Markets Weekly podcast – 13 January 2025
13 Jan 2025
Market update and philanthropy insights
04 March 2024
In this week’s podcast, host Henk Potts discusses the latest inflation data from the US and Europe, and what it could mean for interest rates. He also previews the upcoming US employment report and the UK’s Spring Budget. Henk is joined by special guest Juliet Agnew, our Head of Philanthropy, who introduces our recently released ‘Guide to Giving’, which is designed to help donors get the most from their philanthropy journey.
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Henk Potts (HP): Hello, it’s Monday, 4th March, and welcome to the Barclays Private Bank Markets Weekly podcast, the recording that will guide you through the turmoil of the global economy and financial markets. My name is Henk Potts, Market Strategist with Barclays Private Bank. Each week, I’ll be joined by guests to discuss both risks and opportunities for investors.
Firstly, I’ll analyse the events that moved the markets and grabbed the headlines over the course of the past week. Then consider what good practice in the world of philanthropy looks like. And, finally, I’ll conclude by previewing the major events and data releases that are likely to shape the week ahead.
It was somewhat of a nervous week for investors as they awaited key economic data releases that would provide greater clarity around the current inflation trajectory, and their future policy path in both the US and Europe. Fortunately, for the impressive year-to-date rally, the data prints fell broadly in line with consensus, which helped to cement rate-reduction projections later in the year.
Meanwhile, impressive earnings from the tech sector continue to boost risk sentiment. So, equity markets continued to soar, with both the S&P 500 and Nasdaq registering record highs on Friday. The S&P 500 was up seven-tenths of 1% over the course of the week, it is now up 7.5% year to date.
European stocks also closed the week at all-time highs. The STOXX 600 generated a fourth consecutive month of gains in February. That’s its longest winning streak since 2021. Government bond yields came under pressure. The US 10-year Treasury yields declined to 4.2%. The rate-sensitive two-year yield dropped to 4.54% on Friday.
Falling Treasury yields created less competition for gold. The precious metal traded at $2,082 an ounce at the end of the week, its highest level in over two months. It’s up around 12% over the course of the past year.
The big macro number of the week was the Fed’s preferred measure of inflation, the PCE price index, which, as expected, show inflation accelerated, and January’s price increases are front-loaded at the start of the year. The headline index rose 0.34% month on month, the annual rate coming in at 2.4%, driven by firmer core services inflation.
However, the data doesn’t encourage us to materially change our US inflation or rates forecast. We expect price pressures in services to ease in the coming months and favourable base effects to shine through. We continue to forecast that core PCE inflation will be at 2.5% in the fourth quarter of this year, and at 2.3% in 2025.
In terms of the Federal Reserve, we still see it starting that rate-cutting cycle in June. We think that will be followed by two further 25-basis point reductions in September and December.
More broadly, though, when we look at the US economy, when we look at the recent income, consumer spending and confidence figures, I think it does give us a good guide as to the health of the world’s largest economy.
So, what did we learn from the recent data? Well, personal income rose strongly. In fact, it was up 1% in January. That’s due to increases in dividend income, a rise in social security payments and higher wages, all of which will be supportive of consumption.
However, personal spending contracted in January and consumer confidence fell. We think the spending figures can partly be explained by weather disruption as well as the hangover from the robust holiday spending that we saw. Within the numbers, demand for goods was weaker, but services spending remains robust.
Consumer confidence figures, I think, highlighted a less optimistic view of business- and labour-market conditions, but, as I say, we continue to believe that the mighty US consumer will be supportive of growth, with wages now outpacing inflation. Fiscal policy still remains positive and unemployment still remains very low.
US growth forecasts, we should remember, have significantly improved over the course of the past few months. We now see the world’s largest economy growing at 2.8% during the course of this year.
Now, inflation data was also the headline grabber in Europe ahead of this week’s European Central Bank meeting. Price pressures eased at a slightly slower rate than was expected, as the benefit from lower energy prices starts to fade. Consumer prices rose 2.6% year on year in February, which was marginally above the consensus estimate of 2.5%. Core inflation also decelerated at a lower rate than expected, coming in at 3.1%. The figures suggest that inflation will continue to moderate in the coming months, but disinflationary momentum is now starting to slow.
Now, the European Central Bank is widely expected to keep the deposit rate on hold at 4% for a fourth consecutive meeting on Thursday. However, with both growth and inflation weaker than the European Central Bank’s previous forecast, there are early signs that some of the members of the Governing Council are starting to become concerned that policy is too restrictive, and that the risks are growing that they will undershoot the inflation target in the medium term.
