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 private equity funds, Starmer’s military overhaul, and Musk’s chaotic exit from the US government.

But first, our number of the week…

8%

That’s how much Trump’s landmark legislation proposes to cut the budget of America’s Bureau of Labor Statistics. Already, economists are warning that reduced funding levels could impair the quality and quantity of the BLS’s critical data releases. 

Sidekick Takeaway: Investment and policy decisions are only as good as the information they’re based on. With the UK already struggling with its own data quality issues, decision-makers on both sides of the Atlantic could face greater challenges accessing reliable economic information in the near future. 

Now to our main stories…

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

• Sidekick’s private markets platform is expanding with the launch of private equity funds, which offer access to companies not listed on public exchanges. We dig into the basics of this asset class.
• Keir Starmer unveiled a radical overhaul to Britain’s military posture as part of the government’s long-awaited Strategic Defence Review. UK defence stocks jumped on the news of a greater defence budget, which could also help support Britain’s economy. 
• Following a chaotic exit from the US government, Elon Musk went on a fundraising tour for several of his companies. Musk’s public falling out with Donald Trump, however, could imperil federal support for both Tesla and SpaceX.

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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Private Equity 101: Risks & Rewards

Private equity has long been an asset class built for the ultra-wealthy, featuring high minimums and fees. But today, that’s beginning to change. 

At Sidekick, we recently expanded our private markets platform with private equity funds, offering eligible investors the chance to diversify beyond public markets.

In this section, we’ll briefly explore how private equity (PE) works – and some of the unique risks involved.

Private equity’s long-term potential

Globally, public stock exchanges list over 47,000 companies. But there’s an even wider universe of companies that don’t trade on these exchanges. 

Estimates indicate that 25 times more private firms have raised investor capital than public ones.

While public equity funds invest in exchange-listed stocks, private equity funds invest in these unlisted companies. As historical data shows, this can be a lucrative strategy:

• Between 2000 and 2024, an index of private equity generated annualised returns of 13%, according to MSCI Private Capital Solutions.
• Over that same period, the Russell 3000, a broad index of public US equities, has returned 8% annualised.

With that said, investing in private markets does come with unique risks.

PE funds are far less liquid than public stocks, meaning investors may have to wait several years for distributions or redemptions.

In addition, manager performance is far more variable in private markets, which could result in unexpectedly disappointing returns.

Sidekick Takeaway: While public companies are more accessible than private ones, the number of firms listed on major US and UK exchanges has fallen in recent years. Hence why assets like private equity are increasingly coming into the spotlight.

Note, these are high-risk investments, available to eligible sophisticated and high-net-worth investors only. You could lose all the money you invest.

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The New Blueprint: Britain’s Defence Overhaul

In a move poised to significantly overhaul the UK’s defence strategy, Prime Minister Keir Starmer unveiled a new blueprint for the nation’s military this week.

The long-awaited Strategic Defence Review is ambitious, calling for an expanded military, new munitions factories, and fresh investment in emerging battlefield technology. 

These recommendations are also expensive. Modernising the UK’s nuclear warhead program alone is estimated to cost £15 billion.

All this spending is good news for UK defence firms – and potentially the nation’s economy as a whole.

Military review boosts defence stocks

Following the review’s unveiling, the stocks of UK defence companies jumped.

Shares in BAE Systems and Babcock, two major British defence contractors, both hit one-year highs this week.

But the rest of the UK economy could be set to benefit too. Defence spending typically has a sizeable multiplier effect as firms hire workers and purchase inputs to satisfy government contracts.

Moreover, elevated spending on R&D can translate into technological innovation. Famously, both the internet and GPS were originally defence-funded projects.

However, the UK’s budgetary approach could also imperil this multiplier effect.

Due to the government’s self-imposed fiscal rules, departmental budgets in other areas may have to be cut in order to afford higher defence spending. 

Sidekick Takeaway: Although the UK’s budgetary process imposes some unique quirks, this defence overhaul is indicative of Europe’s current affinity for ‘military Keynesianism.’ From Germany to Britain, defence spending is being used not just to bolster national security, but also to accelerate sluggish economic growth.

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Back to Business: Musk’s Chaotic Exit from Government

This week, Elon Musk officially departed from America’s capital, his tenure at the controversial Department of Government Efficiency coming to an end.

His first step back in the business world? Raising investor capital for several of his firms.

Musk’s xAI technology company is in talks to raise up to $5 billion in debt financing. The firm is likely to benefit from its recent merger with X, whose debt recently traded nearly at par.

Meanwhile, Musk’s brain-computer interface company Neuralink was able to close a $650 million funding round earlier this week as the firm carries out clinical trials.

Unfortunately for Musk, these deals are unlikely to outweigh the damage his chaotic exit from Washington has caused.

Tesla stands to lose from Trump bill

While Musk’s exit from government initially seemed placid, the situation quickly deteriorated as the week unfolded:

• Musk has attacked Trump’s landmark bill over its substantial increases to America’s deficit.
• On X, Musk expressed frustration that the bill will defeat ‘all the cost savings achieved by the DOGE team at great personal cost.’
• More significantly for Musk’s businesses, the legislation is also poised to cut EV tax credits for companies like Tesla.

In response, Tesla stock sank more than 14% on Thursday.

The damage could spread to Musk’s other companies too. After calling Musk ‘CRAZY,’ Trump publicly considered ending all federal contracts with Musk’s companies, including SpaceX.

Sidekick Takeaway: Ironically enough, Musk’s exit from the US government may end up being just as damaging for Tesla investors as his entrance was. With Musk now having alienated voters on both sides of the political aisle, investors in his companies could be paying the price for years to come.

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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.

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.