WeekWatch

A further week of share gains

Markets rose for the third consecutive week, with Friday’s returns buoyed by news from Iran’s foreign minister that the Strait of Hormuz was “completely open” to shipping. The US dollar eased and the price of Brent crude oil fell 9% on hopes that cheaper energy would ease inflationary pressures. However, as of Monday morning, the Strait of Hormuz has once again shut down, and oil prices are up around 6%.  

As for interest rate policy, Hetal Mehta, SJP’s Chief Economist, commented that “central banks are obviously conflicted when it comes to supply shocks. At the moment, markets are pricing in broadly no change in interest rates by the US Federal Reserve over the rest of this year. For the Bank of England, only one 0.25% hike is priced in but I think the bar to hiking is relatively high.”

Record Q1 results from US banks

Upbeat results from several US financial companies helped markets as US earnings season got underway last week. Results in the sector are often considered a useful barometer of both corporate and household confidence. Financials are expected to deliver one of the strongest quarterly earnings in the S&P 500. 

Encouragingly, growth looks set to exceed expectations set at the end of last year. Investment banks have benefited significantly from the Iran war induced volatility. JP Morgan Chase, the largest bank in the US, revealed record trading revenues of US$11.6 billion during the period. Fees earned in investment banking rose by almost a third as corporate dealmaking remained strong. Other banks beating estimates included Goldman Sachs and BNY Mellon. 

Comments by the heads of two banks (Bank of American and JP Morgan Chase) indicate that while consumers are paying more for petrol, this is not yet having a knock-on effect on household expenditure. In the US, household spend on petrol is relatively low, accounting for between 3%-5% of monthly outgoings. With the oil price once again below US$100 per barrel, there are hopes that the current ceasefire will be extended and that the Strait of Hormuz will reopen before existing stocks are exhausted. This will help cap inflationary pressures and the need for interest rate hikes. 

Another UK economic downgrade

Three weeks on from the Organisation of Economic Cooperation and Development’s (OECD) downgrade for the UK economy in 2026, another multilateral agency has followed suit. While the costs for the UK economy resulting from the Iran war are yet to be calculated, the International Monetary Fund (IMF) announced that it expected the UK would be hardest hit of any major economy resulting from the Iran war. Both agencies cut their projections for 2026 UK economic growth by 0.5%. The OECD’s revised figure for 2026 is now 0.7%, while the IMF’s revised number is 0.8%. 

While the degree of the IMF adjustment to UK growth in 2006 was relatively high, it is on a similar growth trajectory to Germany. The UK is also expected to grow faster than Italy, whose economy is only projected to expand by 0.5% in both 2026 and 2027. 

Why is the UK expected to be so severely affected compared to peers? Its vulnerability lies in its increasing reliance on imported energy. Against the backdrop of a more than 30% rise in the price of oil and natural gas since the war began, UK government data shows that 43.8% of all the energy used domestically was imported in 2024, a 3.4% increase on the year before.1 In contrast, domestic energy production was at a record low over the same period, having fallen 68% since its 1999 peak. 

Tech is back

Companies in the US technology sector outperformed during the week, helping the S&P 500 push past its previous all-time high, which was set in January 2026. The tech-focused Nasdaq Composite index broke another record, delivering 12 consecutive days of “higher highs”. What’s changed?

The narrative for tech earlier this year was bearish. There was nervousness about whether the high levels of capital expenditure into AI would ever generate a suitable return. Tech firms are budgeting half a trillion dollars on capital expenditure in 2026. At the same time, there have been concerns that AI will be able to replace many of the services sold by software companies. 

Helped by hopes of a settlement between the warring parties in the Middle East, investor sentiment has turned more upbeat. After a sell off for tech stocks which started at the end of October 2025, valuations in the sector have staged a strong rebound since the beginning of April.

Momentum has been helped by positive updates from major players in the sector. The latest quarterly results from ASML, a Dutch company which manufactures chipmaking machines and is Europe’s most valuable company, and Taiwan Semiconductor Manufacturing Co. (TSMC), a key supplier of chips to industry giants such as Nvidia and Apple, show that industry demand remains strong. Both companies also raised their full year forecasts.

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Reeves’ pension raid could spell the end for salary sacrifice pension schemes

Reports suggest a large number of companies are looking to scrap their salary sacrifice pension schemes for employees. 

It follows changes made by chancellor Rachel Reeves which will bring in a cap on the amount workers can put into a pension without paying national insurance contributions (NICs).

The government has announced that from April 2029 there will be a £2,000 annual cap on the amount of pension contribution individuals can make out of gross salary that will be exempt from NICs. 

In a pensions salary sacrifice scheme, an employee’s contract is changed to reduce their salary in exchange for increased contributions, made by the employer, into a pension. It means the employee reduces their income tax liability as well as saving on NICs, while employers also get relief on their NICs. 

But the changes, from 2029, will mean employees (and employers) will have to pay national insurance contributions on any salary sacrifice pension contributions over £2,000 per year. This makes the perk less attractive for workers and employers.

Experts have argued that introducing the £2,000 cap would have a negative long-term effect on pension saving. Reports now suggest many companies are planning to end salary sacrifice schemes years before the rule comes into effect.

The Office for Budget Responsibility (OBR) has suggested the impact of the salary sacrifice cap would affect more people than expected – not just those in higher tax rate bands.

The OBR estimates that the rule change will bring in £4.7 billion in revenue for the government in the 2029/30 tax year.1

Government seeks to retain mandating powers from Pension Schemes Bill 

The government has moved closer to finalising the Pension Schemes Bill, which grants it powers to direct how pension schemes invest savers’ money and target different asset classes.

Last week, the House of Commons approved an amended version of the bill which retained these powers, with refreshed wording that aligns it more closely with last year’s Mansion House Accord.

As part of the Mansion House Accord, a number of UK pension providers pledged to invest at least 10% of their defined contribution schemes into private markets, aiming to unlock £50 billion for the UK economy by 2030.

The Lords had previously opposed this part of the bill, arguing that it gives the government too much power to direct pension schemes in how they invest workers’ pensions.

The bill will now return to the Lords on 20 April for consideration of the latest amendments. 

The levels and bases of taxation and reliefs from taxation can change at any time. Tax relief is dependent on individual circumstances.