Ellen Ward

The World In A Week - Diversification to the rescue

Written by Chris Ayton

Last week was a mixed one for equity markets with the MSCI All Country World Index down -1.0% in GBP terms. However, with the US being the dominant component of global equity indices, this result was heavily influenced by the -2.8% return of the S&P 500 index. The US equity market lagged once more as investors continued to flee the stock market and the US Dollar as nervousness around President Trump’s unpredictable economic policies led them to look elsewhere. Trump’s continued criticism of Federal Reserve Chairman, Jay Powell, suggesting he should be removed from his post for not cutting interest rates quickly enough, has also created concerns over the ongoing independence of the US central bank.

Conversely, the UK equity market was one of the strongest, returning +4.0% over the week as domestic corporate profit results were generally robust and the market’s lower allocation to the out-of-favour tech sector and greater prevalence of cheaper stocks held the market in good stead. Continental European indices were also robust with the MSCI Europe ex-UK Index up +2.4% over the week in GBP terms. As expected, the European Central Bank lowered interest rates by 0.25% for the third time this year, citing subdued inflation but warning of continued risks to European growth emanating from tariff-related tensions.

Japanese equities were also in the green, with the MSCI Japan index up +3.4% over the week in GBP terms. In recent weeks the market has been worried about the tariff related risks for large Japanese exporters, but some comfort was taken when, after a face-to-face meeting with President Trump and Treasury Secretary Scott Bessent, the Japanese Minister of Economy, Trade & Industry suggested to reporters that the US President had said getting a deal with Japan was a “top priority”.

Away from equities, other diversifying assets generally held up well and supported appropriately constructed, multi-asset portfolios. Bond markets enjoyed a positive week with the Bloomberg Global Aggregate Index up +0.7% in GBP hedged terms. High Yield bonds performed particularly well. Commodities were also collectively positive with gold’s perceived safe-haven status helping the gold price to hit repeated all-time highs.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon. 

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products. 

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments. 

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 22^nd April 2025.

© 2025 YOU Asset Management. All rights reserved.

by Ellen Ward

The World In A Week - Blink and you may miss it

Written by Millan Chauhan

We saw the Trump administration issue several tariff announcements last week which included both the US and China implementing retaliatory tariffs, escalating the trade war between the world’s two largest economies.

President Trump implemented 145% tariffs on Chinese imports, which China responded to with 125% tariffs on all US imports. Universal tariffs of 10% were also announced for imports into the US, however, Trump later announced a 90-day pause on tariffs (except for China) which offers the opportunity for nations to negotiate better terms.

These constantly evolving headlines caused higher levels of volatility as the S&P 500 experienced the three largest intra-day price movements on record, all in the same week.

On Tuesday, the S&P 500 almost entered a bear market, which is defined as a decline in prices of more than 20% from their high. We also saw the third-highest daily return for both the S&P 500 and the technology-heavy index of the Nasdaq. In what was a remarkable week, the S&P 500 closed +4.8% higher and the Nasdaq +6.5% higher, both in GBP terms.

This included the largest daily return for the S&P 500 in history as the index climbed +9.5% last Wednesday. It is a reminder that even under the most stressed market conditions, the resilient investor can be rewarded and emphasises the importance of staying invested.

Last Friday evening, the Trump administration announced that there would be exemptions from tariffs for Chinese-imported phones, computers and other electronics. However, it later emerged that these exemptions would be temporary and could face a separate round of tariffs, contributing to the growing uncertainty.

Amid all the tariff discussions, the US Consumer Price Index (CPI) fell to its lowest level in four years, 2.4% in March from 2.8% in February; this figure came in below expectations. We also saw the big US banks open the quarterly earnings season, posting strong earnings but executives warned of tariff implications for economic growth. JP Morgan’s earnings exceeded estimates, but their CEO, Jamie Dimon warned of credit risks amid the current market volatility.

According to FactSet, the Q1 2025 earnings growth rate for the S&P 500 is expected to be 7.3% but this figure is subject to further revisions as companies issue guidance on their expected earnings for future quarters.

