St. James’s Place WeekWatch
Thank You, St. James’s Place Asia and Middle East, for sharing the latest financial market update with THE EXPATRIATE community. SJP WeekWatch discusses the following;
Trump Tariffs
DeepSeek and AI developments
Market Reactions
UK Debt levels
Passive or active investing and more
Stock Take
Donald Trump returned to the White House last week and announced a raft of executive orders shortly after taking office.
These ranged from declassifying files related to the assassination of JFK to rolling back diversity, equity, and inclusion initiatives.
For many market commentators, though, his attitude towards tariffs took centre stage. Trump made notable use of them during his first term, and there’s been an expectation that the same will be true this time.
Last week, for example, he called for 25% tariffs on Canadian and Mexican goods from the start of February. The tariffs, if enacted, could hit Americans in the wallet, as US consumers would likely shoulder some of the bill.
According to federal trade data, Mexico and Canada are two of America’s biggest trade partners, accounting for almost a third of the value of all goods imported into the US last year.
That said, these fears are yet to be fully realised. Specifically, Trump’s stance on Chinese tariffs appears to have softened. On the campaign trail, there was talk of 60% tariffs on Chinese imports. However, last Wednesday, he said his team were discussing a potential 10% tariff instead.
Commenting on tariffs' effect on investments, Kristina Hooper, Chief Global Market Strategist at Invesco, said:
“When tariffs were implemented in 2018, they caused the S&P 500 Index to experience higher volatility and end the year lower. They caused even more damage to other markets. However, this time around seems like it could be different — there may be more use of tariff threats as a tool to achieve other policy goals and less implementation of actual tariffs. In any event, tariffs had a very temporary impact on the stock market in 2018, so I would not expect new tariffs to impact investors beyond very short time horizons.”
“there’s already been one example of Trump using tariffs as a bargaining tool in international relations. Over the weekend, he threatened Colombia with tariffs to help persuade the country to take back deportees. That situation appears to have been resolved.
According to George Curtis, Portfolio Manager at TwentyFour Asset Management:
“Tariffs are noise. That doesn’t mean markets wouldn’t react to a tariff-driven increase in prices, but we view the potential inflationary impact of tariffs more as a one-off level shift that could delay the underlying downward trend in inflation rather than disrupting it in the longer term.”
It should be remembered that Trump’s inauguration was only a week ago. However, US markets were encouraged, with both the S&P 500 and NASDAQ finishing the week up.
Trump also announced an artificial intelligence (AI) action plan to keep the US at the forefront of developments. Hopes about AI-powered several tech companies valued to record highs last year.
However, the world was shocked at the end of last week when a relatively small group of developers in China released their AI model, DeepSeek R1. This can compete against leading American AI models, such as those from Meta and OpenAI, despite costing a fraction to develop.
Later this week, the Federal Open Market Committee is due to discuss interest rates, but it is expected to keep the interest rate level.
Turning to Europe, the annual World Economic Forum in Davos saw various European Central Bank (ECB) policymakers delivering presentations and journalist interviews. The tone appeared to suggest imminent interest rate cuts, likely to be announced on Thursday when the ECB meets.
This and some encouraging business activity numbers helped lift the MSCI Europe ex-UK by 1.5%.
After all the noise around gilts at the start of the year, the UK had a relatively quiet week, with the FTSE 100 flat. The government is still in a difficult position as it looks to generate growth. UK Chancellor Rachel Reeves will give a speech later this week, outlining her ideas, including cutting back planning rules and announcing a new runway at London Heathrow Airport.
Wealth Check
The basic argument for active management is that skilled managers can identify winners and avoid losers in the stock market, delivering a better return than the market itself. Meanwhile, proponents of passive management argue that simply following the market removes the risk of human error and is cheaper.
That argument is over, says Dr Sarah Ruggins, SJP’s head of investment specialists. There is a world of investment techniques that exists between these two poles.
“We’re unnecessarily constraining our opportunities if we limit ourselves to all active or all passive,” she says.
Instead, we can use both active and passive management – and everything in between. Sarah points out there is a spectrum between the most fundamental passive, low-cost strategy through hybrid options and the most active managers, who invest without regard to indices.
“While the first decade of the millennium saw active funds generally outperform, the past few years have favoured passive investing”, she says: “Thanks to the performance of just a few companies dominating market returns.”
Investor sentiment is much like the market – it's cyclical. When something is popular, money finds its way there. This is why Sarah comments,
“It's unsurprising passives have done so well of late, given the popularity and rise of the largest tech stocks in the world.”
She adds:
“Investing is for the long term, and success doesn't come down to last-minute changes. Being disciplined and diversified are key to sustainable performance over the medium to long term across all market conditions. If we fall into the either/or trap around active and passive, you won't be truly diversified.”
By blending different passive and active fund types, we can create genuinely diversified investment portfolios and solutions for you.
The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
Past performance is not indicative of future performance.
In the Picture
In December 2024, the UK government borrowed £17.8 billion, surpassing expectations and marking the highest December borrowing in four years.
While an increase in borrowing in 2025 could have significant implications for the economy, we continually monitor fiscal policy and the Bank of England's response to borrowing and inflation trends. This allows us to adapt to changing conditions and make informed investment decisions on your behalf, helping you achieve your long-term financial goals.
The Last Word.
“It could be Saudi Arabia, it could be UK. Traditionally it’s been the UK.”
Donald Trump on the first international trip of his second term might be.
Invesco and TwentyFour are fund managers for SJP.
Some of the products and investment structures documented within this article will not be available to our clients in Asia. For information on the funds that are available please get in touch.
The information contained is correct as of the date of the article. The information contained does not constitute investment advice and is not intended to state, indicate or imply that current or past results are indicative of future results or expectations. Where the opinions of third parties are offered, these may not necessarily reflect those of St. James's Place.
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