Market Overview

Market Overview

Overview

‘Ten Days That Shook the World’ is the famous title of John Reed's eyewitness account of the 1917 Russian Revolution, but not to be outdone, Donald Trump shook the world in 7 days with his ‘Liberation Day’ trade tariffs announcement on Wednesday 2 April 2025.This immediately sent financial markets sharply lower.For example, the S&P 500 index quickly fell just over 15% – and was at one point down over 21% from its February high.

But what headlines taketh, headlines giveth, and on Wednesday 9 June 2025 Donald Trump announced a 90-day tariff pause.This climbdown unsurprisingly reignited financial markets.

As such, it’s hard to find superlatives that do financial markets justice over the valuation period (the three months covering 5 April 2025 to 5 July 2025) given the extreme negativity caused by Donald Trump’s chaotic rollout of trade tariffs in the dying days of the last valuation period, or the subsequent sharp rally in markets.

In fact, three months ago it would have been easy to brace for the worse, but we stated that it was our belief the headline-driven panic of early April was a classic over-the-top reaction to a new uncertainty, and that when sentiment was that negative, financial markets wouldn’t need unequivocal good news to have a strong positive response, simply less negativity would be enough – and boy did we get that positive response!

To be honest, just how quickly or powerfully financial markets would rally from those April lows wasn’t on our bingo card, but while this caught many money managers off guard, in line with our core principle (the best way to maximise returns is not by trying to time the market, but by maximising the time you are invested in it), we remained invested and as such portfolio values have broadly recovered.

In fact, the rally has been relentless:even the recent conflict between Israel and Iran, the Indian/Pakistan confrontation, the continuing war in Ukraine, a downgrade of the U.S. credit rating, an unpresidential social media tiff between Donald Trump and his former sidekick, Elon Musk, the testing of the Fed’s independence (the U.S. central bank), or this week’s emotional appearance by Rachel Reeves during the Prime Minister’s Questions, left financial markets largely unscathed.

This is because the rally has been fuelled by progress in trade talks and U.S. tax cuts, resilient economic data and company earnings reports, along with expectations of lower interest rates – and today the S&P 500 index is only 2% lower than it was at the start of the year in sterling terms, while the FTSE-100 index is up nearly 8% over the same timeframe (as the FTSE-100 has climbed 9.5% during the valuation period).

Looking ahead at this coming valuation period (the three months covering 5 July 2025 to 5 October 2025), at the time of writing, Saturday 5 July 2025, it is all about waiting for tomorrow (actually Wednesday 9 July 2025), when the tariff pauses may come to an end (if not before, as Donald Trump said yesterday that letters detailing tariff levels will be sent over the next few days to those countries that have yet to agree new trade terms).

As such, it currently feels similar to when one returns home from a trip to IKEA with a piece of flat-pack furniture, and that feeling of dread and despair knowing that it now needs to be assembled.

However, first and foremost, it is important not to lose your composure and avoid any knee-jerk reactions – remember the best way to maximise returns is not by trying to time the market, but by maximising the time you are invested in it.

And while assembly instructions can be complex (economic data, company valuations, market sentiment, tariff and geopolitical uncertainty, inflation and interest rates, etc) and it’s not altogether clear which are the most important pieces or how they should go together – not to mention that some of the pieces will be superfluous and it isn’t altogether clear why – it is important to take an unemotional and detached perspective when looking at the pieces sprawled across the floor.

Moreover, markets are currently in fine fettle reflecting faith in Donald Trump’s priorities of deregulation and fiscal stimulus, and appear to be growing more comfortable with the current uncertainties (not because they have disappeared but because they now appear manageable).

However, given the time it takes to produce this valuation statement, the tariff pauses may have come to an end.Consequently, please make sure you are subscribed to receive our regular Market Summary emails and videos, which will keep you up to date with our thoughts and views.If you don’t already receive these, please sign up at https://mywealthprivate.co.uk/get-in-touch

Income Element

Fixed Interest securities have struggled over the valuation period, thanks to Donald Trump’s tariffs and concerns over the UK government’s fiscal position, not to mention this week’s gilt market volatility after Rachel Reeves was seen crying in parliament.

However, we believe that financial markets are underestimating how aggressive the Bank of England will be when reducing interest rates given recent economic data readings.As such, our strategy of holding a diversified spread of financially secure companies with investment-grade credit ratings and stable income until they mature means that this price volatility, while understandably unsettling, should be less concerning, as maturity dates and values are known.

Long-Term Growth Element

Although tariffs remain front and centre for equity markets, given the breathtaking recovery in equity markets it is easy to forget that there was any tariff turmoil at all in global equity markets just three months ago.

Unfortunately, the capriciousness of the world’s most important person, coupled with the current fluid geopolitical environment, means equity markets are likely to stay on edge, with volatility the new normal.

In the UK, notable adjustments within portfolios during the valuation period included adding to 3i (a private equity and venture capital company).3i’s core private equity holding, Action (a non-food discount retailer operating across continental Europe), is benefiting from the continuing inflationary pressures influencing consumer behaviour, by growing its market-share as shoppers increasingly seek value.

Within the Asian & Emerging Market regions, we took advantage of the disproportionate sell-off in Chinese and Indian equities at the start of April by adding to funds with exposure to these countries.These purchases were predominately funded by the temporary trimming of the Liontrust Latin America Fund.Some of these funds were trimmed later in the valuation period to fund the purchase of a new holding, Ninety One Asia Pacific, to provide greater exposure to large and mid-cap companies within the Asian region.

Elsewhere we also took advantage of the sell-off in U.S. equities by initially adding to the region.Then after Donald Trump’s 90-day tariff climbdown and markets started to rally, we trimmed holdings back again.While this realised some gains, as we said in the ‘overview’ while we expected equity markets to bounce, we didn’t appreciate how relentless the rally would be and with hindsight we trimmed these holdings too early.

For clients with Ethical portfolios, thankfully returns from socially responsible investing showed a marked change from prior valuation periods, despite headwinds such as NATO’s commitment to increase defence expenditure (which benefitted shares in defence companies) and a growing sceptical attitude towards renewables (for example, the blackout in Spain and Portugal in April wasn’t helped by the fluctuation of renewable generation on their outdated grid system).

All the very best,

The Investment Management Team

my wealth

5 July 2025