Tariff risks have reduced economic growth forecasts and increased the likelihood of the US entering a recession. This has resulted in further weakness in the US Dollar, which fell -1.5% last week against Sterling and has slid -4.3% on a year-to-date basis against Sterling. Treasuries also fell last week as yields on the 10-year US Treasury climbed to 4.5%.

Meanwhile, we saw broadly positive news for the UK as the economy grew 0.5% in February, driven by stronger services output. The UK economy grew 1.4% on a year-on-year basis, which exceeded expectations.

Whilst short-term volatility can be unsettling, our globally diversified approach to investing across asset classes, market caps, and investment styles continues to provide a strong foundation for navigating these turbulent times.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon. 

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products. 

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments. 

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 14th April 2025.

© 2025 YOU Asset Management. All rights reserved.

by Ellen Ward

The World In A Week - The market falls, but the strategy stands

Written by Ashwin Gurung

Last week, US President Donald Trump unveiled a series of tariffs targeting countries around the world which would collectively take tariff rates back to levels not seen since the 1930’s. He believes these measures will encourage American consumers to favour domestically produced goods, re-shore manufacturing jobs and raise revenue to fund his proposed tax cuts, thereby supporting local industries and growth. A baseline tariff of 10% will be applied to all imports into the US, excluding Canada and Mexico. Many other nations, however, will face significantly higher duties under a "reciprocal" tariff system, where the US claims to be matching the tariffs imposed by its trading partners on American products. In reality, these “reciprocal” rates were determined via simply calculating the trade deficit with each country and assuming the US is somehow being disadvantaged by that.

China responded by announcing retaliatory tariffs of 34% on US imports, while several other countries initiated plans for negotiations with the US. Although the full economic impact of these measures remains uncertain, they have undeniably heightened fears of global economic growth slowdown and higher inflation. This has further mounted pressure on the Federal Reserve (Fed) to lower US interest rates to support the economy caused by worsening trade tensions. However, on Friday, Fed Chair Jerome Powell acknowledged and reiterated that the effects of these tariffs remain uncertain and that the Fed will wait for more clarity before adjusting interest rates. Similarly, the Bank of Japan and the European Central Bank are also seeking clarity and are expected to delay any changes to their monetary policies.

Uncertainty quickly spread through financial markets, leading to a sharp fall in global equities. Last week alone, the MSCI All Country World Index fell -7.8% in GBP terms, with the US market being one of the hardest hit. For UK investors, the losses were made worse by a falling US dollar, something we don’t often see during market stress, as the dollar usually strengthens. The S&P 500 declined -9.0%, while the more technology-focused Nasdaq 100 dropped even further, falling -9.7%, both in GBP terms. Similarly, small and mid-cap companies, as measured by the Russell 2000 Index, which are more economically sensitive, fell -9.6% in GBP terms.

The impact was felt across the globe, with the FTSE All-Share Index and MSCI Europe ex-UK Index dropping by -7.0% and -6.9%, respectively, while MSCI Japan Index and MSCI China Index fell -7.3% and -3.0%, respectively, all in GBP terms. The unexpected 24% reciprocal tariff on Japan particularly affected the country's export-driven index. However, the Japanese yen, often seen as a safe-haven currency, strengthened, helping to limit losses for UK investors.

As painful as it was for global equity markets, it was a positive week for our diversifying asset classes, particularly, Absolute Return, high-quality global Fixed Income and certain Real Asset strategies, which undoubtedly reinforced the importance of maintaining diversification across asset classes during these turbulent times.

The Bloomberg Global Aggregate Index of global bonds returned +1.1% in GBP-hedged terms, while our exposure to US longer-dated bonds, which are more sensitive to interest rates, returned +4.5%, as expectations for interest rate cuts in 2025 increased. Similarly, infrastructure-related assets, such as utilities, which are less susceptible to business cycles, remained resilient. Adding to the diversification was our selection of absolute return managers, particularly the Fulcrum Thematic Equity Market Neutral Fund, which returned +3.3% over the week in GBP terms and continues to deliver positive returns independent of market direction.

