February 2025 Market Summary

The first two months of 2025 have seen equity markets in the UK and Europe performing well, whilst the United States has somewhat lagged behind, showcasing that past performance can’t predict future performance. As ever, this is a reminder that a diversified investment portfolio is the best way to capture the upsides in the market, and that doubling down on any single sector can cause problems.

Global Markets

Below shows how the some of the top indices around the world have performed in the year to 3 March 2025.
FTSE 100: 15.74%
S&P 500: 16.05%
Stoxx 600: 12.63%
Nikkei 225: -5.79%

Over the past year, equity markets have continued to perform well for investors, following difficult years during COVID and in 2022. The United States was the key performer during this period, with the concentration of returns being seen in the larger index companies, such as Nvidia who returned over 22% of the S&P 500s total return in 2024, with a new global focus on AI.

So far however, 2025 has seen other regions around the world perform stronger. In 2025, the FTSE 100 is already up over 7%, and the European Index Stoxx 600 is up over 9%. Contributing factors include improved scores for the health of the manufacturing sector, European bank profitability is increasing, increased expectations for higher defence spending, and greater expectations for the European Central Bank to cut rates, with analysts predicting 3 or 4 rate cuts in 2025. However, the S&P is only up 1.46%, with concerns starting to emerge surrounding the large concentration of companies in the United States.

Inflation

2024 saw the annual inflation figure reduce in the UK from a high of 4% to a low of 1.7% in September 2024. Since then however, annual inflation in the UK has steadily ticked up, with the latest ONS data annual inflation from January 2024 to January 2025 reaching 3%.

The Bank of England now expects that inflation will drop back towards the 2% target towards the end of 2027, and for inflation to spi later this year at 3.7% due to rising energy prices, water bills and bus fares.

In the United States, the inflation rate is becoming a more geo-political issue. In January, President Trump criticised the Federal Reserve for not cutting interest rates sooner. However, the Federal Reserve minutes revealed that they have big concerns about proposed tariffs and other government policies which may ‘hinder’ the path to disinflation. The year-on-year inflation figure for the United States from January 2024 to January 2025 is also at 3%.
https://www.bbc.co.uk/news/articles/c62z3j3nydzo

Spring Statement

Following a historic budget in October of 2024, Chancellor Rachel Reeves will deliver the Spring Statement later this month on 26March. Whilst the Spring Statement is typically more of a forecast of the economy, it is yet to be seen whether Reeves will have to make any changes or potentially backtrack on policy announcements made last October. Amidst a weak economy, rising energy prices and a change in the political landscape, Prime Minister Keir Starmer has already refused to comment on further tax rises during the Spring Statement.

Attivo is closely monitoring the Spring Statement, and we will ensure we communicate any resulting important news which may have affect you or your financial plans.