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Please see below, an article from EPIC Investment Partners discussing the challenges for Eurozone economies. Received today – 10/10/2025

The euro was born out of a grand bargain: the stability of the core would anchor the discipline of the periphery. By stripping away the safety valve of devaluation and the natural brake of rising interest rates, the single currency was meant to force governments to live within their means. In practice, it did the opposite. Membership dulled market discrimination, allowing countries to borrow at rates that bore little relation to their economic fundamentals. For a while, the illusion held.

Greece was the first and fiercest warning. Flush with cheap credit after joining the euro, successive governments borrowed freely and spent lavishly, confident that default within the common currency was unthinkable. Beneath the surface, debt piled up, competitiveness eroded, and statistics were massaged. When the truth finally emerged in 2010, the reckoning was swift. The deficit was far higher than reported, the credibility of official data collapsed, and investors fled. Bond yields soared, funding evaporated, and Greece was forced into the first of several bailouts. The crisis exposed the structural flaw at the euro’s heart: a shared currency without a shared fiscal authority, where moral hazard was baked into the system. The warning was clear: markets might ignore imbalances for years, but when trust breaks, the punishment is sudden and unforgiving.

Fifteen years on, the pressure has shifted from the periphery to the core. France, long seen as the anchor of the eurozone, is testing the limits of the system in a different way. Its challenge is not an external liquidity squeeze but a domestic solvency problem: a political inability to stop borrowing. The country’s debt now exceeds 110% of GDP, while deficits hover around 6%, double the level permitted under European rules. Decades of high social spending and generous pensions have become politically untouchable, and attempts at reform have met fierce resistance. Tax cuts designed to spur growth have eroded revenues, leaving the government trapped in a cycle of chronic shortfalls.

For years, French bonds traded almost as safely as German Bunds. That calm has begun to fray. Investors are starting to price in not default risk, but dysfunction. Repeated government collapses and the use of constitutional shortcuts to force through budgets have undermined confidence in France’s ability to govern itself. The spread between French and German yields has widened to its highest in a decade, a quiet but telling signal that markets are losing faith in the country’s capacity to generate the surpluses needed to stabilise debt.

The parallel with Greece is uncomfortable. In 2010, Europe had the political will and the financial tools to contain a small nation on the periphery. France is different. It is too big to bail out and too central to fail. The European Central Bank can buy time with bond purchases, but it cannot manufacture consensus or rewrite budgets. The euro’s early lesson still stands: credibility, once squandered, cannot be printed. France’s fate will determine whether Europe has learned from 2010, or whether history is preparing to repeat itself once again.

Please continue to check our blog content for the latest advice and planning issues from leading investment management firms.

Alex Kitteringham

10^th October 2025

Please see the below article from EPIC Investment Partners detailing their discussions on the UK Public Sector. Received this morning 09/10/2025.

The UK has a big public sector productivity problem

As the Chancellor does her sums, she will see that UK public sector productivity is still 4% below the levels it reached in 2019 (ONS estimate), with the NHS lagging by rather more. This is a major extra cost to the taxpayer and probably is larger than the whole of the overrun in the deficit the OBR will report to her. If only she could magic it away, harder choices like tax rises or cuts in spending that people value would be avoided.

The previous government presided over a big recruitment into the civil service and into NHS Administration during covid, and those extra numbers have stayed in post. The current government has added further to them.

What is current policy to boost productivity?

The present budgets assume there will be a squeeze on staff numbers and an increase in output to tackle this problem. The spending figures on administrative overhead, which is running at £14.08bn this year, are for it to rise to £14.23bn next year, before falling away to £13.2bn by 2028-9 and tumbling to £12.6bn the following year, after an election. This implies reducing numbers, as there will be pay awards and promotions to cater for.

However, if you read on in the public accounts, you discover that a Transformation Fund has been set up to spend £3.25bn on the application of AI and other improved processes to achieve some productivity gains. Adding those back into the figures, the administrative costs rise from £14.33 bn this year to £16.23bn next, an increase of 14% before falling to £14.89bn in 2027-8. That is still 4% above the current year level.  The “Transition costs” are said to be one offs and temporary so are not included in the main figures.

It may well be that AI offers plenty of scope for economies in administration in government. The expensive welfare system can be extensively computerised and already uses a lot of computing power to distribute benefits to millions of people. The NHS might be able to handle patient records, bookings, workforce planning and other central tasks better with more AI. These gains should, however, be additional to recovering the lost productivity since 2019, as 2019 was a pre-AI age.

