Welcome to this week’s Market Pulse, your 5-minute update on key market news and events, with takeaways and insights from the Sidekick Investment Team.

Today, we’re looking at BYD vs. Tesla, Reeves’ spending cuts, and the US 10-year yield.

But first, our number of the week…

2.4%

That’s how much the US economy grew in Q4 2024, a slight upgrade from previous estimates. A surge of consumer spending late in the year helped keep growth elevated. 

Sidekick Takeaway: The next US quarterly GDP reading will be released in April, and will be closely watched to see what impact Trump’s policies are having on the US economy. Concerningly, real-time estimates show negligible Q1 growth, even after removing distorting import figures. 

Now to our main stories…

Only have a minute to read? Here’s the TL;DR:

• BYD sales topped $100 billion in 2024, eclipsing Tesla for the first time since 2018. The Chinese auto giant’s deliberate focus on improving core EV technology has paid off compared with Tesla’s strategy of embracing new products like autonomous robots. 
• As expected, Chancellor Reeves announced sweeping budget cuts as part of her Spring Statement this week. While these cuts mean that Reeves once again has £9.9 billion in fiscal headroom, additional adjustments may be needed if the economy deteriorates.
• Traditionally, the Fed sets US interest rates. But the Treasury is now playing an increasing role, with Treasury Secretary Bessent focused on keeping 10-year yields low. This move could lower US housing costs and potentially boost stocks. 

It’s important to note that the content of this Market Pulse is based on current public information which we consider to be reliable and accurate. It represents Sidekick’s view only and does not represent investment advice - investors should not take decisions to trade based on this information.

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BYD Leapfrogs Tesla: The Value of Focus

BYD’s sales topped $100 billion in 2024, eclipsing rival Tesla for the first time since 2018.

What’s more, the Chinese auto giant’s 2025 is off to a blazing start. Sales are up 93% year-on-year in the first two months.

Tesla’s lagging performance isn’t entirely surprising. Elon Musk’s divisive political activity has deterred buyers globally, with Tesla sales dropping nearly 50% in Europe. 

However, BYD’s emerging lead over Tesla also reflects the profoundly different growth strategies embraced by the two companies.

BYD and Tesla: Focus vs. Range

Tesla has pursued a range-focused growth strategy, introducing a wide suite of new products and technology.

These include the humanoid robot Optimus and the Cybercab robotaxi, each of which appears to be at least several years away from commercial deployment. 

On the other hand, BYD has focused aggressively on improving and iterating their existing vehicles.

For instance, the company recently unveiled industry-leading five-minute charging. That follows BYD’s announcement that advanced driver-assist features will now be included in every model as a standard feature.

As Tesla flounders, BYD is reaping the rewards of this focused specialisation. 

So far this year, Tesla’s stock has fallen by about a third, while BYD’s China-listed shares have gained about a third.

Sidekick Takeaway: There is mounting evidence that BYD’s underlying technology is leapfrogging Tesla thanks to a focused growth strategy. Increasingly, Tesla’s competitive advantage appears to be regulatory protection, which would not justify the high valuation multiples afforded to a tech-driven company. 

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Back to Square One: Reeves Resets Budget Headroom

On Wednesday, Chancellor Rachel Reeves delivered her widely anticipated Spring Statement.

Heading into the speech, Reeves faced a deteriorating fiscal picture that necessitated either tax hikes or spending cuts to align with self-imposed fiscal rules.

As expected, Reeves opted for cuts. These included reductions of £4.8 billion on welfare and £3.6 billion on departmental spending.

These cuts are deeply controversial, with official forecasts showing that they could push a quarter of a million people into poverty. 

And concerningly, they may not be enough to guarantee Reeves sufficient headroom for the rest of the year.

Reeves still left with little headroom

While these cuts have bought Reeves time, further budget changes may be necessary in 2025:

• When Reeves first unveiled her budget plan in October, official forecasts showed £9.9 billion in ‘headroom’ before fiscal rules would be breached.
• By the time of the Spring Statement, this headroom had evaporated completely on a worsening economic outlook and rising interest expenses.
• The latest cuts bring the budget back to £9.9 billion in headroom – exactly where things started. 

If slowing growth weighs on tax receipts and the BoE keeps rates elevated, additional adjustments could be in store in autumn. 

What’s more, this week’s cuts may end up contributing to the very slowdown that makes further cuts necessary.

Sidekick Takeaway: Rigidly sticking to a set of self-imposed fiscal constraints, regardless of the evolving environment, is a risky strategy. Reeves has shown little willingness to adjust her budget rules, and the UK economy could end up paying the price.

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Rewriting the Rules: The Treasury’s 10-Year Plan

When it comes to setting America’s interest rates, the Federal Reserve is typically thought of as the only game in town.

Under the Trump administration, however, that may no longer be true. Now, the Treasury wants a say.

In interviews and speeches in recent weeks, Treasury Secretary Bessent has repeatedly expressed a desire to keep yields low – particularly on the 10-year Treasury bond.

In fact, strategists across Wall Street are now rewriting their 10-year yield forecasts in expectation of a more activist Treasury.

How could the Treasury impact 10-year yields?

Unlike the Fed, the Treasury lacks direct tools to fix interest rates at a precise level.

However, the Treasury can still influence rates through various channels:

• The Treasury can choose to auction fewer 10-year bonds, driving prices up and therefore yields lower.
• By influencing regulations, the Treasury could incentivise banks to hold more 10-year bonds, increasing demand.
• Finally, continued ‘forward guidance’ in public comments could give investors the confidence that these measures will be maintained moving forward. 

Why is the administration so focused on 10-year yields?

The most straightforward reason is that US mortgage rates are heavily influenced by the 10-year yield. As such, lower yields should lead to lower housing costs.

Moreover, stock valuations are influenced by long-dated yields, so a lower 10-year yield could help support the market.

Sidekick Takeaway: In the past, the Treasury’s focus has been on borrowing across the yield curve at the lowest possible interest cost. Increasingly, however, the Treasury could be set to target long-dated yields with activist borrowing policies. When it comes to rates, the Fed isn’t the only game in town anymore.

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Notices

Sidekick Money Ltd is a company registered in England and Wales (No. 13882980). Sidekick Money Ltd is authorised and regulated by the Financial Conduct Authority (FRN 984829). Our address is 21-33 Great Eastern St, London, EC2A 3EJ.

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