Q1 Market Commentary 2025

Over the first quarter of 2025 markets were mixed as a combination of factors took effect. In the US, Donald Trump was inaugurated as President for a second term and quickly set about moving his policies forward. The degree of the tariffs unnerved markets as did the efficiency drive led by Elon Musk in the ‘Department of Government Efficiency’. This has caused wider concern on inflation and global growth. So far this has impacted the US market while investors have sought more attractive opportunities in Europe and Asia.

The domestic market

The UK market as measured by the MCSI UK IMI index was up by 5.10%.  Given the rotation out of the US market and the tariff concerns, this has impacted the US Dollar with Sterling rising. For the companies with foreign revenue this has been helpful particularly in the large cap names. Corporate earnings on the whole remain resilient, whilst mergers and acquisitions have picked up this year from a variety of sources proving value within the UK market, and flows from overseas have started to return.  The consumer remains in a reasonable resilient place and should inflation and rates start to fall this should be helpful.

What about the USA?

In the US, equity markets were impacted as a combination of trade tariff concerns alongside some questions around AI costings following a Chinese competitor Deepseek’s announcement, raised some concerns for US technology companies.  Corporates continue to surprise on the upside to earnings growth and forward expectations remain robust at this stage, whilst there has been some slowing given the broader market uncertainty. We continue to engage with fund groups on how companies are adapting to the changes as further details come out.

What’s happening in Europe?

In Europe there was a surprise policy change in Germany with the new chancellor Friedrich Merz proposing a €1trn spending package and the unlock of the debt levels the country had historically had. This has also been part of a wider push by the US to get European countries to spend more on Defence as part of NATO with Poland in particular announcing strong spending in this area.   The increased fiscal spending and continued falling inflation as well as further monetary loosening should support, but we will again monitor the potential trade tariffs and the implications of these for the strategies we hold.

ASAM’s outlook

We continue to look at the investment outlook for the long-term. Our focus remains on fundamental analysis to identify opportunities that have the ability within their business models to adapt to the market conditions. We look to create opportunities that blend asset type and regions that will be robust to current conditions and unforeseen change. Over the last twelve months there have been lots of indiscriminate moves in markets, sectors, and individual companies. Many market changes are reactionary and occur without long term consideration of how individual companies are performing and adapting to the economic environment. It is worth remembering that some of the most successful businesses globally took decades to become the household names they are today.

This information is obtained from sources considered reliable, but its accuracy and completeness is not guaranteed by Anderson Strathern Asset Management Limited. Neither the information nor any opinions expressed constitute financial advice. Investments can fluctuate in price, value and/or income and may return less than the original amount invested. Past performance is not necessarily a guide to future performance. Anderson Strathern Asset Management Limited is authorised and regulated by the Financial Conduct Authority.

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