So, what does that mean for rates? Well, we expect communications to start to pave the way for a cut, with the cycle starting in June. We think the deposit rate will finish the year at 2.75%.
So, that was the global economy and financial markets last week. I’m proud to announce that Barclays Private Bank recently published our new ‘Guide to Giving’, a blueprint for good practice in philanthropy today. Here to discuss the report, I’m pleased to joined by Juliet Agnew, Head of Philanthropy for Barclays Private Bank.
Juliet, great to have you with us today. Let’s start off. What’s in the guide and what do you hope to achieve with it?
Juliet Agnew (JA): Thanks, Henk. Yes, this ‘Guide to Giving’ has been a real labour of love over the last three years. And it contains 12 chapters, all of which are designed to help donors today, philanthropists and donors, to navigate the fast evolving world of modern giving. And it really reflects the hundreds of client conversations that we’ve had over the past years, plus our years of experience of working in the charity sector, advising high-net worth and ultra-high net worth individuals and their families on setting up foundations and having an impact with their giving.
So, it covers a range of topics and the common questions that they often have. Everything from understanding personal values and how important those are in terms of motivations for giving and really understanding those, to navigating family dynamics in philanthropy, to whether or not you need a structure for your giving, and what the various options are in that regard, to how do I focus my giving and the common approaches in philanthropy in developing a strategy.
So, it contains a lot more than that, but what we’re trying to do with this is to help our clients and donors to understand that although giving away money is easy, actually having an impact with your giving and a really rewarding experience with your giving is not so easy. So, this guide is here to really help them on that journey to answer some of those key questions that they have, help them to understand the opportunities of philanthropy as well as some of the common obstacles that are likely to come and try and trip them up.
Another key thing to say is that we don’t actually tell donors what to do. I think that’s really important. We outline key trade offs, we outline choices, common pros and cons and a variety of different approaches, which include stories and personal case studies from a wide range of inspirational, experienced philanthropists.
But we don’t tell them what to do because it’s really important that they come up with that strategy themselves. And what we really hope to achieve, ultimately, is more thoughtful, more effective and more rewarding giving.
The key message that we have for donors is: be curious, be humble, listen more than you speak, don’t assume you have the solutions, and we hope that you bring the best of yourself to this amazing opportunity that you have to make a change in the world for your giving.
HP: OK. Let’s try and pick up on some of those points in a little bit more detail. So, why have you written this guide now and what are some of those key trends and developments in philanthropy that you focus on?
JA: We’ve written the guide now in reflection of the fact that so much has changed in the world in the last 10 years. And, in fact, we wrote a ‘Guide to Giving’ 10-years ago within Barclays Private Bank, but a lot has happened in that time and the causes that we’re trying to address with philanthropy are recognised now to be very complex, you know, for example think about climate change. And philanthropy should really be about the world we want to see, not just putting sticking plasters on issues that have arisen out of the way that we live.
So, there’s really now a recognition that philanthropy needs to be much more strategic, needs to be thinking about root causes and often needs to involve collaboration. And it’s not just enough to give money away, as I’ve mentioned, but you really need to think about how you go about it and what philanthropy is best designed to do.
And, again, in the last 10 years there’s been a real take-off in understanding that philanthropy is best placed to innovate, it’s best placed to flow to places that private markets and governments can’t. And at the same time, there’s been a real reckoning in the philanthropy space, a sense of self reflection where many donors now recognise that power dynamics can be an issue, the fact that they have a lot more power and resource, and potentially make decisions in an ivory tower can be very detrimental to the impact that they’re trying to make in the world.
So, we do confront some of these issues in the guide. We think it’s important that donors embarking on this journey understand, reflect on these issues and think about what that might mean for their giving. Again, we’re not telling them that there is one way to do philanthropy, but we want them to understand the critical issues of our time, what the world needs from them and put forward some practical steps to help them explore how they can involve some of these concepts in their giving.
HP: Juliet, you’ve outlined very nicely some of the concepts you cover within the guide, but who is this guide really for? Who do you think will be the main beneficiaries of it?
JA: So, we’ve obviously written it with clients in mind, but the key thing about this guide is that we’ve made the decision to make it public for the first time. So, it’s really for anyone who wishes to engage meaningfully with giving back and who wishes to put their private wealth towards public good.
And we’ve tried really hard to be super engaging at the same time as accessible and practical. So, we’ve removed jargon and we’ve made it as simple as possible to engage with some of these quite thorny topics at times.
