation. In the short term, there is enough progress on inflation to allow the BoE to keep cutting interest rates gradually.”

Springing into action ahead of the next Budget

Turning attention to supply, Chancellor Rachel Reeves faces challenging decisions, with very limited options to try and generate economic growth over the next few months. Reeves is expected to reveal her Spring Statement in March, which will likely show that the fiscal headroom she gave herself in the previous Budget will be gone.

UK equity performance was aided by a weaker pound relative to the US dollar. Most of the earnings for companies in the FTSE come from abroad, so a weaker pound meant that these companies could record high sterling revenues and profits. Additionally, a cheaper pound creates attraction around domestic share prices, making them of keen interest for overseas investors – another boost in market optimism in the previous week.

It’s global positivity!

The positive momentum was seen in several markets. The European Central Bank looks to be on course to implement gradual interest rate cuts – provided there are no big economic shocks – and this has helped lift the MSCI Europe ex. UK by 3.1%.

Looking east, Asia also received the positive market memo! Chinese equities ended the week in positive territory when the Shanghai Composite rose by 2.3% (local currency), spearheaded by better-than-expected GDP data.

The next chapter for the US

Across the pond, the S&P 500 rose by 2.9% after encouraging inflation figures were revealed alongside strong corporate results. However, the nation faces uncertainty with Donald Trump’s inauguration, which took place yesterday. Republican voters are looking for Trump to hit the ground running after he revealed plans to make extensive use of executive orders to enact changes quickly, including in immigration and environmental regulation.

Wealth Check 

The Autumn Budget and your financial plans

Many of those with long-term financial plans were left feeling uncertain following the 2024 Autumn Budget. The intention behind the Budget, according to Chancellor Rachel Reeves, is to fund investment, fuel growth and fill a £22 billion-pound black hole in public finances. One of the ways that she is looking to fund this is through pensions.

How will my pension be involved?

Pensions are usually the last thing to be touched – and usually only after drawing down on savings and ISAs. By using your savings, you can lower the overall taxable value of your estate, while ensuring the pension is preserved for future generations without being subject to a 40% Inheritance Tax (IHT).

However, this is currently under discussion and could change from 6^th April 2027. You can still draw down 25% of your pension as a tax-free lump sum – up to £268,275 – but from 2027, any unspent pension could possibly be counted and taxed as part of your estate when you pass away.

As a result of the Budget, many have been left conflicted as to whether to draw their pension and take the repercussions of income tax but still be able to gift some of their money to loved ones.

5 options to adapt your financial goals

• By using your annual £3,000 IHT gifting exemption (£6,000 for a couple) to gift money to your family members or loved ones during your lifetime, instead of as an inheritance, you can reduce the size of your estate over time.
• Make a gift of more than £3,000. However, if you pass away within 7 years of giving the gift, it’ll be included in your estate for tax purposes.
• Make regular monthly ‘gifts’ to family or cover some of their outgoings, including things like childcare or school fees. These are tax-free, as long as they’re made from a disposable income and don’t impact your standard of living.
• Consider spending more of your pension pot on yourself, or others.
• Take out a Lifetime Assurance policy to help cover the eventual IHT bill.

One more route that you can put into action is to accept your IHT liability but protect your family by planning for it. If you have the appropriate disposable income, you could take a whole of life insurance policy which will cover some of the anticipated bill. These whole lifetime policies last for the duration of your life and also pay out a tax-free lump sum to your family when you pass away, which can be used to pay the IHT. Aside from being a comforting sum of money, it can also provide peace of mind for everyone. However, you need to make sure that you can afford these payments until the end of your life.

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

In The Picture

Although the start of 2025 has brought back memories of the brief extreme gilt crisis in September 2022, it appears unlikely that a similar situation will unfold at this time. The recent volatility has been driven by a mix of global and domestic factors, including ongoing concerns about inflation.

The Last Word

“Starting tomorrow, I will act with historic speed and strength and fix every single crisis facing our country.”

– US President Donald Trump speaking on Sunday as he promised to hit the ground running for his second term as President.

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 20/01/2025

14^th January 2025

Stock Take

Lingering concerns about inflation and the pace of interest rate changes pushed up UK government borrowing costs last week, striking multi-decade highs.

Bond yield behaviour

Since September 2024, when the US Federal Reserve started to cut interest rates, global bond yields have been on the rise. And American inflation is showing to be more resilient than expected, with initial hopes for a quick return to lower interest rates now fizzled out.

Consequently, 30-year UK gilts saw yields hit highs not seen in 27 years, and 10-year gilt yields reached 2008 levels.

Hetal Mehta, Head of Economic Research at St James’s Place, says that the rise in gilt yields has been mostly driven by global factors. Because of stubborn inflation and wage growth in the UK, it’s made it harder for the Bank of England (BoE) to make aggressive cuts to policy rates. She states:

“The domestic upshot is that higher cost of debt will reduce already limited fiscal headroom. For the Chancellor, the options are limited, especially given that the optimistic growth forecasts from the Office for Budget Responsibility (OBR) look increasingly unrealistic. Raising taxes would be politically difficult, but cutting spending risks further slowing growth. It’s a tough balancing act with no easy solutions. This policy ‘catch-22’ may have exacerbated daily market moves beyond what global factors might imply.”

