Written by Chris Ayton
The rebound from April’s “Liberation Day” equity market sell-off continued last week with the MSCI All Country World Index up +2.9% in GBP terms. The S&P 500 Index in the US closed the week up +2.8%, with Friday’s close the first time the index had enjoyed nine consecutive positive trading days since 2004. The US market was boosted by some resilient employment data; in reality, much of the data only confirmed things were broadly fine before the escalation of tariff-related uncertainty. Similarly, earnings results, which are also backwards-looking, have generally held up well. However, Apple’s shares declined after the CEO, Tim Cook, announced that tariffs would likely add around $900m to Apple’s costs over the June quarter alone.
One major announcement last week was news that the legendary investor Warren Buffett will be stepping down as CEO of Berkshire Hathaway. Buffett has been at the helm since 1965, when it was a pretty modest and underperforming textile company. He leaves after 60 years with the company, now a $1.2 trillion conglomerate and, as of Friday, with the shares at a record high. Incredibly, the shares have risen approximately 20% per annum over those 60 years, double the return of the S&P 500 Index. For anyone seeking to teach their kids about the power of compounding and staying invested, Berkshire Hathaway’s 2024 year-end annual report highlights that this represents a cumulative return of 5,502,284% versus 39,054% for the S&P 500 Index over that period. This is despite including share price declines of over 30% in 2008 and approximately 50% in 1974.
Most other equity markets also performed positively last week. The MSCI Europe ex-UK Index was up +3.4%, the MSCI Japan Index was up +2.5%, and the MSCI Emerging Markets Index was up +3.3%, all in GBP terms. The FTSE All-Share Index was up +2.3%, with mid and smaller companies generally the better performers. Markets are predicting that the Bank of England will almost certainly cut interest rates this week. Inflationary risks in the UK seem to be receding with wage growth expected to slow, energy prices falling and concerns over declining global activity caused by ongoing tariff uncertainty providing the Central Bank with greater ability to cut.
Away from equities, global bonds were broadly flat over the week, although global high yield bonds delivered small gains. Broad commodity indices dropped back over the week as oil prices continued to decline over a combination of global growth concerns and fears of a global supply glut following a decision by OPEC+ oil producing nations to increase supply.
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