This note contains an overview of our market views, what we are watching, and our portfolio strategy. Any reference to portfolio positioning relates to our Flagship Solution. Clients with bespoke discretionary or advisory portfolios should consult their Client Advisor for the latest update on your portfolio.
Some tweaks to restore the fiscal path:
The Spring Statement made no reference to new tax measures, but it did include a range of initiatives to combat tax avoidance and evasion, possibly raising an estimated £1 billion. According to the forecasts from the Office for Budget Responsibility, the UK fiscal watchdog, the budget would have been in deficit by £4.1 billion in 2029/30 without the measures announced today. So, there’s been an adjustment to welfare cuts to save an extra £4.8 billion in order to restore in full the headroom planned in the budget last year – with a surplus of £9.9 billion.
No changes to taxes following the Autumn Budget despite ISA rumours:
We are now in a new Capital Gains Tax (CGT) regime introduced from Budget Day 2024 where rates are now at 18% and 24% for basic and higher rate taxpayers respectively. Business Asset Disposal Relief, now at £1m of lifetime capital gains, is now taxed at 14% from April 2025 and 18% from April 2026.
The significant changes that were announced to pensions and IHT Business Reliefs for Farmers and Business Owners in the 2024 Budget are still to bear out, with draft legislation anticipated later this year following HMRC Consultations that have recently ended.
Raising exposure to European and UK equities:
Equity markets have been volatile so far this year, quickly rotating in reaction to a fast-changing narrative. We’ve recently adjusted our investment strategy to reflect this leadership change, increasing our exposure to European equities, including UK, to a tactical overweight. Improving corporate earnings relative to expectations, more attractive valuations, and newly announced government spending, including for defence and measures to foster long-term economic growth, were the changes in fundamentals needed to increase our positioning. And, while US tariffs are a downside risk, should the Russia-Ukraine war end, we’d see an upside risk for the European markets.
Diversifying US equities:
To fund this trade, we’ve sold some US equities. Valuations are demanding, and policy uncertainty is higher. We still think innovation in the US is continuing apace, and AI-related themes remain compelling from a medium-term perspective. We maintain our overweight on a US equal-weighted equity index, giving greater emphasis to attractively valued sectors that might benefit from US policies, such as fiscal stimulus, trade protection and deregulation, from industrials to financials. So, despite reducing US equities, we are still slightly overweight.
While we’re underweight US Treasuries based on fiscal concerns, we’re overweight short-dated gilts. UK inflation is slowing more than expected, and we think the UK economy is unlikely to grow much more than 1% this year. So, given that yields are still elevated, we believe the Bank of England has scope to cut rates, which would support bond prices. In foreign exchange, we think sterling is unlikely to strengthen much further against the dollar, given our view that the Bank will lower interest rates. However, it’s unlikely to weaken as we expect the US Federal Reserve to also cut rates. We forecast the GBP/USD exchange rate at around 1.29 in the final quarter of this year.
How we’re navigating volatile markets:
We’re diversified across asset classes and regions. We also maintain our exposure to inflation-protected bonds, gold, and broad commodities to mitigate a range of risks. We cushion bouts of market volatility with equity ‘insurance’ instruments that appreciate when the market falls. This ‘insurance’ instrument worked as expected in the US, allowing us to lock in some profits and partially offset the fall in US equities, and we still hold some protection there.
Important Information
Information correct as of 26 March 2025.
This document is designed as marketing material. This document has been composed by Brown Shipley & Co Ltd ("Brown Shipley”). Brown Shipley is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England and Wales No. 398426. Registered Office: 2 Moorgate, London, EC2R 6AG.
This document is for information purposes only, does not constitute individual (investment or tax) advice and investment decisions must not be based merely on this document. Whenever this document mentions a product, service or advice, it should be considered only as an indication or summary and cannot be seen as complete or fully accurate. All (investment or tax) decisions based on this information are at your own expense and at your own risk. You should (have) assess(ed) whether the product or service is suitable for your situation. Brown Shipley and its employees cannot be held liable for any loss or damage arising out of the use of (any part of) this document.
The contents of this document are based on publicly available information and/or sources which we deem trustworthy. Although reasonable care has been employed to publish data and information as truthfully and correctly as possible, we cannot accept any liability for the contents of this document, as far as it is based on those sources.
Investing involves risks and the value of investments may go up or down. Past performance is no indication of future performance. Currency fluctuations may influence your returns.
The information included is subject to change and Brown Shipley has no obligation after the date of publication of the text to update or amend the information accordingly. Accordingly, this material may have already been updated, modified, amended and/or supplemented by the time you receive or access it.
This is non-independent research, and it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
All copyrights and trademarks regarding this document are held by Brown Shipley, unless expressly stated otherwise. You are not allowed to copy, duplicate in any form or redistribute or use in any way the contents of this document, completely or partially, without the prior explicit and written approval of Brown Shipley. Notwithstanding anything herein to the contrary, and except as required to enable compliance with applicable securities law. See the privacy notice on our website for how your personal data is used (https://brownshipley.com/en-gb/privacy-and-cookie-policy).
© Brown Shipley 2025