So, we think it’s really useful for a wide audience of donors and, critically, wherever they are in their philanthropy journey. So, it’s particularly useful, obviously, for those that are just starting out and want an introduction to these concepts, but it’s also useful for donors that have been on that journey for a while and actually perhaps are not having the impact that they want to achieve. So, this should really help them to change that and to consider what they can do to have that deeper impact.
HP: OK. To finish off, Juliet, please could you discuss some of those myths about philanthropy that you hope this guide will challenge, but also tell our listeners where they can find out more information.
JA: There are so many myths that exist in the philanthropy and the charity space to be honest and this guide really tries its best to tackle some of those key ones. A common one, for example, is the idea that the amount that you give is super important. And, of course, giving a lot of money is very generous, but it doesn’t define you as a philanthropist and it doesn’t necessarily guarantee you being able to make a change in the world.
How you give, and this is a core message that we put across in the guide, how you give is possibly more important than what you give. So, how thoughtful and how informed are you, for example? Who are you involving in the decision-making? Have you got people with lived experience helping to contextualise and inform your giving? These are really important factors.
And the other thing to bear in mind is that people often forget with giving that making a decision to fund one charity, for example, potentially contributes to another one going out of business. So, we need to make sure that we are really informed to understand what the world needs and understand what charities need from us. So, being informed is possibly more important than how much you give.
The second myth I’ll mention is that it’s really easy. I think we commonly see people start to give and embark on that journey with a sense that this is going to be really easy, and I have heard first hand so many times that that is not the case. So, understand that it potentially needs professional support. It doesn’t mean you have to hire staff. There are plenty of organisations out there that can help you. You can collaborate with others, there are advisers like us out there, but you will have more of an impact, and, quite frankly, find it much more rewarding, if you have support on the journey.
And then the third myth that I’ll just mention very quickly is the idea that the gift is somehow a one-way enterprise, that somehow the donor is giving something to the charity and that charity doesn’t give anything back, for example. I think that’s a real misunderstanding of what actually happens when you engage in meaningful giving. And, in my experience, many of the clients that I work with have underestimated how much they’re going to learn on the journey and it’s a very humbling experience. So, it’s most rewarding, obviously, the more you put in.
So, we really encourage clients to engage with a spirit of enquiry, a spirit of humility and diligence and care, and understand that the more you give the more likely you are to be transformed for the better as well through the experience of philanthropy.
Finally, if you want to read the guide, please check out the Barclays Private Bank website. It’s all available on there and you can download a PDF as well of the entire document.
HP: Well, thank you, Juliet, for your insight today. We know it’s a topic a great number of our clients are interested in, and they truly appreciate some guidance around the framework and the structure they should be considering when it comes to giving effectively.
Let’s move on to the week ahead, where the focus in the UK this week will, of course, be on the spring Budget on Wednesday. This is likely to be the last major fiscal event before the next General Election. The chancellor is expected to try and balance politically-attractive tax cuts with the need to maintain a fiscally-responsible approach to the nation’s finances, following the market aftershocks of the LDI crisis generated by the September 2022 ‘mini Budget’.
We expect Chancellor Hunt to use the majority of the estimated £20 billion-worth of fiscal headroom to reduce the lower band income tax rate or the national-insurance contribution and freeze the fuel tax duty.
Now, speculation around a reduction in stamp duty, inheritance tax and more generous child benefits may prove to be unfounded or delayed until closer to the General Election.
We don’t expect significant revenue-raising measures to be announced, despite the ongoing debate around changes to the non-dom tax status, but we could see an increase in the rate of tax on tobacco products and liquid vapes, and details on the sale of the Government’s stake in NatWest.
In terms of the OBR forecast, we expect the inflation projection will be downgraded due to an easing of energy prices and softer core inflation. The growth forecast, we think, we will be lowered for the first two years and slightly higher after that, and the reduced rate of public sector net borrowing compared to November forecasts due to a lower interest payment. But, overall, the expected policy changes are unlikely to have a material impact on our inflation or growth expectations.
On the data front, market participants will be waiting for Friday’s US employment report, where we expect the US economy created 225,000 jobs in February. That’s down from the 353,000 gain recorded in January. We look for average hourly earnings to rise by two-tenths of 1%, or 4.4% year on year. We look for the US unemployment rate to pick up, but only one-tenth of 1% to 3.8%. Remember, that’s still very low by historical standards.
And with that, I’d like to thank you once again for joining us. I hope that you’ve found this update interesting. We will, of course, be back next week with our next instalment but, for now, may we wish you every success in the trading week ahead.
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