Written by Chris Ayton
Last week was a mixed one for equity markets with the MSCI All Country World Index down -1.0% in GBP terms. However, with the US being the dominant component of global equity indices, this result was heavily influenced by the -2.8% return of the S&P 500 index. The US equity market lagged once more as investors continued to flee the stock market and the US Dollar as nervousness around President Trump’s unpredictable economic policies led them to look elsewhere. Trump’s continued criticism of Federal Reserve Chairman, Jay Powell, suggesting he should be removed from his post for not cutting interest rates quickly enough, has also created concerns over the ongoing independence of the US central bank.
Conversely, the UK equity market was one of the strongest, returning +4.0% over the week as domestic corporate profit results were generally robust and the market’s lower allocation to the out-of-favour tech sector and greater prevalence of cheaper stocks held the market in good stead. Continental European indices were also robust with the MSCI Europe ex-UK Index up +2.4% over the week in GBP terms. As expected, the European Central Bank lowered interest rates by 0.25% for the third time this year, citing subdued inflation but warning of continued risks to European growth emanating from tariff-related tensions.
Japanese equities were also in the green, with the MSCI Japan index up +3.4% over the week in GBP terms. In recent weeks the market has been worried about the tariff related risks for large Japanese exporters, but some comfort was taken when, after a face-to-face meeting with President Trump and Treasury Secretary Scott Bessent, the Japanese Minister of Economy, Trade & Industry suggested to reporters that the US President had said getting a deal with Japan was a “top priority”.
Away from equities, other diversifying assets generally held up well and supported appropriately constructed, multi-asset portfolios. Bond markets enjoyed a positive week with the Bloomberg Global Aggregate Index up +0.7% in GBP hedged terms. High Yield bonds performed particularly well. Commodities were also collectively positive with gold’s perceived safe-haven status helping the gold price to hit repeated all-time highs.
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