Market Update – 12th March 2025.

On Friday, Chinese policymakers lowered their inflation target to around 2%. By Monday, the National Bureau of Statistics reported that February’s Consumer Price Index (CPI) had fallen 0.7% year over year, with core inflation—excluding food and energy—declining by 0.1% last month.

The data suggests lingering deflationary pressures and weak domestic demand, despite recent AI-driven investor optimism. Economists advocate further monetary easing, though comparisons to an early Lunar New Year may distort trends. Meanwhile, at last week’s National Commerce Work Conference, officials set a 5% consumption growth target for 2025, aiming to boost trade and stimulate demand.

The latest survey from the Recruitment and Employment Confederation, released Monday, indicated that the UK job market cooled in February, though at a slower pace than January. The softer decline suggests that expectations of future rate cuts and stronger-than-anticipated economic data may be easing pressures on businesses.

That said, the Bank of England is widely expected to hold interest rates steady at 4.5% in its meeting next week. Policymakers may weigh potential rate cuts against the possible impact of April’s increases in National Insurance contributions and the minimum wage. Compounding this, wage growth continues to trend lower, moving below the 6% seen in Q4 2024.

The ‘my wealth invest’ app will be available to clients who hold investments with my wealth, which is a trading name of Wealth at Work Limited, part of the Wealth at Work group.

On Monday, U.S. stocks sold off following remarks by President Trump in a Sunday interview. When asked whether he foresaw a recession this year, Trump gave an ambiguous response, stating that the country would go through a “transition” due to the scale of upcoming actions, which he described as “very big.”

Despite later clarifying on Tuesday that he did not anticipate a recession, market volatility persisted through the first half of the week. This is in part due to a repeatedly shifting stance on tariffs from the president, who at times has announced taxes only to enact last-minute pauses. One of the tariffs that has come to fruition today is one of 25% on Canadian steel.

Trump’s rhetoric has spooked investors and the past two weeks have certainly been rocky as investors have grappled with the uncertainties and extremities within his flippant remarks. Trump’s bark – forever worse than his bite – may cause some short-term noise in markets but if we look back to his previous term in office, we see similarities that eventually gave way to moderated trade deals and productive relationships with global partners.

Savvy investors should look beyond the headlines and focus on the data. Last Friday, Jerome Powell reaffirmed that the U.S. economy remains in a strong position. This is precisely why the Fed prioritises distinguishing meaningful trends from short-term noise—and why they chose to pause interest rate cuts at their last meeting.

Our focus remains on a well-diversified strategy designed to weather market ups and downs. Not only do dips in market sentiment create attractive entry points for long-term investors, but we urge clients to remember that Trump’s hyperbole is fleeting, whereas your investment journey is built for the long run.

Still to come this week we have U.S. CPI and PPI, UK GDP, and Michigan Consumer Sentiment.

Nicola Tune, Portfolio Specialist