Written by Cormac Nevin
The S&P 500 Index of large U.S. companies declined by -4.3% last week, breaking a six-day winning streak. This was comprised of a -2.6% fall in the value of the index in U.S. Dollar terms, and a further decrease in the value of the U.S. dollar against the pound sterling. This U.S. underperformance also dragged down global indices, which are now heavily overweight U.S. assets following a decade of outperformance, with the MSCI All Country World Index of global equities falling -3.0% in GBP terms. Other markets were much more stable over the course of the week however, with the MSCI Japan Index up +0.4%, the FTSE All Share Index of UK stocks up +0.2% and the Continental European market only down -0.8% (all in GBP terms).
The latter market was the subject of some volatility towards the end of the week as President Trump announced a significant escalation in trade measures by proposing a 50% tariff on all imports from the European Union, citing dissatisfaction with the pace of ongoing trade negotiations and labelling the existing trade deficit with the EU as “unacceptable”. In addition to the EU tariffs, President Trump targeted the technology sector by threatening a 25% tariff on smartphones not manufactured in the United States, explicitly naming Apple and Samsung. This action aimed to pressure these companies to relocate their manufacturing operations to the U.S.. The immediate market reaction was negative, with Apple shares declining over 6% during the week, contributing to broader market losses given that company’s large weight in the S&P 500 Index (Approx. 6.7%).
Fixed Income markets in the U.S. were also challenged by a lacklustre 20-year bond auction and concerns over the size of the government’s fiscal deficit. This was set against the backdrop of the credit rating agency, Moody’s, downgrading the U.S. credit rating from Aaa to Aa1 citing profligate government spending.
We continue to believe that an appropriately diversified portfolio of global assets, complemented by diversifying alternative investment styles is the best approach to the current market environment, particularly if we are witnessing the end of American exceptionalism in investment performance.
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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 19th May 2025.
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