MARKETS

In February, global equity markets continued to diverge, with UK and European markets climbing (FTSE100 +1.6% and Eurostoxx 50 +3.8%) and Japanese markets falling (Topix  -3.8%). The US indices remained volatile and continued their retracements with the S&P 500 and NASDAQ producing negative returns of 1.3% and 3.9% respectively (in US$ terms).

This divergence was caused primarily by two factors: on the positive side, the potential for there to be a ceasefire in Ukraine; and on the negative side, Trump’s tariff policies, particularly towards their closest and largest trading partners: Canada, Mexico and China.

THE MACRO PICTURE

The global economy is forecast to grow at 2.8% in 2025. (www.un.org)

In the US, core inflation (CPI) fell from 3% in January to 2.8% in February.

In the UK and Europe, inflation remained stickier. However, despite this, the Bank of England voted seven to two to reduce the base rate to 4.5% in the hope this will begin to stimulate growth in an increasingly anaemic economy.

Brent Crude oil declined 2.5% due to relatively weak global demand and increases in oil inventories.

COMMENTARY

It has not been easy to distil the events of the last month. The dearth of dignity and diplomacy in the Trump administration’s discussions with other global leaders has certainly been quite shocking for most. It is not necessary to go into the specifics, however – as we signposted to our readers – there is clearly an agenda to do whatever it takes, irrespective of the potential reputational damage or geopolitical repercussions, to restore the economic prowess and hegemony of the US. Whether this is achieved by strengthening the US economy more than other economies can strengthen theirs (the favourable option), or by being the least damaged out of a world of economies which are hit by tariffs and the need to divert precious social spending to increased defence spending, seems not to matter.

Keeping abreast of the Trump administration’s tariff count is a challenge in itself. The tit for tat retaliatory nature of tariffs between the US and its trading partners has, in some circles, been labelled ‘insane’, by a bystander in Peace Arch Park, on the US and Canada border where there is a gate with the insignia, ‘May these gates never be closed again’. Just this Tuesday, 11^th March, was perhaps the most staggering example to date which saw Trump threating to increase tariffs to 50% on Canadian steel in response to the Canadian administration threatening a 25% surcharge on electricity going from Ontario to New York, Minnesota and Michigan. Eventually both sides desisted, but this exemplifies the scattergun and rather exhausting nature of these negotiations – if one can call them such.

Canada is not alone having to deal with this onslaught from the Trump administration; the EU, Mexico and China have also been on the receiving end of tariffs. So far, although the steel tariffs will have an effect, the UK has managed to remain outside of the scope of direct US tariffs.

Such sharp trade measures and hostile rhetoric are beginning to take their toll and are now preying on market sentiment. Since the end of February, there has been contagion from US equities into the UK and rest of the world’s markets which have turned negative so far in March. It is likely that volatility will remain elevated throughout the tariff implementation period which has seen Goldman Sachs reduce its growth projections for the US economy from 2.4% to 1.7% in 2025.

One of the better pieces of recent news has been the potential for there to be a ceasefire which Ukraine has agreed to. At the time of writing, the Russian Federation is yet to make a statement.

EXECUTIVE ORDER COUNT

The Executive Order count was 56 when we wrote to you last month. While, at the time, this seemed excessive (as we stated, more than the sum of Reagan, Bush, Clinton and ‘Dubya’s entire presidencies), more were expected. Trump has signed another 31 since, totalling 87, setting a record that no other president is likely to surpass.

ELON MUSK’S WEALTH

Elon Musk – fan or not – has decimated his own wealth with his antics. Shares in Tesla, which rose by two thirds between 1^st November and the end of 2024 have since fallen by 40% in 2025. Musk owns 12.8% of the Tesla stock which had a market capitalisation of $1.2 trillion at its share price high making Musk’s shares worth $154 billion. These shares are now worth $92 billion meaning that in Tesla shares alone, Musk’s net worth has fallen by an enormous $62 billion in 2025.

It will be interesting to see how much of a financial masochist Mr Musk is and what proportion of his wealth he will have to destroy before he begins to relent. In spite of his (paper) losses, it is probably correct to assume he will remain amongst the wealthiest multi-billionaires on the planet. However, it is an elite cohort full of egos and prima donnas which, even he, is not immune to and will want to remain a key member of. Donald Trump buying the latest Model S outside the front of the White House while the share prices crashes is not likely to appease investors.

Ongoing geopolitical tensions, including conflicts in Eastern Europe and the Middle East, have contributed to economic instability. Additionally, concerns over potential inflation due to expansive fiscal policies have made gold an attractive hedge for investors. Collectively, these factors have propelled gold prices to unprecedented levels, underscoring its enduring appeal as a store of value during times of economic and political uncertainty.

INVESTMENTS

You would expect that a significant proportion of your investments are invested in equities, either directly or indirectly through investment funds. For much of the last 15 years, such investments have benefitted your portfolios as the world recovered from the financial crisis.

However, we would like to reassure you that we have exposure to bonds, most of which are government bonds (very secure) and alternative investments: property, infrastructure, gold and absolute returns funds. The first two, property and infrastructure, have some bond-like characteristics and are usually less vulnerable to sharp changes in sentiment. As a consequence, their values are less susceptible to equity market vacillations as well as paying attractive income yields, often in excess of government bonds.

Gold needs no introduction and little explanation. It has been a store of value throughout historical periods of uncertainty and inflation. We touched on it last week, but should you wish to read more, I wrote an article in 2023 which still feels pertinent today.

To explain absolute returns funds; they have flexibility in their investment methodology which enables them to produce positive returns for their investors irrespective of the prevailing market conditions. They can do this by using different asset classes like currencies or by ‘shorting’ companies whose prospects they feel are less attractive. Whilst this may sound hedge fund-esque, we ensure any fund we invest in has extremely rigorous risk controls in place as you, our clients, are always the most important factor in any decision making.