Introduction
Geopolitics continues to dominate the financial news as markets continue to react to Trump’s unpredictable tariff war. In 2024 the US was not just the world biggest economy, it was firing on all cylinders, as Trump returned for a second term. At the end of the first quarter of 2025 the question on many investors’ minds is whether the President is willing and able to blow that all up just to prove a point (The Guardian).
Trump will unveil his reciprocal tariffs on ‘Liberation Day’, 2nd April, and global markets are braced for the reaction (The Times).
UK
The Chancellor delivered her Spring Statement on 26th March, with no changes to taxation as promised. However, low growth and higher borrowing costs have left the Chancellor even more constrained by her own fiscal rules than in October. Without a significant change to economic growth, it is hard not to wonder ‘when’ rather than ‘if’ Reeves will start to course correct, all of which fuels more speculation about what will be announced in the Autumn Statement and greater uncertainty which further hinders investment and growth (The Times).
A report from the Office for Budget Responsibility (OBR) was delivered alongside the Spring Statement, which added some useful colour to the Chancellor’s statement (ONS).
- The OBR has halved the 2025 growth estimate from 2% to 1%.
- However, the OBR has also upgraded the UK’s economic growth forecast from 2026 onwards. GDP growth is forecast at 1.9% in 2026, 1.8% in 2027, 1.7% in 2028, and 1.8% in 2029.
- US trade tariffs are a key geopolitical risk to UK growth with the potential to wipe out any surplus projected in the 2025 budget (Reuters).
- The OBR believes debt as a percentage of gross domestic product (GDP) will fall in five years’ time, meeting one of the Chancellor’s key rules.
- The Chancellor believes the 2% inflation target will be met by 2027. The OBR now thinks inflation in 2025 will average 3.2% before “falling rapidly” to 2.1% in 2026 and reaching the Bank of England’s 2% target from 2027 onwards.
Business confidence appears low. Tariffs and increasing costs for employers through the National Insurance hike and rising minimum wages meant 44% of manufacturers expressed optimism about increasing output in the coming year, down from 56% previously. This was matched by a decline in the S&P Global UK Purchasing Managers’ Index (PMI) for manufacturing, which fell to 44.9 in March from 46.9 in February (FT).
Europe
Despite a more positive first quarter to the year than many expected, the Organisation for Economic Co-operation and Development (OECD) revised its Eurozone GDP growth forecast for 2025 downward to 1.0%, from the previous 1.3% (Reuters).
Inflation within the Eurozone showed signs of easing, with the annual inflation rate declining to 2.2% in March, down from 2.3% in February (ECB).
The European Central Bank (ECB) reduced its key interest rate from 2.75% to 2.5% in March. This marked the sixth rate cut in seven meetings, aiming to stimulate growth amid persistent uncertainties.
United States
US stocks have taken a thumping in the first quarter of the year, and President Trump is attracting more attention than even he might be comfortable with (Investopedia).
- The Dow Jones was down -1.28%, its worst quarter since Q2 2024.
- The S&P 500 was down -4.59%, its worst quarter since Q3 2022.
- The Nasdaq was down -10.42%, its worst quarter since Q2 2022.
The Magnificent Seven stocks all fell in the quarter:
- Tesla was down -35.8%.
- Nvidia was down -19.3%.
- Alphabet was down -18.3%.
- Amazon was down -13.3%.
- Apple was down -11.3%.
- Microsoft was down -9.7%.
- Meta was down -1.6%.
Tesla’s dramatic collapse in value could also be connected to its political activities, but there is no question that these big tech stocks all took a battering (Barrons).
Far East
The Shanghai Composite Index declined by 0.48% since the beginning of 2025, indicating modest investor caution (Trading Economics).
There are concerns about China’s banking sector. The Chinese government injected 520 billion yuan (approximately $72 billion) into major state-owned banks (Reuters).
In Japan, despite corporate earnings being robust, the Nikkei 225 experienced a 4% decline in March (Reuters).
Emerging Markets
Indonesia’s economy has been plunged into uncertainty amidst concerns over policy changes under new President Prabowo Subianto (WSJ).
A rally in India’s Nifty 50 stock index in the first quarter of 2025 helped the index pull back several months of losses (Reuters).
Conclusion
US trade tariffs continue to cast their shadow across global markets. They are influencing economic decisions in every major country (Lazard).
Diversification is critical, as second-guessing global markets in these conditions is almost impossible. Fortunately, it’s a key tenet of our investment philosophy.
If you have any questions or wish to explore your options, reach out to us. Our team of experts is ready to assist you. please don’t hesitate to contact us on 0333 241 3350 or email info@richmondhousewm.co.uk
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