It is also the case that spending more money on digital systems only delivers productivity gains and cost savings if sufficient staff posts are removed to more than offset the extra computer cost. The government needs to explain both to its staff and to the public what it has in mind in terms of lower staff numbers and how it can handle that without compulsory redundancies. Natural wastage can achieve a lot but it requires more discipline over external hirings than the government has managed so far.

Trends in civil service numbers and gradings

Civil service numbers fell to 384,000 full time equivalents in 2016, following a long period of controls on recruitment and replacement. It has now risen to 516,000, an increase of a third.  The public sector as a whole employs 6.1m workers, of which 1.2m are designated as being in administration.

Between 2014 and 2024 there was substantial grade inflation or promotion. In 2014 58% of the civil service was at Executive Officer or higher grade, whilst that rose to 74% ten years later. Some of this reflects the automation of some lower paid jobs and the need for higher paid supervisory. Some of it probably was caused by the wish to retain people without being able to give them an above average pay rise, unless they could redefine their responsibilities and be promoted.  Either way the civil service is now more top heavy and has higher average pay.

What are the likely chances of getting a decent boost to growth and to cost savings from public sector productivity?

In theory the chances are good. We know the government can be run with far fewer civil servants without new technology, as has been done in the recent past. It should be possible to recapture the lost productivity by better management of staff numbers as people move jobs or retire. AI should be an ideal technology to make a big reduction in civil service administration costs. Much of the work is drafting briefs, policy papers and administrative documents. AI would be well placed to do the first draft and to give officials easy access to the stock of established government policies, positions and data to inform the latest brief or decision.

In practice it looks as if the transformation will be delayed and the costs will be front loaded. The second year of a new government would be the ideal time for Ministers, when they have learned more of their departments, to work with the senior officials to get some savings. The Transformation fund, with a very round number of £2bn to spend next year, clearly needs a lot more work on what the money will buy, how long it will take to put in and where the savings will come from. The forecast of bigger savings in a future year that will definitely be after the election is not a very bankable proposition in this fast-moving world of AI. The Chancellor will need to look elsewhere for savings or put up taxes if the AI programme remains on its current leisurely timetable.

Please continue to check our blog content for advice, planning issues and the latest investment, market and economic updates from leading investment houses.

Alex Clare

09/10/2025

Please see this week’s Markets in a Minute update below from Brewin Dolphin, received yesterday afternoon – 07/10/2025.  

How are politics affecting markets?

Explore how political events in France, Japan, and the U.S. are influencing investor sentiment.

Key highlights

• Shutdown? So what? Global stocks rallied to fresh highs, brushing off the U.S. government closure and subsequent economic data blackout.
• Jobs jigsaw: Although fewer U.S. jobs are being created, layoffs remain at low levels.
• Artificial intelligence (AI) alliance boom: Chip stocks surged as global mega-deals signalled structural tailwinds for AI infrastructure.

Markets look past the U.S. government shutdown

Global stocks continued their steady march to new highs last week despite the U.S. government shutdown and disappointing private jobs data.

Last week’s price action tells us something important: markets are looking past the short-term noise of politics and patchy data and instead balancing between structural optimism for AI and cyclical caution – with AI having an upper hand due to strong evidence of financial commitment and collaboration amongst players within the AI infrastructure ecosystem.

The U.S. government officially shut down on 1 October, as Congress failed to pass the necessary spending bills to fund federal operations into the new fiscal year. Around 750,000 federal workers are now furloughed, including many responsible for compiling key economic data. That means that data such as non-farm payrolls, the consumer price index (CPI), retail sales and gross domestic product (GDP) won’t be released until the government reopens.

This creates a significant information gap for investors and policymakers, particularly at a time of economic uncertainty over the labour market. The Federal Reserve (the Fed) will be flying blind ahead of its next policy meeting in October, with markets leaning on a rate cut.

From an economic perspective, the impact of a U.S. government shutdown tends to be modest. Historical estimates suggest a temporary drag of -0.1% to -0.3% on GDP, typically reversed when back pay is issued to federal workers. The greater risk would come from a prolonged shutdown, which could begin to affect broader confidence and spending.

For now, markets are sanguine. U.S. stocks have shown mixed performance during past government shutdowns. What’s different this time is the potential for deeper, structural implications. President Donald Trump has suggested he may take this opportunity to permanently lay off government workers providing services outside of the administration’s core policy goals. That would mean a shift from the usual furlough and back pay approach that tends to have little economic impact. So far, the markets’ base case is that the shutdown will again be temporary and its impact manageable.

