The world is shifting from election cycles to policy implementation, and investors must stay vigilant. With new governments settling in and economic strategies taking shape, the financial landscape is set for transformation. From Trump’s second-term agenda to Starmer’s fiscal strategy and China’s economic recalibration, key global policies will dictate market movements.
Donald Trump’s return to the White House signals a wave of protectionist policies, including widespread tariffs and increased government spending. His administration holds a narrow majority in Congress, but unlike his first term, re-election is not a concern. Trump’s focus is on cementing his legacy through decisive economic measures. The proposed flat import tariff could stoke inflation in the short term while reshaping global supply chains. If US firms pivot to domestic suppliers, major exporters to the US may experience economic strain. Meanwhile, Trump’s aggressive fiscal spending plans suggest continued high levels of government debt issuance, influencing global bond markets and investor sentiment.
In the UK, Keir Starmer’s government enters its first full year with a strong mandate but rising economic pressures. The Labour administration’s fiscal rule, which aims to reduce public debt relative to GDP, faces immediate challenges as gilt yields climb. This rise in borrowing costs could force further fiscal tightening, with potential tax hikes or spending cuts. Political stability is expected, yet market watchers remain alert to Chancellor Rachel Reeves’ spring budget. Any shifts in corporate taxation or spending priorities could impact business confidence and market valuations. The pound’s strength in 2024 has waned, and further depreciation could affect investment flows and corporate earnings. Meanwhile, the Bank of England is likely to cut interest rates, easing conditions for businesses affected by April’s tax increases and wage hikes.
In Europe, political turbulence in Germany and France adds uncertainty to the region’s economic trajectory. Trade tensions with the US remain a critical concern, as Trump’s tariff plans could weigh on European exports. The European Central Bank is expected to continue its easing cycle, though balancing the needs of diverse economies remains a challenge.
China’s economy enters 2025 under the influence of government stimulus aimed at reviving domestic demand and stabilizing equity and property markets. However, responses to these measures have been muted, and further interventions may be necessary. The global impact of China’s policies will hinge on trade dynamics, particularly in light of Trump’s tariff agenda. A rekindled US-China trade war could dampen China’s recovery and reverberate across European and emerging markets.
Beyond the major economies, political instability in emerging markets like Venezuela and Georgia adds another layer of risk to global stability. Meanwhile, Trump’s campaign promise to resolve the Russia-Ukraine conflict remains a focal point. Any progress toward a settlement would provide relief for European markets, but the timeline and feasibility of such a resolution remain uncertain.
The global investment landscape is in flux. At Arbuthnot Latham, our investment approach remains rooted in active management, ensuring we identify both opportunities and risks as these policy shifts unfold. With key economic players making bold moves, vigilance and adaptability will be essential in navigating 2025’s financial terrain.
Arbuthnot Banking Group PLC (LON:ARBB), trading as Arbuthnot Latham, provides private and commercial banking products and services in the United Kingdom. Founded in 1833, Arbuthnot Banking is based in London, United Kingdom.
