UK Stocks & Trump’s Trade War Impact – March 17, 2025

President Trump’s ‘America First’ strategy is shaking up world markets, however the UK inventory market isn’t flinching. Certain, there have been a couple of wobbles prior to now ten days however the FTSE 100 and FTSE All-Share have stayed resilient. So, what’s driving the latest efficiency, and may it sustain? Let’s dig in.

The UK market is defying sceptics:

The FTSE 100 is up 6.6% YTD, beating the S&P 500 (-3.9%) and defying years of underperformance.
The Euro Stoxx 50 (+10.7%) is even stronger, as world buyers rotate into worth shares and away from overpriced US mega-cap tech.
In the meantime, the FTSE 250 (UK-focused shares) isn’t enjoying alongside, caught in mid-cap limbo because the UK economic system struggles. However in the event you’re a long-term investor, a few of its unloved shares is perhaps hidden gems ready to shine.

FTSE 100 loves its “previous economic system” shares:

Banks, oil, and mining shares are holding agency – due to excessive charges, expensive crude, and value-hunting buyers.
Lloyds and Normal Chartered popped as buyers piled into financials, whereas BP and Shell stayed sturdy, shrugging off vitality value swings.

Not-so-hot sectors, now:

Client shares are struggling. Value-of-living pressures imply UK consumers aren’t splurging on luxurious sneakers.
Actual property took a success. Increased-for-longer charges = powerful occasions for property shares. Savills a notable case and not too long ago dropped after failing to current a transparent turnaround plan.

Shares within the highlight:

NatWest fell because the UK authorities bought extra shares. Traders don’t love “compelled” promoting, however this can be a step towards full privatization.
Assura (healthcare property enterprise) jumped on takeover buzz. Personal fairness loves low cost UK belongings – anticipate extra M&A strikes.
Gold miners shined as gold hit an all-time excessive. Tariff fears + safe-haven demand = buyers speeding into treasured metals.

The macro setup is essential – watch the BoE.

The Financial institution of England meets on March 20. Will they maintain charges at 4.5% or trace at cuts? Inflation ticked as much as 3%, which might delay fee cuts.
If the BoE eases later in 2025, rate-sensitive shares (actual property, client) might rebound.

Bottomline: Worth Play or Worth Lure?

Low cost, however for a way lengthy?
The FTSE 100 trades at ~12x ahead earnings – beneath its long-term common (14x) and cheaper than each the S&P 500 (21x) and Europe (15x). Whereas it might not be a deep discount, its relative low cost suggests room for a re-rating as world buyers take discover.
Personal fairness and overseas buyers are already snapping up undervalued UK belongings.
Dividends nonetheless rule.
The FTSE 100’s 3.8% dividend yield dwarfs the S&P 500’s 1.4% – providing regular revenue even when development takes time.
Persistence pays.
Warren Buffett’s warning: Markets battle once they neglect the basics—earnings have traditionally grown ~7% per yr, on common. When markets overshoot this tempo, they’re basically borrowing returns from the long run. The US has front-loaded years of beneficial properties, whereas the UK has quietly caught to its long-term tempo. That will make UK a greater risk-reward wager for long-term buyers.

Tariffs as a Boomerang? Trump’s Commerce Conflict Weighs on U.S. Company Income

Considerations are rising, however panic stays absent: Extra S&P 500 firms are mentioning “tariffs” of their earnings calls than at any time within the final 10 years. This highlights how a lot commerce uncertainties threaten company income and market stability. On the similar time, the variety of firms mentioning “recession” has dropped to its lowest stage in over 5 years, signaling that fears of an financial downturn stay low.

Tariff uncertainty clouds the outlook: S&P 500 firms are anticipated to report 7.3% YoY earnings development in Q1 2025 (see chart), a pointy revision down from 11.6% projected on the finish of 2024. Income development is estimated at 4.3% YoY. Trump and uncertainty over new tariffs are weighing on expectations, however the market has already partially priced in these dangers. Tariffs alone gained’t crash the economic system, however they may speed up the slowdown within the U.S.

4 sectors hit hardest: The 4 sectors with the best mentions of “tariffs” in This fall earnings calls—Supplies, Industrials, Client Discretionary, and Client Staples—are additionally those which have seen the biggest cuts in earnings expectations for Q1 2025. This means that tariffs will not be only a speaking level however are instantly impacting company earnings.

Earnings development doesn’t all the time imply inventory beneficial properties: Eight of the eleven S&P 500 sectors are anticipated to report earnings development in Q1 2025, led by Well being Care and Info Know-how. Nevertheless, larger income don’t robotically translate to rising inventory costs—valuations and market developments play a vital position. Whereas Well being Care has gained 4.5% YTD, Info Know-how is down 10.0%, reflecting a market shift towards defensive and cyclical sectors. Well being Care, Vitality, Utilities and Actual Property have been the strongest performers this yr.

Bottomline: Whether or not the four-week dropping streak is an overreaction or if the correction continues will grow to be clear within the coming days. Traditionally, corrections happen virtually yearly, usually creating new alternatives. Nevertheless, buyers stay at the hours of darkness relating to Trump’s commerce insurance policies and are in search of readability. Let’s see whether or not the Fed can calm the markets considerably on Wednesday – or set off new turbulence.