President Trump’s ‘America First’ strategy is shaking up world markets, however the UK inventory market isn’t flinching. Certain, there have been a number of wobbles up to now ten days however the FTSE 100 and FTSE All-Share have stayed resilient. So, what’s driving the current efficiency, and may it sustain? Let’s dig in.
The UK market is defying sceptics:
The FTSE 100 is up 6.6% YTD, beating the S&P 500 (-3.9%) and defying years of underperformance.
The Euro Stoxx 50 (+10.7%) is even stronger, as world buyers rotate into worth shares and away from overpriced US mega-cap tech.
In the meantime, the FTSE 250 (UK-focused shares) isn’t enjoying alongside, caught in mid-cap limbo because the UK financial system struggles. However for those who’re a long-term investor, a few of its unloved shares may be hidden gems ready to shine.
FTSE 100 loves its “previous financial system” shares:
Banks, oil, and mining shares are holding agency – because of excessive charges, expensive crude, and value-hunting buyers.
Lloyds and Commonplace Chartered popped as buyers piled into financials, whereas BP and Shell stayed robust, shrugging off vitality worth swings.
Not-so-hot sectors, now:
Shopper shares are struggling. Price-of-living pressures imply UK customers aren’t splurging on luxurious sneakers.
Actual property took a success. Greater-for-longer charges = robust occasions for property shares. Savills a notable case and lately dropped after failing to current a transparent turnaround plan.
Shares within the highlight:
NatWest fell because the UK authorities offered extra shares. Traders don’t love “pressured” promoting, however this can be a step towards full privatization.
Assura (healthcare property enterprise) jumped on takeover buzz. Personal fairness loves low cost UK property – anticipate extra M&A strikes.
Gold miners shined as gold hit an all-time excessive. Tariff fears + safe-haven demand = buyers speeding into treasured metals.
The macro setup is essential – watch the BoE.
The Financial institution of England meets on March 20. Will they maintain charges at 4.5% or trace at cuts? Inflation ticked as much as 3%, which might delay charge cuts.
If the BoE eases later in 2025, rate-sensitive shares (actual property, client) might rebound.
Bottomline: Worth Play or Worth Lure?
Low cost, however for the way lengthy?
The FTSE 100 trades at ~12x ahead earnings – under its long-term common (14x) and cheaper than each the S&P 500 (21x) and Europe (15x). Whereas it might not be a deep discount, its relative low cost suggests room for a re-rating as world buyers take discover.
Personal fairness and international buyers are already snapping up undervalued UK property.
Dividends nonetheless rule.
The FTSE 100’s 3.8% dividend yield dwarfs the S&P 500’s 1.4% – providing regular earnings even when progress takes time.
Persistence pays.
Warren Buffett’s warning: Markets wrestle after they neglect the basics—earnings have traditionally grown ~7% per 12 months, on common. When markets overshoot this tempo, they’re primarily borrowing returns from the long run. The US has front-loaded years of positive aspects, whereas the UK has quietly caught to its long-term tempo. Which will make UK a greater risk-reward guess for long-term buyers.
Tariffs as a Boomerang? Trump’s Commerce Warfare Weighs on U.S. Company Income
Issues are rising, however panic stays absent: Extra S&P 500 firms are mentioning “tariffs” of their earnings calls than at any time within the final 10 years. This highlights how a lot commerce uncertainties threaten company income and market stability. On the identical time, the variety of firms mentioning “recession” has dropped to its lowest stage in over 5 years, signaling that fears of an financial downturn stay low.
Tariff uncertainty clouds the outlook: S&P 500 firms are anticipated to report 7.3% YoY earnings progress in Q1 2025 (see chart), a pointy revision down from 11.6% projected on the finish of 2024. Income progress is estimated at 4.3% YoY. Trump and uncertainty over new tariffs are weighing on expectations, however the market has already partially priced in these dangers. Tariffs alone received’t crash the financial system, however they might speed up the slowdown within the U.S.
4 sectors hit hardest: The 4 sectors with the very best mentions of “tariffs” in This fall earnings calls—Supplies, Industrials, Shopper Discretionary, and Shopper Staples—are additionally those which have seen the biggest cuts in earnings expectations for Q1 2025. This means that tariffs usually are not only a speaking level however are immediately impacting company earnings.
Earnings progress doesn’t all the time imply inventory positive aspects: Eight of the eleven S&P 500 sectors are anticipated to report earnings progress in Q1 2025, led by Well being Care and Data Know-how. Nevertheless, increased income don’t routinely translate to rising inventory costs—valuations and market developments play a vital function. Whereas Well being Care has gained 4.5% YTD, Data Know-how is down 10.0%, reflecting a market shift towards defensive and cyclical sectors. Well being Care, Power, Utilities and Actual Property have been the strongest performers this 12 months.
Bottomline: Whether or not the four-week dropping streak is an overreaction or if the correction continues will develop into clear within the coming days. Traditionally, corrections happen virtually yearly, usually creating new alternatives. Nevertheless, buyers stay at nighttime concerning Trump’s commerce insurance policies and are searching for readability. Let’s see whether or not the Fed can calm the markets considerably on Wednesday – or set off new turbulence.
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