While short-term volatility can be unsettling, our globally diversified approach across asset classes, market caps, and investment styles continues to provide a strong foundation for navigating these turbulent times. By maintaining this exposure, we are better positioned to limit downside risks and capture opportunities as they arise.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon. 

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products. 

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments. 

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 7th April 2025.

© 2025 YOU Asset Management. All rights reserved.

by Ellen Ward

The World In A Week - Tariff Man redraws global capital flows

Written by Cormac Nevin

Markets endured a broad-based sell-off last week, with the MSCI All Country World Index of global equities returning -1.7% in GBP terms. The sell-off was concentrated in the US market in general, and large-cap US technology names in particular. The UK market was a source of stability in equities, rallying +0.2%, while global investment grade bonds also returned a positive +0.1% in GBP hedged terms. What has been unique about the challenges faced by the US equity market this year has been that it has been accompanied by a concurrent weakening in the US Dollar, meaning losses are exacerbated for GBP investors. This is relatively unusual in recent years, as we often see the US Dollar rallying in times of stress.

One interesting aspect of markets this year has been that the second coming of a President initially viewed as good for US stocks (and capital markets more broadly) appears to be driving international investors away from these assets as he re-aligns global relationships at a far deeper and faster pace than his first presidency. Investment in US assets by default has, over recent decades, become almost hard-wired into everything from global capital markets to personal investment plans. Today this is overwhelmingly done via the unthinking and very basic algorithm that is “passive” investment. If we look at one of the most popular LifeStrategy ranges in the UK, running £43bn in assets, they unthinkingly default 52% of every Pound they receive for equity allocation to the US market (in their range for European investors it is as high as 64%). This is also done blindly at market cap weights, meaning exposures are now very concentrated in large-cap tech stocks -an interesting outcome for products that are marketed as diversified investment solutions!

Governments in the UK, Europe and across the globe are increasingly keen to see those mechanical investment flows stay within their borders and indeed employed to fund re-armament or other infrastructure projects at home. One of the most consequential (if unintended) tariffs Trump enacts might be one on the US stock market. While the US equity market has been a fantastic source of returns for investors in recent decades, we think that a broad-based investment allocation framework remains very well suited to realising investment goals in the current climate.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments. 

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 31^st March 2025.

© 2025 YOU Asset Management. All rights reserved.

by Ellen Ward

The World In A Week - No surprises

Written by Dominic Williams

Overall, markets enjoyed a positive week, with the MSCI World Index gaining +0.8% in GBP terms, boosted by value stocks, which outperformed their growth counterparts over the week. The main focus was on interest rate decisions from three major central banks, all of which delivered outcomes in line with market expectations.

The week began with the Bank of Japan, which voted to maintain interest rates at 0.5%, a 17-year high, meeting consensus forecasts. The central bank has been gradually raising rates over the past year in response to rising inflation, while also working to normalise monetary policy after decades of deflationary pressure. The decision to hold rates was largely driven by ongoing uncertainty around the US administration’s evolving trade policies, particularly concerning tariffs. As Japan is a heavily export-oriented economy, any tariff-related developments could have significant implications. Market reaction to the interest rate decision was muted. However, Japanese equities performed strongly, with the MSCI Japan Index rising +3.2%, supported by gains in value stocks, the MSCI Japan Value Index rose +4.2%, both in GBP terms.

Later that day, the US Federal Reserve (Fed) also opted to leave interest rates unchanged at 4.5%, again aligning with market expectations. However, attention quickly shifted to Fed Chair Jerome Powell’s comments and the updated economic projections. The Fed now expects US GDP growth in 2025 to be 1.7%, down from the previous forecast of 2.1%. Core inflation is projected to remain elevated at 2.8%, above the Fed’s 2% target. Much of this revision is attributed to the anticipated impact of new tariffs, which are expected to push inflation higher while dampening growth. However, as we’ve noted previously, the real-world effects of these tariffs remain highly uncertain.

Despite these cautious projections, US markets posted gains, with the S&P 500 rising +0.7% over the week. Notably, most of the gains were concentrated in value and smaller capitalisation stocks. The Russell 1000 Value Index increased by +1.2% while the Russell 2000 (small-cap index) rose by +0.8%, both in GBP terms.

