Wealth of Advice, Swale House, Mandale Business Park, Durham, DH1 1TH
As we step into 2025, the financial landscape continues to evolve with new economic developments shaping market movements. In our latest Wealth of Advice market update, recorded on 19th February 2025, we break down the latest trends and what they mean for investors.
One of the key headlines this month is the UK’s higher-than-expected inflation rate, which came in at 3%, surpassing the projected 2.5%. A significant contributor to this rise was the addition of VAT on school fees. While rising inflation may seem concerning, it also indicates that consumer spending remains strong, helping to sustain economic activity. Importantly, despite fears of an economic downturn, the UK narrowly avoided a recession, with a small but positive GDP growth of 0.1% in the final quarter of 2024.
Interest rates remain a hot topic as central banks around the world adjust their strategies. In the UK, rates are expected to come down more aggressively than in the US, providing potential relief for borrowers while aiming to stimulate growth. Historically, interest rates between 3-4% have been considered a healthy benchmark, and the current rate of 4.5% suggests we are moving toward long-term stability. This is positive news for both savers, who may see improved returns, and businesses, which could benefit from reduced borrowing costs.
Markets have had a mixed but ultimately positive start to the year. January was strong, particularly in the US, but February brought some volatility. One of the biggest shake-ups was NVIDIA’s sudden 17% share price drop after news that China had developed competing microchip technology. However, markets quickly rebounded, demonstrating resilience and ongoing investor confidence.
Despite short-term fluctuations, major global indices have performed well in early 2025. The FTSE 100 has seen a notable rise of 7.83% since the beginning of the year, outpacing global benchmarks like the MSCI World Index and the S&P 500.
Over a 12-month period, the S&P 500 has surged by 23.46%, showing strong momentum in US equities.
Encouragingly, even cautious investment portfolios have delivered impressive growth, with many gaining over 15% since November 2023.
Political events continue to shape market sentiment, particularly in the US. President Donald Trump’s recent remarks on Ukraine and trade tariffs with Mexico and Canada have introduced some uncertainty. However, markets have demonstrated resilience in the face of these shifts, adapting to new developments as they unfold.
With interest rates stabilising and inflation trends moving towards target levels, the broader economic outlook remains optimistic. While short-term market fluctuations are inevitable, history shows that long-term investors are rewarded for staying the course.
At Wealth of Advice, we remain committed to guiding our clients through evolving market conditions with clarity and confidence. If you have any questions or would like to discuss your investment strategy, don’t hesitate to reach out. Remember, long-term growth is built on patience, strategy, and informed decision-making.
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Wealth of Advice are authorised and regulated by the Financial Conduct Authority, reference number 563909. Past performance is no guide to future returns. Your investments can go down as well as up, and you may get back less than you originally invested. This content is for educational purposes only and is not financial advice.
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