A low-hire, low-fire U.S. jobs market

With official payroll data suspended, attention turned to private indicators. The ADP (Automatic Data Processing)’s employment report showed private sector job losses for the second consecutive month, adding to evidence of a slowing labour market.

U.S. private employment changes

Source: ADP

Still, the narrative isn’t one of collapse. For instance, jobless claims remain stable and low. Companies seem to be reluctant to lay off workers due to lingering skill shortages and a lower labour supply due to immigration policy changes. This low-hire, low-fire dynamic means the labour market is slowing gently rather than falling off a cliff.

The positive news is that consumers are still spending and companies are investing in technology. Supporting this sanguine view, the Atlanta Fed’s GDPNow model projects 3.8% GDP growth in the third quarter. This is hardly consistent with a recessionary economy.

That said, the Fed’s policy challenge remains. Without timely official data, policy decisions will rely on alternative sources and sentiment surveys. Markets are pricing in interest rate cuts for October and December, driven by a weaker labour market and Fed officials’ view that current rates remain high relative to the neutral rate – the level that neither stimulates nor suppresses inflation.

Mega AI deals fuel global chips rally

The standout story remains the surge in AI infrastructure-related stocks, as a fresh wave of deals and capital commitments highlight the scale and potential longevity of this investment cycle.

Following Nvidia’s $100 billion investment in OpenAI, OpenAI is touring the world securing its data centre buildout partners. In Korea, Samsung and SK Hynix signed new deals to supply high-bandwidth memory chips for OpenAI’s Stargate project. Japan’s Hitachi and Fujitsu expanded collaboration with Nvidia and OpenAI to support energy and infrastructure projects.

This reinforces a critical theme: that no single company or country can deliver the scale of infrastructure required to support the insatiable demand for computing power in the age of AI. As such, collaboration across the ecosystem is essential. Whether it’s data centre construction, memory chips, energy infrastructure, chip design, or cloud storage, the size of the opportunity demands deep partnerships.

This interdependence enhances visibility into the longevity of capital investment while keeping the benefits within the AI infrastructure ecosystem, making the theme a firm favourite amongst investors.

The asset performing as well as, or even better than chips, is gold, which has gained momentum amid broader concerns about institutional credibility. The current U.S. government dysfunction adds further rationale for continuing this trade.

Chip stocks and gold prices rallied hard this year

Source: Bloomberg

Will Japan see its first female prime minister?

In Japan, Sanae Takaichi has emerged as the winner of the weekend’s Liberal Democratic Party (LDP) leadership election. Although the LDP-Komeito coalition currently lacks a majority in the lower house of the National Diet, it will still likely elect her as the country’s first female prime minister. Voting is likely to take place later this month.

Takaichi’s election has sparked speculation about her potential policies, particularly regarding the economy. The key controversy is whether she may try to influence the Bank of Japan (BoJ)’s monetary policy and whether she can bring about fiscal expansion. She has in the past been responsible for some dramatic quotes about the future direction of interest rates, but more recently, she has seemed to endorse the need for the BoJ to make its own decisions. She has also pledged fiscal expansion through income tax cuts and even cash handouts. A cut in sales tax already seems likely.

The market reaction to Takaichi’s victory has been notable, with the yen weakening against major currencies and longer-term bonds falling. However, stocks have risen, with the Nikkei 225 Stock Average reaching a record high.

Exporters and certain manufacturers have also seen significant gains, as investors bet on the potential for increased government spending and stimulus under Takaichi’s leadership. Overall, Takaichi’s election is being seen as a positive for risk assets, with investors weighing the potential benefits of her policies against the potential risks.

The view for the bond market is more nuanced. Short-term yields have fallen, reflecting a real impression that Takaichi will coerce monetary policy. In contrast, longer-term bond yields have risen, reflecting expectations of higher eventual interest rates and inflation.

French political turmoil continues

In France, Sébastien Lecornu resigned as prime minister on Monday, which came less than 24 hours after President Emmanuel Macron appointed a new cabinet. It highlights a political gridlock that’s very difficult to break, involving the near-impossible task to pass a budget that involves unpopular spending cuts and tax increases to reduce the budget deficit.

Although markets have become used to French political drama, investors are losing patience and French borrowing costs are rising. To see French bonds yield more than Italian bonds is the kind of shock that might galvanise the electorate or the French parliament into action. France has an average maturity of eight years on its government bonds, so it’ll take some time for higher bond yields to do lasting damage.