On Thursday, the Bank of England also held its base rate steady at 4.5%, as widely expected. The Bank indicated it remains open to potential rate cuts later in the year, as it attempts to strike a delicate balance between curbing elevated inflation and supporting an economy showing signs of weakening. In line with the Fed, the Bank of England revised down its growth forecast for 2025 from 1.5% to 0.75%. Markets remained relatively neutral, with the FTSE All Share rising by a modest +0.1%. However, UK value stocks contributed most positively, with the MSCI UK Value Index rising +1.0%.

In continental Europe, Germany’s newly appointed Chancellor, Friedrich Merz, unveiled a significant €1 trillion investment package in defence and infrastructure. This ambitious programme will be funded by a relaxation of Germany’s traditionally strict fiscal rules, marking a notable policy shift. The initiative is expected to boost the country’s defence readiness, stimulate economic activity, and support job creation in Europe’s largest economy, which has suffered from sluggish or negative growth in recent years. However, the overall European market was little changed by this announcement, the MSCI Europe ex-UK Index rose +0.2% over the week in GBP terms.

China bucked the trend seen across most markets, with the MSCI China Index posting negative returns of -1.6% in GBP terms. This marks a reversal from the performance year to date, where China had been one of the stronger performers. Within Emerging Markets, India saw a turnaround in fortunes, with the MSCI India Index gaining +6.6%, in GBP terms following negative performance year to date.

These developments highlight the importance of maintaining a well-diversified portfolio across regions and investment styles. As different areas come in and out of favour, diversification remains key to capturing opportunities and mitigating risks in a changing macroeconomic environment.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon. 

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products. 

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments. 

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 24th March 2025.

© 2025 YOU Asset Management. All rights reserved.

by Ellen Ward

The World In A Week - Pricing in the tariffs

Written by Millan Chauhan

We saw a continued sell-off in global equities last week, which was driven by weaker performance from US Equities. The MSCI ACWI index declined -1.8% in GBP terms, largely caused by fears of a growth slowdown following President Trump’s erratic trade policies. After the closing bell last Thursday, the S&P 500 entered correction territory, which is defined as a 10% decline in the value of an index from its peak. This was the seventh fastest correction in history for the S&P 500 index. The sentiment towards the US has weakened and investors have grown increasingly concerned that Trump’s aggressive and somewhat unpredictable trade agenda will impact the US’ forward economic growth expectations and has amplified recessionary fears. Tariffs have been one of Trump’s major policy objectives and he has imposed a sweeping 25% tariff on all steel and aluminium imported into the US. This policy is aimed at supporting the US manufacturing sector but, by bumping up the price of imports, this could initially lead to a resurgence in inflation and could increase the prices of a broad range of consumer and industrial goods. In addition, Trump threatened to impose a 200% retaliatory tariff on alcohol imports from the EU.

Elsewhere in the US, we did see a key inflation measure, the Consumer Price Index (CPI) cool slightly to 2.8% on a year-over-year basis, which was slightly below expectations. On a year-to-date basis, the S&P 500 Index of US Equities has declined -6.8% in GBP terms whereas other equity asset classes such as UK Equities, Japanese Equities and European Equities have held up much better.

At the same time, we have seen strong performance from global listed infrastructure assets and commodities. The S&P Global Infrastructure Index rose by +1.6% last week and is an exposure with embedded inflation linkage via exposure to regulated utilities. Last week, the Bloomberg Commodity Index also returned +0.2% and is a gentle reminder why we believe diversification across regional equities, asset classes and investment styles is critical to your clients’ portfolios.

European equities, as measured by the MSCI Europe ex-UK Index, fell -1.3% in GBP terms over the week but remains up double digits year-to-date.  European banks have performed well and, more recently, we have also seen European defence companies such as Rheinmetall, Leonardo and Thales rise sharply following the EU’s commitment last week to boost its defence spending by €800 billion. This commitment is in response to supporting Ukraine but also is aimed at boosting Europe’s military capabilities, should the US not support Europe. However, overall, we have yet to see European profit forecasts accelerate, in fact they have come down a bit this year. As a result, the recent market appreciation in Europe has only served to make the market more expensive, already trading above its historical average levels.

