In the U.S, the economy contracted by 0.2% (annualized) in Q1 2025, marking it the first GDP decline in three years. The slight upward revision from the initial 0.3% drop was supported by a 7.8% surge in fixed investment, the strongest since the middle of 2023. However, consumer spending slowed to 1.2%, its weakest pace since the middle of 2023 as did federal spending which declined by 4.6%. Imports rose 42.6%, driven by businesses and consumers stockpiling ahead of new Trump administration tariffs. The Federal Reserve held rates steady at 4.25%–4.50% in May for the third consecutive meeting, as expected. The Manufacturing PMI dipped in April, indicating a contraction in manufacturing while the Services PMI rose in May, reflecting moderate expansion.

In the Eurozone, GDP rose 0.3% in Q1, the fifth straight quarter of growth, though slightly below the 0.4% preliminary estimate. The expansion was driven by stronger domestic demand, aided by easing inflation, lower borrowing costs, and fiscal loosening in Germany. Input costs rose moderately, and overall business sentiment was at its lowest level since September 2022.

In the UK, the economy expanded by 0.7% in Q1, its best quarterly performance in three quarters and ahead of the 0.6% forecast. Growth was led by the services sector, especially administrative support (+3.3%) and retail trade (+1.5%). Industrial production rose 1.1%, while construction remained flat. Net trade contributed positively with household consumption edging up by 0.2%. Despite the strong headline figure, manufacturing sentiment remained weak, with the CBI survey showing further declines in output and new orders coupled with rising input cost pressures. The Services PMI inched up in May, signalling modest growth, though demand remains fragile and cost pressures persist. Business confidence showed a slight improvement.

Global equity markets rebounded strongly in May following April’s tariff-related uncertainty. Major indices posted solid gains, with the MSCI World up 5.7%, the S&P 500 rising 6.2%, and the Nasdaq surging 9.0%. In the UK, the FTSE 100 gained 3.3%, the FTSE 250 rose 5.8% while the Small Cap and AIM indices advanced 6.0% and 8.1%, respectively. The Fledgling index outperformed, climbing 8.2% over the month.

Our portfolio performed well in May, with a Total return of 5.5%. After allowing for expenses the Portfolio NAV increased by 4.8%. During the month we sold our remaining holding in Tritax Big Box, reduced our holdings in Begbies Traynor, Fevertree Drinks, RELX and Games Workshop. We started a new position in Keystone Law Group which is a UK based law firm with a tech enabled platform model, allowing self-employed lawyers to deliver flexible, high-quality legal services. The largest contributors to performance were Impax Asset Management, Alpha Group and AJ Bell all rising over 10%. The largest detractors from performance were Auto Trader, National Grid and NWF Group.