The banks are in decent shape. The European Central Bank (ECB) has a transmission protection instrument (TPI) to prevent regional spillovers. The TPI allows it to purchase a country’s government bonds if it decides that its borrowing costs are higher than justified by economic fundamentals. For this reason, the ECB is comfortable to see borrowing costs rise until it needs to force some corrective action.

However, the political steps needed to get to that point don’t seem imminent, and so it seems likely that French government bonds will remain under pressure.

Please continue to check our blog content for advice, planning issues and the latest investment market and economic updates from leading investment houses.

Charlotte Clarke

08/10/2025

Please see below, an article from EPIC Investment Partners with their views on the French Prime Minister’s resignation. Received today – 07/10/2025

France’s fifth Prime Minister in two years resigned yesterday morning, making the UK appear a relative haven of stability. Mrs Reeves is wrestling with some frightening numbers prior to another tax raising budget on November 26th, but she must be relieved that she isn’t in charge of the French economy.

In summary:

1. The French state forms the largest part of the economy with the highest percentage of total spending in the world at 57%. The UK’s is 44%.
2. French debt has edged ahead of the UK. Including off balance sheet liabilities such as pensions, French debt exceeds 400% of GDP
3. France has not run a budget surplus since 1980
4. The French have the longest retirements in the world, averaging in excess of 25 years.
5. France is the only place in the world where the average pensioner earns more than the average worker. The annual cost exceeds 350 billion euros.
6. France spends 14% of GDP on pensions vs 8% in the UK, and as the population ages, this cost is crowding out all other areas of public spending
7. France’s retirement age is 64
8. GDP per capita at $44,000 compares with the US at $82,000 and the UK at $49,000.
9. Average French tax rates are 46%. The UK figure is 35%.
10. In 2023, average French real wages fell 3.6% while state funded pensions rose 5.3%
11. France’s population is ageing faster than the European average. In 1981 there were 5 million pensioners. Today there are 17 million
12. French bond yields are now higher than in Spain, Greece and Italy

Absent a decade of explosive economic growth, France’s trajectory is not sustainable, and continuing political instability prevents any meaningful cuts in government expenditure. Being part of the Eurozone will be a mixed blessing. The ECB’s promise to do ‘whatever it takes’ to protect and preserve the Euro was an expensive undertaking when Greece faced similar issues. France, as the second largest economy in the EU, will be totally a different proposition.

The price of an ECB rescue will include the loss of control over government spending, and given the inevitable reaction of the French population to the end of their ‘Social Contract’, a more realistic option could be a return to the French currency. France must have noticed the improvement in the UK’s competitiveness and affordability of its assets to foreign buyers as the Pound fell following the financial crisis in 2008. The alternative could be catastrophic.

Please continue to check our blog content for the latest advice and planning issues from leading investment management firms.

Andrew Lloyd

7^th October 2025

Please see below, an article from Tatton Investment Management, analysing the key factors currently affecting global investment markets. Received this morning – 06/10/2025

Nothing shuts down the stock markets

Global stocks bumped up last week, despite the US government shutdown. Perhaps markets expect a resolution, or perhaps only a mild economic impact. When US government shutdowns are short, they rarely hurt the economy too much. The last long shutdown (December 2018-January 2019) had a delayed impact on stocks, but investors don’t seem as concerned now (they suspect it will be more like the 1995 shutdown).

The clamour in Washington contrasted with a quiet Labour party conference in Liverpool, where the most important takeaway was what wasn’t said: Chancellor Reeves declined to rule out tax rises. The least economically disruptive hikes would be income or VAT, but they would be unpopular. At least the Treasury’s stamp duty suspension for new London stock listings should help bring liquidity back to our beleaguered market. With the FTSE 100 hitting another all-time high, we issue our usual reminder that UK growth and profits aren’t as bad as the media suggests.

More encouraging was the US Supreme Court’s stay of execution for Fed governor Lisa Cook. The next legal flashpoint will be the November ruling on tariffs. Investors don’t like tariffs, but they have brought in much-needed tax revenues – so a ruling against them could hurt US bond yields and, by extension, stocks.

Over the weekend in Japan, Takaichi Sanae was elected the new and first female leader of the ruling Liberal Democratic party, which is set to make her prime minister.  Stock markets reacted with a 4% rally, while the Yen lost about 2%. Given her pro fiscal stimulus, and anti central bank independence stance, the market reaction has set the scene for her surprise success, decisively and without delay.