Last week, the MSCI China index fell marginally by -0.1%, but we saw Chinese markets react positively to Beijing’s promise of new measures aimed at supporting consumption. Consumption within China has been very weak for some time, with consumer prices dropping in February by -0.7% on a year-over-year basis. This also marked the 25th month of Chinese CPI inflation being below 1% and was the largest fall in consumer prices for 13 months. However, the emergence of DeepSeek has led to an uptick in Chinese technology earnings expectations, and the region has been one of the better-performing regional equity asset classes this year, returning +16.5% in GBP terms.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon. 

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products. 

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments. 

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 17th March 2025.

© 2025 YOU Asset Management. All rights reserved.

by Ellen Ward

The World In A Week - Tariffs, reversals, and turnarounds

Written by Shane Balkham

Last week, the US imposed additional tariffs that could increase the effective average tariff rate on all imports into the country. Before the Trump administration returned to power, the average tariff rate was around 2.7%, now after the proposed increases it could be between 6.9% to 8.4%. However, within 48 hours Trump had reversed course and indicated that goods that are exempt from tariffs under the United States Mexico Canada Agreement (USMCA) would be given another 30-day reprieve. This is the same agreement that Trump himself orchestrated in his first term as President.

Implementing tariffs, then raising tariffs, before walking back on those threats, creates uncertainty. As the pandemic showed, supply chain disruptions can create significant growth problems. This has been weighting negatively on the US stock market. Last week the S&P 500 fell -4.1% in GBP terms and year-to-date the index is down -5.0%.

While China is imposing retaliatory tariffs of its own, China has set a 5% GDP growth target for 2025 and raised the fiscal deficit goal to 4% of GDP. The annual inflation target has been lowered to 2%, the lowest since 2003, as the country grapples with deflationary pressures. Equity markets reacted positively to these announcements, helping China deliver the strongest gains last week. However, the latest annual inflation rate of -0.7%, which fell short of market expectations, underscores the persistent deflationary pressures and casts doubts on China’s ability to achieve its targeted growth.

Leading the way is Europe, with Germany’s new government announcing plans to increase investment. After years of budget cuts, Germany is now adopting an attitude of whatever-it-takes and breaking chains of historical austerity in favour of a significant overhaul of infrastructure and defence spending. The fiscal pivot by Germany could represent a watershed moment for Europe. At the heart of this transformation is the historic reform of Germany’s budgetary rules to allow defence spending above 1% of GDP to be excluded from the country’s rigid debt-brake mechanism¹. It is a clear response to growing geopolitical instability and a commitment to military preparedness.

Alongside the defence spend, there is a €500 billion fund for infrastructure spending. The fund will channel investment into transport, energy networks, and housing over the next decade, hopefully laying the foundations for a new cycle of economic expansion. After years of sluggish growth, Germany is now looking to set itself on the path to recovery. The MSCI Europe ex-UK index rose +2.1% in GBP terms last week and is up +13.0% for the year to date.

The military commitments will be welcome news to Ukraine, who suffered without the aid of the US, as the conflict intensified with Russia seizing back territory in the Kursk region. Ukraine had hoped to use the control of the Kursk region as leverage in negotiations with Russia. President Zelenskyy will be in Saudi Arabia this week in crucial talks that are aimed at persuading the US to resume military support.

This year has clearly demonstrated the importance of global diversification. While we still see multiple attractive pockets of opportunity, the geopolitical and economic landscape is uncertain and ensuring that you have an appropriately diversified portfolio, across geographies and asset classes, is as important as always.

¹In Germany the federal government and the 16 states are obliged to balance its books and are prohibited from taking out extra loans. No other G7 country has such strict limits on new borrowing. The rules were introduced in 2009 as a reaction to the Global Financial Crisis, to act as a brake to financial capacity and hopefully avoid a repeat of the Global Financial Crisis.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon. 

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products. 

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments. 

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 10th March 2025.

© 2025 YOU Asset Management. All rights reserved.

by Ellen Ward