Tech key to UK turnaround?

The Labour government now faces further added pressure. Over the weekend, it’s been reported that Prime Minister Keir Starmer is placing hope on artificial intelligence (AI) to encourage UK growth.

At the end of March, Chancellor Rachel Reeves will reveal her Spring Statement, which will include updated OBR economic and fiscal forecasts.

Fixed Income Portfolio Manager at Schroders James Ringer offers his insight on what could help ease the situation. He states:

“There are two main catalysts for a turnaround in the current market conditions: intervention or lower inflation data. Intervention could originate from the UK Treasury or the BoE. On the Treasury side, verbal intervention is likely the first step. The Chief Secretary to the Treasury recently reiterated the government’s commitment to the fiscal rules, but did not provide further details.”

UK market flat despite gilt rise

Gilt issues may have been prevalent this week, but the FTSE 100 remained fairly flat last week, with a weaker pound assisting exporters.

The headline figure concealed a range of results. Housebuilder companies have been under pressure since the reveal of the Autumn Budget as buyers are struggling with possible higher funding costs and increased job uncertainty.

US equity feeling the pressure

There was a stall in US equity markets when the strong jobs data was unveiled on Friday and subsequently diminished expectations of US interest rate cuts later in the year.

The US tech companies that dominate US indices took quite the hit from this. NASDAQ dropped by 2.3% and the S&P 500 fell by 1.9% over the week, with the latter now having lost nearly all the gains it made in the immediate aftermath of the 2024 US Presidential election.

On Friday, the Bureau of Labor Statistics revealed that last month expectations were exceeded when 256,000 jobs were added, and unemployment fell to 4.1%.

Does this change things for the Federal Reserve?

With the job market remaining fairly stable, the Federal Reserve can enjoy the benefit of being more patient with further interest rate cuts this year. Economists will be keeping an eye on the inflation data being revealed this week for an indication as to how it will alter future decisions for the Federal Reserve.

Across Europe and Asia

In mainland Europe, the MSCI Europe ex UK rose 1.2% on expectations of an interest rate cut being put in place by the European Central Bank later in the month.

And in Asia, the Nikkei 225 retreated by 0.5% and the Shanghai Composite retreated by 0.2%. The Nikkei 225’s fall came about as a result of the speculation surrounding the Bank of Japan’s plan to hike up rates, whereas the Shanghai Composite fell as a result of deflationary pressures reflected in the latest Consumer Price Index and Producer Price Index releases.

Wealth Check 

What legacy do you want to leave for your loved ones?

Whether you own a business, are an employee or are retired, it’s a question that many of us ponder but seldom think through thoroughly – even though we find a lot of our clients have strong opinions on the subject! Being time-poor is a particularly potent issue for entrepreneurs, who spin a lot of plates on a daily business.

Find the time to plan

Even though business directors are busy people, it’s important that you put time aside to put a thorough plan in place that will ensure your wishes are carried out.

Before considering the practicalities, it’s worth thinking carefully about the type of legacy you want to leave behind. This is an important part of forming the financial planning process, something which our financial advisers can assist you with.

Managing assets

Business owners also face the extra complexity of having to consider what happens to their business and personal assets and must create a strategy that incorporates both.

Passing the baton

You may want to relinquish some control during your lifetime, possibly by passing the business over to a family member. But they may not have the aptitude or interest to take it on, so you’ll need to consider your succession planning – both at the retirement stage and in the event of your death before reaching retirement.

Selling on and moving on

If it’s part of your plan to sell the business, there needs to be a lot of consideration as to how and when you’ll do this, and to which person you sell it on to. What you do with the proceeds will also need to be considered carefully as you could end up with a large lump sum that will become a big part of your personal wealth.

Legally verified

Finances make up just one part of legacy planning. Legal and business tax advice is also extremely important when making your decisions. A financial adviser, a lawyer and an accountant are the three key professionals you want in your corner and all moving in the same direction.

Tax laws are constantly changing, your personal circumstances may vary from time to time, and new and unexpected business opportunities could arise. It’s therefore crucial to review everything on a regular basis.

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

In The Picture

Markets face unexpected changes all the time. The post-election period can be an uncertain time for markets as the graph demonstrates, but there are always opportunities to be taken…

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 Last Word

“This country deserves a real choice in the next election and it has become clear to me that if I’m having to fight internal battles, I cannot be the best option in that election.”

– Canadian Prime Minister Justin Trudeau announcing his resignation, in advance of elections due later this year.

The information contained is correct as at the date of the article. The information contained does not constitute investment advice and is not intended to state, indicate or imply that current or past results are indicative of future results or expectations. Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.

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SJP Approved 13/01/2025