In these weekly economic insights, we share our macroeconomic analysis from the previous week and how it affects our portfolio positioning and our current economic outlook.

United States

This week has been one of complex interplay between policy shifts, market uncertainties, and evolving trade dynamics across developed markets. In the United States, the narrative continues to be dominated by an assertive trade policy under President Trump. The administration is now contemplating tariffs on foreign digital services taxes imposed on American technology companies while threatening further duties on steel, aluminium, and even broader reciprocal measures. The approach is unpredictable and appears designed to challenge longstanding global trade norms. Meanwhile, US companies are beginning to show signs of strain, with corporate loan delinquencies rising at a rate not seen in nearly eight years.

Although consumer spending remains resilient, these credit pressures highlight the vulnerability of smaller firms to the persistent high interest rates, all while the Treasury market wrestles with a growing fiscal deficit and the challenge of absorbing increased debt issuance.

United Kingdom

Across the Atlantic, the United Kingdom is contending with its own set of headwinds. Recent inflation data has sent shockwaves through the economy as prices reached a 10-month high of 3 per cent in January.

This unexpected uptick, driven by factors such as subdued declines in airfares, the impact of VAT on private school fees, and rising food costs, has complicated the outlook for the Bank of England. Despite solid wage growth, the economy has shown only marginal expansion, and concerns over sluggish growth are prompting renewed scrutiny of fiscal policies. Chancellor Rachel Reeves now faces mounting pressure from businesses and voters alike as critics argue that recent tax hikes may have contributed to this inflationary resurgence. The persistent inflation alongside a weak growth environment continues to challenge policymakers, who remain caught between the need for further monetary easing and the risks of triggering additional fiscal retrenchment.

European Union

In the European Union, trade tensions and sluggish economic activity have kept the outlook murky. After a series of intense discussions in Washington, EU trade commissioner Maroš Šefčovič reported positive momentum in negotiations aimed at reducing and eventually eliminating, automotive tariffs, a critical issue given the current 10 per cent levy on cars compared to the US rate. Yet beneath these talks lies a broader challenge: the Eurozone’s economic activity appears to have nearly stalled. A recent PMI reading barely nudged above the expansion threshold, while input cost inflation for businesses has surged to levels not seen in almost two years. This combination of stagnant output and rising prices continues to put pressure on the

European Central Bank, which now faces a delicate balancing act between stimulating growth and curbing persistent inflation risks.

Asia-Pacific

Over in Asia, the picture is nuanced. In Japan, concerns have been raised over China’s tightening of export controls on essential semiconductor raw materials such as gallium, germanium, and antimony. Japanese officials and executives are increasingly alarmed by the potential disruption to global electronics supply chains, with key industries from automotive components to advanced power semiconductors at risk. The sharp fall in Japan’s gallium imports from China over the past year underscores the gravity of the situation, and companies are already contemplating alternate sourcing strategies. Meanwhile, in Australia, the Reserve Bank finally cut interest rates for the first time since 2020, a decision welcomed by consumers and policymakers alike as inflation shows signs of easing.

Although the rate cut reflects a careful calibration amid a tight labour market and global uncertainties driven partly by US trade policies, it also highlights the country’s resolve to support growth ahead of a looming election

Regal Capital Outlook

At Regal Capital, we see opportunities emerging in this multifaceted environment despite the evident risks. In the United States, while the tariff rhetoric and fiscal deficits present challenges, we remain bullish on high-quality fixed-income instruments and select equities in the technology and export sectors, where a potential de-escalation in trade tensions could unlock latent value. In the UK, the search for yield in government bonds continues to be attractive, particularly if further rate cuts materialise in a more benign inflation scenario. Europe’s automotive and industrial sectors could benefit significantly if trade negotiations yield a meaningful reduction in tariffs, thereby stimulating cross-border commerce. In Asia, we are closely monitoring Japan’s supply chain adjustments and Australia’s monetary easing as key opportunities for diversification in technology, manufacturing, and consumer sectors.

Overall, the interplay between policy uncertainty and evolving market fundamentals remains the central theme in developed markets. As global trade tensions persist and central banks navigate the twin challenges of stimulating growth while containing inflation, investors must remain agile and well-diversified. At Regal Capital, our strategic focus is on identifying quality assets that can weather short-term turbulence while positioning portfolios for a sustained recovery over the medium term. We look forward to discussing these insights further as we refine our approach in these volatile times.

Disclaimer

This website and all materials contained herein are issued by Regal Capital Botswana (Pty) Ltd ("Regal Capital") for informational purposes only and do not constitute investment advice, a solicitation, or an offer to buy or sell any financial instruments. The content is general in nature and does not consider specific investment objectives, financial situations, or individual needs. While Regal Capital strives for accuracy, no representation or warranty, express or implied, is made regarding the completeness, reliability, or accuracy of the information. Any opinions or estimates reflect the author’s judgment as of the publication date and are subject to change without notice. Regal Capital, its affiliates, directors, employees, agents, or contractors shall not be liable for any direct, indirect, or consequential loss or damage resulting from the use of or reliance on this website. Users should seek independent financial advice before making any investment decisions.

All intellectual property rights in this website are proprietary to Regal Capital or authorized third-party sources. No content may be reproduced, distributed, or transmitted without prior written permission. Investing involves risks, including potential capital loss. Past performance is not indicative of future results, and investments in foreign currencies are subject to exchange rate fluctuations. The strategies or instruments mentioned may not be suitable for all investors.

By accessing research materials, users acknowledge that Regal Capital and its affiliates may hold positions in securities discussed. Research is provided “as is” without warranties of accuracy or completeness and should not be considered a recommendation or solicitation. Users are encouraged to conduct their own due diligence and consult financial, legal, or tax advisors. Regal Capital is not liable for any trading losses, lost profits, or other damages resulting from reliance on its research. Use of this website is governed by the laws of Botswana, and users agree to the jurisdiction of its courts for any disputes.