Market Pulse
Friday, May 9, 2025
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 Reform UK’s election surge, Warren Buffett’s retirement, and the EU’s proposal to recognise UK qualifications.
But first, our number of the week…
That’s how much consumer borrowing increased in the US in March, driven by a rise in credit card balances. That eclipsed expectations by about $800 million, indicating robust consumer spending amidst economic uncertainty.
Sidekick Takeaway: Consumer spending drives the US economy, accounting for about two-thirds of America’s GDP. While it may seem odd to view a rise in credit card balances as encouraging, any indication of robust consumer spending is good news for US growth – and thus for the world economy.
Now to our main stories…
Only have a minute to read? Here’s the TL;DR:
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.
In a stunning performance, Nigel Farage’s Reform UK party won hundreds of council seats in British local elections last week.
Significantly, Reform won a special by-election in Runcorn and Helsby, securing the party’s fifth MP seat. Labour last carried the district with a 35-point majority.
Politically, the results show a crack in the two-party system that has dominated the British government for decades. Reform’s gains largely came at the expense of Conservatives, who lost 676 seats.
More surprising, however, were the losses to Labour, signaling a deep frustration with the government’s current fiscal policies.
Benefit cuts, tax rises weigh on Labour
Under Chancellor Rachel Reeves, Labour has prioritised fiscal prudence in government.
The resulting effort to balance the budget has led to unpopular spending cuts and tax increases.
These measures include moves to scrap winter fuel payments and reduce disability benefits. Increases to employer taxes, meanwhile, are weighing on unemployment and inflation.
In the face of these election results, Labour could be compelled to change course.
With the UK facing increased economic challenges amidst Trump’s trade war, the timing is especially urgent.
Some Labour MPs are already calling for a reversal, including dozens of ministers in the government’s ‘Red Wall’ caucus.
Sidekick Takeaway: The most immediate consequences of last week’s election could be changes to Labour’s economic policies. The timing is not right for fiscal prudence to take priority over the UK’s economic health – a view that recent election results seem to reflect.
This week, investment titan Warren Buffett announced his decision to step down as CEO of Berkshire Hathaway at the end of the year.
Buffett’s decision is not entirely surprising. At 94, he has been widely expected to pass the reins to successor Greg Abel for some time.
As an investor, Buffett’s track record speaks for itself. Berkshire’s annualized total returns of 19.9% since 1965 are nearly double the S&P 500.
Nonetheless, Buffett’s decision is a sign of the times – the Oracle of Omaha’s favoured investing style has fallen increasingly out of favor in recent years.
Buffett goes while value fades
Warren Buffett is famed as a ‘value investor,’ focused on rigorous fundamental analysis to identify underpriced securities.
Over the past few years, however, value investing opportunities have been few and far between.
The S&P 500’s cyclically-adjusted price earnings ratio, a measure of how expensive shares are, has stayed persistently elevated for over a decade.
Thanks to a dearth of value deal-making, Berkshire’s cash pile has grown to a massive $350 billion in recent years.
Meanwhile, ‘growth’ strategies focused on earnings expansion have performed strongly.
Over the past 10 years, Vanguard’s growth ETF (VUG) has eclipsed the firm’s value ETF (VTV) by over 4.5 points annually on a total return basis.
Sidekick Takeaway: While few investors would argue that growth’s outperformance will last forever, it’s clear that the environment hasn’t favoured Buffett’s approach for some time. Still, his reputation as a steady hand in volatile markets, as well as his unique investment quips, will be missed.
In a move that could make it significantly easier for Brits to live and work in the bloc, the EU is soon set to propose rules that would allow for recognition of UK professional qualifications.
The proposal remains in draft phase, according to FT reporting. Under its current form, however, the changes could benefit lawyers, engineers, bankers, and other skilled workers.
If enacted, this change could satisfy a key British request in post-Brexit negotiations.
More broadly, it’s a further sign of ample deal-making appetite between both sides in the current geopolitical environment.
UK and EU deal-making is accelerating
In addition to potential changes to professional qualification recognition, the EU and UK are in active talks about a range of further issues:
Many of these deals could be finalised by May 19th, when a widely anticipated summit between the two sides is expected to be held in London.
Sidekick Takeaway: Geopolitical negotiations can often seem abstract and remote, but the current bout of EU-UK negotiations could have real benefits for British workers. Recognising professional qualifications in the bloc would be a small but meaningful change.
Please remember, investing should be viewed as longer term. Your capital is at risk — the value of investments can go up and down, and you may get back less than you put in.
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