Relief

Wall Street witticisms include the adage that ‘only baboons pick bottoms’, a reference to the idea that trying to predict the length and magnitude of any market correction is a futile exercise and will only be known with hindsight. The task has been made more challenging of late by the constant noise emanating from the Oval Office.

On that note, global stock markets bounced higher this week, with sentiment boosted by the Donald’s comments that there may now be some ‘flexibility’ over the country’s tariff implementation. This has been interpreted as a watered-down version of the broad scope of reciprocal tariffs set to be unleashed on America’s trading partners on April 2, a date now labelled ‘Liberation Day’ by the Make America Great Again (MAGA) team.

Better than expected US manufacturing and services sector data provided further encouragement. The S&P Global flash US composite purchasing manufacturers index rose to a three-month high of 53.5, with a reading above 50 suggesting most businesses are reporting growth in activity.

Headline index moves mask the grim reality for many stocks. Besides Berkshire Hathaway, the investment vehicle controlled by the Legend of Omaha Warren Buffett, every one of the largest 10 companies in the S&P 500 index is down more than 10% from its 52-week price high, with six of the largest 10 stocks down by more than 20% from their 52-week price high.

The most closely followed macro event of the week was the US Federal Open Market Committee (FOMC) meeting. Chaired by Chairman Jerome Powell, the committee reviews economic and financial policy conditions, determines the appropriate stance of monetary policy, and assesses the risks to its key objectives: 1) price stability, and 2) full employment.

For markets, the key outcome was the (widely anticipated) decision to maintain the target federal funds rate in the 4.25% to 4.50% range. The accompanying statement noted that ‘uncertainty around the economic outlook has increased’, which Powell later qualified as relating to tariff policies. The Fed’s projections reflected this new reality via downward revisions to forecasted growth, and upward revisions to inflation and unemployment.

Closer to home, UK Chancellor Reeves channelled her inner Elon Musk in announcing a 15% cut to government running costs by the end of the decade. The number represents savings amounting to more than £2 billion per annum, with 10,000 jobs expected to be impacted across human resources, policy advice, communications, and office management. As the saying goes, the rubber is now meeting the road in terms of the oft talked about efficiency benefits of technology and AI.

In corporate news, Google announced the acquisition of cybersecurity startup Wiz for the princely sum of $32 billion, shaking up what had been an extremely quiet period for IPO’s and merger and acquisition activity. Separately, Nvidia, the poster child of this AI chip super cycle, announced plans to spend ‘hundreds of billions’ on US chipmaking in the next four years, whilst also acknowledging the growing threat of China as a major competitor in the space, this despite existing US sanctions.

Gold remained steady, holding above the psychologically important three thousand dollars per ounce level. The barbarous relic, as it is known by investors unconvinced by its allure, has now outperformed the S&P index by 2.5 times since the year 2000. Go figure.

This week, investors will be closely watching data releases including US consumer confidence, and the US Personal Consumption Expenditures (PCE) price index, known for capturing inflation (or deflation) across a wide range of consumer expenses and reflecting changes in consumer behaviour. It is one of the measures of inflation favoured by the Federal Reserve.

In the UK, Rachel Reeves’ Spring Statement, set to be delivered on Wednesday, is anticipated to be two things: short and gloomy. Economic growth forecasts are set to be slashed, whilst her own fiscal rule – requiring government to balance spending with tax receipts by 2030 – is already being broken. Expect to hear the new favoured phrase ‘the world is changing’, albeit not necessarily for the better.

Global recession or no-recession, that is the question. The answer is likely to have a meaningful impact on the potential path for asset prices during the remainder of 2025.

(Cover Image Source: Mohamed Nohassi)