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 the US-China trade truce, the US-UK trade deal, and potential changes to the ISA market. 

But first, our number of the week…

29%

That’s how much shares of retail investing platform eToro jumped after the company’s IPO this week. eToro ended up raising more money than originally anticipated, an encouraging sign of robust investor demand.

Sidekick Takeaway: Given the uncertainty in the capital markets over the past few weeks, many companies have been shying away from stock or bond issuance. eToro’s IPO pop is a strong sign that underlying risk appetite remains strong, especially for business models less impacted by tariffs. 

Now to our main stories…

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

• While far from a comprehensive deal, the US and China agreed to a trade truce in an agreement that saw tariff levels decline by over 100 points on both sides. Still, the market’s relief rally is overshadowed by the significant trade uncertainty on the horizon.
• The US and the UK signed a trade deal in the first landmark agreement of Trump’s trade war. While the deal covered agricultural commodities and metals, the agreement was more limited than initially expected, with the 10% baseline tariff remaining in place.
• Rachel Reeves is reportedly set to conduct a review of the UK’s ISA market in a move that could dramatically cut the tax-free cash cap. Unfortunately, punishing savers is unlikely to yield the retail investing culture that Reeves hopes for. 

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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Waving the White Flag: The US-China Trade Truce

For weeks, the US and China have verbally sparred over trade tensions.

While American officials insisted that China would come to the negotiating table, Chinese policymakers vowed to ‘never back down’ to US demands.

This week, both sides agreed to wave the white flag – for now.

While far from a comprehensive deal, the US-China trade truce resulted in a mutual 115-point decrease in tariff rates. 

The US tariff on Chinese goods dropped to 30%, with a 10% rate in the opposite direction.

The agreement is an encouraging sign of a trade detente. Nonetheless, the market’s relief rally may end up proving somewhat premature. 

China truce beneficial, but risks loom

The China truce was just one of the signals this week that America’s trade war could be moving to a new stage.

In a flurry of dealmaking, the US announced AI-related agreements with the UAE and Saudi Arabia as Trump toured the Gulf States.

That followed America’s trade deal with the UK, the first formal deal of Trump’s trade war (discussed below). 

This shift has translated into widespread investor optimism. On Monday, the S&P 500 jumped 3% after the China truce was announced.

But it’s not clear how long this dealmaking will last. Reciprocal tariffs are still set to go into effect in July, with no hint yet of a further extension.

What’s more, there are worrying signs that other major trade deals won’t be finalized for some time.

Sidekick Takeaway: As of Thursday, the S&P 500 has recouped all of its losses so far this year. While this optimism may well be justified, there remains far more trade uncertainty than the market’s level might indicate. 

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First of Many? The US-UK Trade Deal

Late last week, the US and UK signed a landmark trade agreement, the first of Trump’s trade war.

Donald Trump hailed the agreement as ‘full and comprehensive.’

But in reality, Keir Starmer’s words were more appropriate – the deal is a ‘platform for the future.’

There is no doubt that the trade deal is an important step in mitigating the worst impacts of Trump’s trade war on the UK economy.

Nonetheless, the agreement is surprisingly limited in scope and may stymie the UK’s plans for future negotiations. 

Rushed deal offers limited relief 

The terms of the deal addressed several crucial British concerns. Yet tariffs on the UK will remain substantially higher than they were previously:

• Tariffs on British steel and aluminium will be removed entirely, while tariff rates will be lowered for a certain quantity of UK vehicle exports. 
• The UK will remove tariffs on US ethanol, with further agreements to come on other agricultural products.
• Notably, however, the deal did not remove the 10% baseline US tariff, which impacts all British goods. 

Moreover, the deal left one of the most contentious areas of the US-UK relationship untouched – the digital services tax. 

Ultimately, the deal’s limited scope makes it appear rushed and haphazard. 

And having delivered Trump a win, it may be hard for Starmer to get the Americans back to the negotiating table for a more comprehensive agreement. 

Sidekick Takeaway: As an additional headache, security cooperation language in the agreement appears to have infuriated China. This will complicate Starmer’s efforts to rebuild relations with the country, a further indication that this deal could have been more carefully considered. 

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Carrot & Stick: Reeves to Conduct ISA Review

According to reporting from the FT, Chancellor Rachel Reeves is set to begin a review of the ISA market in the next few weeks.

Reeves’ review is long-awaited. She has previously alluded to finding the ‘right balance’ between saving and investing, indicating a potential cut to the cash ISA tax-free cap.

The review is expected to take place over the summer and include consultation with key industry figures across London’s financial sector.

Major fund managers have reportedly pushed the cash ISA cuts to incentivise domestic investing. Other firms, however, have strongly rebuked the potential changes.

Unfortunately, this move could be the latest iteration of the government’s wrong-headed approach to improve the UK’s lethargic investing climate.

Reeves focused on symptoms, not causes

Reeves’ efforts are partly motivated by a desire to build a retail investing culture in the UK, similar to what exists in the US.

But trying to replicate this culture by punishing savers misses the fundamental reasons for America’s strong investing climate.

Historically, the US has been a fast-growing economy with a regulatory environment friendly to capital formation and investor education.

These ‘pull’ factors have drawn in individual investors of their own accord. In contrast, the UK is attempting to unilaterally ‘push’ savers toward investing.

The stick won’t be as effective as the carrot. Reeves should focus on addressing the causes of the UK’s lukewarm investment culture, not just the symptoms.

Sidekick Takeaway: With any luck, Reeves’ review will help uncover more promising strategies for kickstarting the UK’s capital markets. If ISA changes are to be made, they will likely be unveiled during the Chancellor’s autumn statement. 

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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.