Ed’s World Market Insights (Week 20) – Private Equity Perspectives
May 18, 2025•5 min read
Ed’s World Market Insights (Week 20) – Private Equity Perspectives
Welcome to your Week 20 market update. After last week’s “flat and cautious” mood, this week delivered a sharp reversal, with risk assets staging a powerful rally as trade tensions eased and inflation data surprised to the downside, is the spring starting to unfurl? As always, I’ll reflect on what’s changed, what hasn’t, and what it means for private equity and risk assets. Grab your coffee (and maybe a croissant this time) as we dive in for the Sunday morning.
Recap: What Changed This Week?
Last week, I wrote about the markets treading water, central banks holding the wheel, and investors waiting for a sign.
World Market Insights – Week 19, 2025: Markets Pause, Macro Questions Linger
This week, we got several signs that the coil is unwinding:
- US–China Tariff Truce: The Trump administration and China reached a temporary truce, slashing tariffs on both sides for 90 days. The US cut tariffs on Chinese imports to 30%; China reciprocated with a 10% tariff on US goods. This breakthrough, along with new trade deals with the UK and Middle Eastern partners, helped erase much of the “tariff premium” weighing on equities.
- Inflation Surprise: US consumer inflation (core CPI) for April rose just 0.2%, below expectations. This cooled fears of persistent inflation and revived hopes for a possible Fed rate cut later in the year. Next month prediction remains at 91% likely no rate cuts in the US but UK
- Interest Rate Movement: In the UK, the Bank of England cut its base rate by 0.25% to 4.25% (the third cut in six months) as inflation continued to moderate and economic growth slowed. This move was widely anticipated and added to the global sense that monetary policy may be loosening at the margin. CME forecasts for the US still sees the first US rate cuts in the late summer.
- Tech and Small Caps Lead: Tech giants like Nvidia, Tesla, Meta, Amazon, and Alphabet surged, with the Nasdaq up a whopping 7% for the week. Even small caps and the Russell 2000 joined the party, signalling broader risk appetite.
- Markets rotate out of Gold: After a stellar run, gold dropped 4% (its largest weekly fall of the year) as investors rotated out of safe havens and back into equities. A good sign.
The Flow: From Fear to FOMO
It’s remarkable how quickly sentiment can shift. Just a few weeks ago, markets were fretting over sticky inflation, weak GDP prints, and the risk that “higher for longer” rates would choke off growth. This week, a combination of diplomatic progress and softer inflation data triggered a classic “risk-on” rotation, and the FOMO (“Fear Of Missing Out”) seems to have commenced. The S&P 500 and Nasdaq not only erased their year-to-date losses, but tech stocks posted some of their biggest weekly gains in years.
Even the Dow, which had lagged in recent months, broke higher and reclaimed its uptrend. Germany’s DAX hit a record high, up an astonishing 30% from its April low–a reminder that global risk appetite is alive and well.
What’s Driving the Turnaround?
- Tariff Relief: The US–China truce and new trade deals have removed a major overhang, at least for now. With tariffs slashed, companies can plan and invest with more confidence, and supply chains get a much-needed reprieve.
- Inflation Cooling: The softer CPI print has investors betting that the Fed may not need to keep rates “higher for longer.” This is a key tailwind for both equities and private assets, as lower rate expectations boost valuations and liquidity.
- Broader Participation: The rally isn’t just about the Magnificent Seven anymore. Small caps, cyclicals, and even some lagging sectors are catching a bid, suggesting a healthier, more sustainable advance.
Risks and Cautions
Before we get too carried away, a few words of caution (it wouldn’t be an Ed note without them):
- Trade Fragility: The tariff truce is temporary–just 90 days. Negotiations could easily unravel, and the EU is still threatening retaliatory tariffs on US goods.
- Economic Reality: The Q1 GDP contraction was still real, driven by a surge in imports and a trade deficit. Underlying vulnerabilities remain, even if sentiment has improved.
- Overbought Conditions: After such a rapid surge, markets may be due for a pause or pullback, especially as technical resistance levels are tested.
Ed’s Final Word
This week’s action is a classic reminder that markets are forward-looking and can turn on a dime when the narrative shifts. Central banks remain in the driver’s seat, but geopolitics and inflation data are the traffic lights. For private equity and risk asset investors, the message is to stay nimble, watch the liquidity cycle, and don’t chase the market higher in a fit of FOMO–patience and discipline still win the long game.
Week 20, 2025: In markets, the only constant is change-so keep your wits, your watchlist, and your breakfast close at hand.
Ed le Feuvre
Partner, Beaufort Private Equity Limited
As always, these are the thoughts and opinions of mine and no one else’s—not even Beaufort Private Equity Limited. Please do your own research before making investment decisions and reach out to your Beaufort relationship manager if you have any queries or follow-ups.
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– Practicing Chartered Accountant; experienced (25+ years) finance professional for regulated financial services organisations – Director and co-owner of Gibraltar FSC regulated Company & Trust Management Company – Strong financial modelling and financial planning and analysis for FTSE listed financial conglomerate – Treasurer (£1BN of AUM and £250M of regulatory capital) for regulated financial services organisation – Board experienced (both Group and subsidiary) along with leadership chairing committees – Experienced at running large multi located departments and teams – Corporate Finance experience in both technology, private equity and banking M&A – International audit experience UK GAAP, US GAAP, IFRS and Gibraltar GAAP – Strong managerial finance, financial accounting and financial internal control including Sarbanes Oxley audits – ERP implementation experience in Oracle and NetSuite and online accounting systems – Big 4 ACA qualification with treasury, finance, corporate finance and consultancy experience – Cambridge university education
