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Global Market Commentary – May 2025

Please note that the content of this review should not be considered as investment advice or any form of recommendation. If you require investment advice, please do not hesitate to get in touch with a member of our qualified team.

A Return to Normal?

  • Stock markets (MSCI World Index) made good gains in May and have risen 3.6% so far this year
  • Bond markets (Bloomberg Global Aggregate Index) have gained 5.7% this year
  • The worst of the tariff shock appears to have passed, but uncertainty remains high

Key Themes

Central banks continue to cut interest rates across most of the developed world, with the EU, Australia and New Zealand all cutting in the last fortnight and the UK and US expected to do so again as the year progresses. Inflation remains slightly above the 2% target, but appears largely under control and within a tolerable range. In such an environment, and absent external political shocks, stocks have been free to rally.

UK

The UK stock market has continued to recover from April’s tariff-driven selloff. The AIM All-Share index gained 8% in May to reach its highest level since September – shortly before the Autumn Budget which reduced the inheritance tax relief on AIM shares by 50%. Small caps also outperformed large caps on the main market, in a potential sign that risk appetite is returning. Takeover activity has continued apace, with the nation’s largest pawnbroker, H&T Group, being bought by a pawnbroker in the US at a 44% premium to its previous price.1

United States

The latest acronym to take the investment world by storm is TACO (Trump Always Chickens Out).2  With trade tariffs being announced and then abandoned within days, stock markets have begun to look through the noise and focus on something more tangible: the massive US budget proposal that sits with the Senate. Designed to cut taxes and increase spending, the budget could add $2.5 trillion to the US deficit over 10 years.3  All else equal, such fiscal largesse should be very good for stocks. The growth-focused Nasdaq index bounced almost 10% in May, with Microsoft approaching new highs.

Europe

European stocks are the best performers this year, with the Stoxx 50 index up 12.5%. Within the region, the FTSE Greece index has surged 30% on hopes the country will finally regain its developed market status.4  This would open up significant capital flows from global investors and complete a redemption which has been more than a decade in the making, after Greece was demoted to emerging market status in 2013 during its infamous debt crisis.

Asia & Emerging Markets

Cash-rich Japanese companies have now increased their shareholder returns (dividends + buybacks) to 4% per annum on average.5  Some are also seeking investment opportunities overseas, with Nippon Steel attempting a high-profile $15 billion takeover of US Steel, which may help it mitigate the impact of Trump’s steel tariffs.6  Meanwhile, South Korean stocks were boosted by a favourable election result, with the new president promising stimulus measures and action to close the “Korean discount”.7,8  British politicians should perhaps take note.

Bonds

The US budget may be good for stocks, but it does nothing to appease the “bond vigilantes” who warn about the spiralling cost of government debt across the developed world.9  Bond yields have thankfully stabilised in recent weeks, with a 10-year US Treasury yielding 4.35% per annum. However, the cost of government debt has risen significantly overall, five years on from the zero interest rate period sparked by the Covid pandemic. The US interest expense has now reached $1.1 trillion per annum – double the level of 2020 and equating to 3.0% of GDP, which is close to the highest percentage in history.10,11

Points of Interest

Elon Musk has abandoned his efforts to cut expenditure across the US government after only six months. His Department of Government Efficiency (DOGE) started with the grand ambition of eliminating $2 trillion of unnecessary spending. It has achieved less than one-tenth of that.12  Now on the outside of the government looking in, Musk has complained vociferously about the increased spending contained within the budget.

Tesla stock got a boost from his return to the company, rising as much as 50% in the past month. Nevertheless, the stock price remains well below its past highs, with EV revenue declining 20% year-on-year amid tough competition and brand damage related to Musk’s political views.13

Summary

2025 has been a very noisy year so far. Important news has come thick and fast, be it related to trade tariffs, defence spending, artificial intelligence or other themes. Bond yields, foreign exchange rates and stock prices have all been volatile, as a result. Trump will continue to shout loudly from his podium, but maybe – just maybe – there are signs that the market is now settling down into its own path, as we approach the six-month mark of his final term. The summer is usually a quieter time for investors, and now more than ever, that would be very welcome.

Note: Past Performance Is Not A Reliable Indicator Of Future Performance

Sources may be found online HERE, or provided on request

 

GWA Portfolio Performance

Please note that any performance figures are provided for information purposes only. The performance of your own investments may deviate from the returns shown below due to a number of factors, including product charges, the timing of contributions & withdrawals and portfolio rebalancing.  Performance relates to the GWA Portfolios only; if you hold other investments performance will be different.

 

MGTS Qualis Funds

Please note that this should not be considered as investment advice or any form of recommendation or inducement to invest. If you require investment advice, please contact your financial adviser.

The MGTS Qualis Funds launched in June 2023 and are managed by our wholly owned subsidiary, GWA Asset Management Ltd.

 

Fund Positioning

The MGTS Qualis Defensive Fund invests mainly in fixed income funds, which hold government bonds and corporate bonds. The fund also invests in alternative assets, such as property.

The MGTS Qualis Growth Fund invests solely in equities and is focused upon geographic diversification. The fund invests primarily in the UK, US, Europe and Asia.

For further information including the latest Fund Factsheets, please visit qualisfunds.co.uk

 

Back to News and Events

News and Events

Global Market Commentary – May 2025

2025 has been a very noisy year so far. Important news has come thick and fast, be it related to trade tariffs, defence spending, artificial intelligence or other themes.

Global Market Commentary – April 2025

April 2025 was a historic month for stock markets, which declined rapidly upon President Trump’s announcement of huge international trade tariffs, then rose almost as quickly when he reined back on them.

Changes to Employee Protection

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ARRIVEDERCI

The meaning of the Italian word Arrivederci is ‘goodbye, until we meet again’. Since Greaves West & Ayre opened our doors in 1918 we have said goodbye to some long standing members of the team. We started 2025 by saying a fond farewell to two key members of GWA -
Derek Simpson and Brian Tait