May 2025 - Beckett Asset Management

16.05.2025 – Special Relationship Shaken, Not Stirred

Philip.James@beckettinvest.com21 May 2025

Special Relationship Shaken, Not Stirred

At the beginning of April on ‘Liberation Day’, Trump announced widespread tariffs with the UK faring relatively well compared to the more punitive tariffs on other nations. As expected, we’ve seen a swift scramble to make trade deals with the US, and the UK has managed to reach the front of the queue. But is the new trade deal particularly meaty or a cheap political win?

Sifting through the rose-tinted, political brown-nosing between Trump and Starmer, the main headline is that 10% tariffs on imports from the UK are here to stay. It feels as though the UK negotiators haven’t put up too much of a fight, given that the hand they were initially dealt wasn’t too bad compared to the rest of the world – although clearly it would be deeply unpopular to say this publicly. The finer details are yet to be ironed out but as at the time of writing, the trade deal primarily focuses on agriculture, steel and automobiles.

Trump claims ‘the best beef in the world’ will be making its way to British shelves (I think the Japanese and Argentinians might have something to say about that), with Rolls Royce aircraft engines as well as UK manufactured cars heading the other way, still subject to a 10% tariff, albeit significantly less than the 25% minimum currently imposed on other nations. Post announcement both leaders were questioned about industries not covered by the deal such as media. Trump’s response was that “James Bond has nothing to worry about”, I’m not sure what that really means but it’s fair to say that the US-UK trade dialogue may well continue.

Despite this being dressed up as positive news, tariffs are still higher than they were at the start of the Trump presidency which will lead to rising costs and create a headwind for global growth. The positive news to be had is that whilst no other US trade deals have been announced yet, the UK looks set to be more favourably treated than many other nations and jobs at British steel and UK based auto manufacturers look much safer than only last week.

Perhaps most importantly, the deal comes at a time where both political leaders are looking to halt the decline in their approval ratings. For Trump in particular, many of his supporters associate him with a strong economy and his promises to bring down inflation. Approval ratings and polls would suggest that voters are losing patience with both of these subjects but with midterm elections coming around next year, it’s probable that Trump’s actions are going to have to refocus on pleasing the electorate in order to appease his Republican colleagues.

For now, we remain very cautious about the outlook for the US. We are likely to maintain our underweight position given the destructive effects of tariffs are not yet showing in the hard economic data points. Elevated levels of volatility are expected to continue given there are many trade deals yet to be discussed, and it is reasonable to expect that not all negotiations will go swimmingly and possibly not before the end of the 90-day tariff pause in July. Despite these ongoings, the team are alert to the prospect of US policy swiftly turning positive in the second half of this year given the midterm elections next year and we may well take advantage of extreme volatility to reduce our underweight position.

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02.05.2025 – Is This Another Cunning Plan, Baldrick?

Philip.James@beckettinvest.com8 May 2025

“Is This Another Cunning Plan, Baldrick?

Yes… no… well… I thought it was, but now I’m not so sure.”

Trump’s cunning plan to cut the US’ trade deficits looks to have backfired as bond investors appeared to lose faith in the government’s financial strategy. Following ‘Liberation Day’ 10-year Treasury yields initially dropped due to concerns around slowing growth but very quickly yields rose from 3.9% to 4.4% in just two days. Either investors were raising cash following losses on the equity market, or because they were losing faith in the sustainability of US debt, both are far from ideal.

The President now claims, “countries are kissing my ass wanting to make trade deals”. Whilst this is quite peculiar language for a politician to use, it feels as though most countries will likely now make trade deals with the US. What those deals look like is very up in the air, but it’s reasonable to expect Trump to be seeking deals that are at least optically good for America and can be spun to the American public as great deals, deals better than the world has never seen, unbelievable deals.

Whilst the 90-day pause on the more punitive tariffs is a positive, huge tariffs remain against China and we shouldn’t gloss over the fact that 10% on the rest of the world is still a tax increase on American imports. The outlook remains uncertain, and our view on the outlook for the US specifically remains negative. We have further reduced our allocation to the US within the Blenheim Overseas Equity fund, taking advantage of the short-term but significant near 10% bounce the US market had following the 90-day pause announcement.

The Midas Touch

A lot of assets have turned to gold in recent weeks. Treasuries, the Dollar and stocks have all seen selling pressure with investors turning to non-US orientated safe havens.

Arguably gold remains the ultimate safe haven asset and investors are channelling their inner magpie, flocking to the shiny metal. At the time of writing the price has risen over 25% year to date and over 40% in the previous 12 months, monumental moves for what can sometimes seem quite a dull asset but it’s times like these where its diversification properties can make a significant difference in portfolios.

We can’t claim to have foreseen the recent politically charged market dynamics at the time but from October last year we began building a gold position in the Alternatives fund. This was initially a small holding but by the turn of the year the weighting reached the approximately 7% position that it is today. Without a doubt, gold has played a leading role in the Alternatives fund’s 3% year to date return and more importantly, helped to minimise the drawdown of the portfolios.

As far as possible we’ll always seek to replicate asset allocation choices within the Ethical portfolios, but commodities and mining often comes with their fair share of ethical issues. Our chosen method of gold investment is through the Royal Mint Responsibly Sourced Physical Gold exchange-traded commodity (ETC) which is backed by physical gold and held at The Royal Mint in Cardiff. Part of their process is to source as much gold as possible from recycling, including from old mobile phones, which is ultimately much less carbon intensive and more ethical than taking gold out of the ground, meaning that we are able to hold this particular gold investment in the Ethical portfolios.