Market Outlook
Last Updated: 9 May 25 5 min read
Markets reversed some of their strong gains from last week but were up towards the end on the prospect of trade deals. Economic data out of China in April was weaker than expected – construction, manufacturing and employment – all lower than projected which suggests its economic position appears to be weakening as a result of less US demand for its goods. This week the Peoples Bank of China announced a package of support measures to try and counter what looks like slowing growth. In contrast, the US labour market remains ‘solid’ according to the Federal Reserve.
The Federal Open Market Committee met this week and kept US interest rates on hold for a third meeting running. The Fed is acknowledging the risks to economic growth from the shock trade policy but in the absence of a weakening labour market has so far avoided cutting rates because of the likely inflationary impact of tariffs. The Bank of England cut interest rates, also as expected, to 4.25% and continues the pattern of quarterly rate cuts we’ve had since August.
The US and UK struck the first Trump-era trade deal. The deal sticks to the 10% initial tariff with carve outs for autos (now 10% tariff rate) and steel (0%). In return the UK will buy more US farm goods and $10bn of Boeing planes. At an effective tariff rate of just below 10% the deal still puts the UK in a worse position than it was before Trump’s April tariffs. More important for markets are the reported trade talks happening this weekend between the US and China in Geneva. A deal that cuts the current tariff rate would be a big positive.
The economic environment has been resilient so far. The brief 90 day pause in targeted tariff implementation may give world leaders & policy makers temporary respite, despite broad 10% tariffs already being in effect. We expect markets to remain volatile as countries now pivot their efforts to negotiate with the US. The multi-asset portfolios are globally diversified investing across equities, fixed income and other asset classes, including Real Estate and Alternatives. Within equities regional differentiation may continue to be an important theme and aid in risk management during uncertainty.
Equities |
1 Week |
YTD |
1 Year |
|---|---|---|---|
S&P 500 |
-0.39% |
-3.29% |
10.08% |
FTSE 100 |
-0.27% |
6.41% |
5.99% |
Euro Stoxx 50 |
0.90% |
9.89% |
7.57% |
MSCI Asia Pacific ex Japan |
-0.16% |
4.85% |
10.46% |
MSCI China |
0.43% |
12.96% |
23.35% |
Source: Bloomberg as at 9:43am on 9.5.25
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