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The rich might not get richer this time

Market Update

21.04.2025

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What happened last week?

Global

  • Gold notched another record price, after central banks stockpiled bars and investors flocked to safe-haven assets.

US

  • The US spared phones and laptops from reciprocal tariffs… but the president might just be lining them up for a specialised tax instead.

Europe

  • LVMH’s worse-than-expected results indicated that even wealthy shoppers have cut back, so analysts now expect the luxury goods sector to flatline this year.

Asia

  • China’s economy fared better than expected last quarter, but economists don’t expect that to last.

Why It Matters

Gold’s price has risen over 25% this year, notching a record high of over $3,300 an ounce. Now it’s true, investors tend to pile into safe-haven assets when they feel a shiver up their spine – economically speaking. (Remember, we’re talking about the assets that historically held their value throughout volatility, like gold, bonds, and the US dollar.) But this rally is stronger than usual: China’s central bank has nearly tripled gold’s share of reserves since the pandemic, while investors have stored cash in the precious metal’s related ETFs at an unprecedented pace. That’s why Goldman Sachs expects gold’s price to reach $3,700 by the end of the year, or $4,500 if investors find more reasons to seek shelter. Just bear in mind, all of this attention could well have made gold the most crowded trade out there – so if investors decide to swap for riskier assets or cash, there could be a serious fall from grace.

The US president seems to have a penchant for gadgets, sparing phones and laptops from the latest tariffs – including the 145% whopper placed on Chinese goods. That’s a relief for tech firms entangled in China’s supply chains, like Apple and Microsoft – but the breather might be short-lived. Semiconductors and other electronics will now be classed as imports related to “national security”, with bespoke levies expected soon. 

That’ll have businesses on tenterhooks – and if there’s anything investors and companies both hate, it’s uncertainty.

The luxury sector was the first to recover after the pandemic – but it’s also been the first to come back down since. Bellwether firm LVMH revealed that last quarter’s sales were 3% lower than the year before, with dismal demand in China and the US largely to blame. Hermès – the ultimate symbol of high-end accessories – fell short of forecasts too, announcing that it’ll need to increase (already eye-watering) US prices from May to offset tariffs. The industry is banking on intense customer loyalty and devotion to style – but even the very richest have their cut-off points. Maybe that’s why HSBC now expects the sector’s revenue to stay flat in 2025, down from the 5% uptick predicted earlier this year.

China’s economy perked up by a better-than-expected 5.4% last quarter. This was fuelled by state-sponsored spending incentives (like appliance swaps and free dinner vouchers) and a rush from businesses to ship exports before tariffs set in. With the levies expected to hamper trade and, from there, financial confidence in the coming months, economists don’t expect China’s resilience to last.

 

The Focus This Week: The Rich Might Not Get Richer This Time

If you are into company earnings, you’ll be spoilt for choice this week. Heavyweights Tesla, Microsoft, Alphabet, and Visa will open their books, as well as a few key names from the industrials, consumer staples, and healthcare sectors. All put together, we’ll get an idea of how the economy held up last quarter. Analysts predict a decent run: S&P 500 companies are expected to have made 7.3% more profit last quarter versus the same time last year. Because companies tend to beat expectations by around 6 to 7% (at least over the past few years), that uptick could actually land in the double digits.

That said, history doesn’t always repeat itself. Of the S&P 500 companies that have reported so far, only 69% of companies have beaten estimates – below the five-year average. More worryingly, a few have kept their outlooks for this year to themselves, blaming tariffs and the unpredictable economy. Watch to see if other bellwether firms (like Caterpillar or Microsoft) do the same. Their fortunes or failures tend to reflect broader trends, so if they join that chorus, the lack of certainty could spook markets more than a simple miss.

Keep an eye on companies and sectors that rely on global trade or consumer demand – like Boeing, Tesla, Visa, and Ford. We don’t need to tell you why the first is worth watching (i.e.tariffs), but the second will indicate whether well-off US shoppers are still spending. That’s important: the top 10% of American earners now make up nearly half of the country’s total consumer spending – the biggest driver of the economy. So far, the consumer discretionary sector (selling nice-to-haves, not must-have products) has posted the biggest drop in sales growth of all the S&P 500 sectors this earnings season. That could indicate the reversal of the wealth effect: with stock market fluctuations undermining even the richest households’ financial confidence, luxury-loving shoppers could start tightening their fine leather belts.

A few pleasant surprises this earnings season could entice investors back toward stocks – especially if Big Tech and major consumer firms saw their wallets widen. But if more firms hold back outlooks, report slimming margins, or see wealthy spenders… well, stop spending, then investors could be pushed further into self-protection mode instead.

The Week Ahead

  • Monday: You didn’t miss much. A day best spent hunting for discounted chocolate eggs.
  • Tuesday: Earnings: Tesla, General Electric, Visa, Intuitive Surgical.
  • Wednesday: Germany PMI Manufacturing (April), UK PMI (April), Earnings: Boeing, AT&T, IBM, Philip Morris, ServiceNow, Thermo Fisher Scientific, CME Group, Newmont, Ford.
  • Thursday: US existing home sales (March), US durable goods orders (March). Earnings: Alphabet, Intel, Microsoft, Procter & Gamble, Pepsi, Gilead Sciences, Merck, Caterpillar.
  • Friday: UK retail sales (March), Earnings: AbbVie, Exxon Mobil, Aon.

    This document is provided to you for your information and discussion purposes only. It is not a solicitation for business or an offer to buy or sell any security or other financial instrument. Any information including facts, opinions, or quotations, may be condensed or summarised and are expressed as of the date of writing. The information may change without notice and Trusted Novus Bank (“TNB”) is under no obligation to ensure that such updates are brought to your attention. Past performance is not a guide to future performance.