31 March 2025: Weekly Update – Liberation Day Tariffs and Stagflation Risks

On top of US domestic economic concerns, global equity investors are mainly allocated to US equities and, as a corollary, under allocated to other equity regions. US equities are highly valued on many metrics and the US dollar is expensive. With a key objective of Trump being to weaken the currency there is potential for global rebalancing to continue and relative valuation differences to compress.

Closer to home, Chancellor Rachel Reeves delivered the UK's Spring Statement last week, highlighting spending cuts and a decline in economic growth forecasts for this year. The Office for Budget Responsibility has also projected higher unemployment and inflation rates in the near term. Given the Chancellor's narrow margin of safety to meet her fiscal constraints, the T. Bailey Multi-Asset funds carry a shorter duration exposure to UK gilts, specifically the October 2028 Treasury Gilt.

Through the economic uncertainty of this quarter, gold has continued to make new highs - the spot price hovering around $3,120/oz at the time of writing. Until there is some clarity on trade and inflation, this shift towards safer assets could persist.

Following an extremely strong run of performance so far this year we have trimmed exposure to copper across the T. Bailey funds of funds. Whilst we acknowledge the longer-term factors driving the price appreciation of the metal, in the shorter-term weaker economic activity poses a risk.