US Q3 corporate earnings will now come into focus, and are expected to rise 8.2%. Companies usually downgrade expectations to engineer a ‘beat’ which boosts their share price. Analysts aggressively cut Q3 earnings amid earlier tariff uncertainty, and companies stopped issuing guidance. Lacking guidance, analyst forecasts remained static. That lowers the chance of a ‘beat’ (as does a drop in AI-related profits) which makes an earnings boost to stocks less likely.

There was also discussion of leveraged buyouts, following the Saudi-backed deal for EA. But we note that the actual amount of leverage was small compared to the deal’s price.

Markets are ignoring politics and awaiting earnings; we’re in the in-between space. But stocks are powering ahead anyway, suggesting a bit of speculation. We shouldn’t be surprised if we see a pullback in the coming weeks, considering the removal of favourable liquidity conditions.

September Asset Returns Review

Global stocks gained 4% in sterling terms last month, while bonds added 0.7%. Risk appetite is strong across all major equity markets. That is despite a tightening of financial liquidity for seasonal and US treasury-related reasonings. The Federal Reserve’s dovish turn in September (a 0.25 rate cut and more signalled ahead) pushed up growth expectations, resulting in a 4% gain for US stocks and an outperforming tech sector.

Smaller US stocks were buoyed by the Fed’s cut, but underperformed through September overall. Stronger growth expectations raised long-term inflation and rate expectations, weighing on small-cap valuations. The ‘Magnificent Seven’ rallied for most of the month, but sold off in the last week due to end-of-quarter rebalancing and fears about AI investment’s sustainability.

The UK and Europe rallied by less than the US but are outperforming year-to-date. We think the UK economy is better than media commentary suggests.

The Fed’s dovishness is at odds with other central banks, which are signalling a tighter outlook and are probably right. The Bank of Japan is on the opposite end, signalling a rate rise in October amid stronger growth and inflation. Japanese stocks gained 2.8% and look strong.

China was yet again the best performer, gaining an incredible 9.1% through the month, despite persistent economic weakness. Chinese positivity is largely about Beijing’s stimulus drive, but stocks are supported in the near-term by strong liquidity conditions (both government and private).

Stronger Chinese growth expectations also pushed up copper prices last month. But gold was the standout commodity, with prices up 12.1% last month. This is sometimes taken as a sign of geopolitical anxiety, but gold has been rallying for years for a variety of reasons. The main release for investors’ political anxiety continues to be the dollar, which weakened again in September. For UK investors, the dollar’s weakness takes the shine off US equity’s impressive rally since “Liberation Day”.

Politics not derailing Japan

Japanese stocks pulled back from their highs last week, but their recent rally looks well supported. We’ve been positive on Japan for a while, thanks to corporate reforms boosting profitability and the competitiveness of Japanese exports. Both share buybacks and dividends are up this year, reflecting strong cash generation. Global investors are catching onto these improvements and sensing a bargain, due to Japan’s low equity valuations.

It’s not all sunshine: the recent trade deal with the US still includes a 15% tariff for Japan, and the government faced a new leadership contest on the weekend. Bond yields have increased 0.5 percentage points this year – a bigger sell-off than anywhere else.

Sanae Takaichi – one of the leadership candidates and an acolyte of former Prime Minister Shinzo Abe – has called for greater fiscal spending. But while fiscal stimulus helped in Abe’s era of zero inflation, Japanese inflation has been above 2% for three years. The Bank of Japan (BoJ) were split on whether to raise rates in September, but bond markets are pricing in a hike this month. The BoJ is tightening, but is still dovish relative to the underlying economy. That’s intentional, as the bank wants to kickstart a process of wage inflation.

That might sound odd, but Japan has historically struggled to embed wage rises. Koizumi – the other government leadership candidate – wants to explicitly tie wage rises to inflation, which could help consumer confidence (although undermine monetary stability). July’s 5.25% average wage rise was the highest pay bump in 34 years. This isn’t hurting profit margins either – suggesting incentivised employees are becoming more productive.

National pay negotiations in the spring will be crucial. Tariffs and government instability are headwinds, but domestic growth is coming through and a positive cycle is taking hold. For Japanese stocks, the cycle of reform, growth and confidence is more important than policy.

Please continue to check our blog content for the latest advice and planning issues from leading investment management firms.

Marcus Blenkinsop

6^th October 2025

Please see this week’s Markets in a Minute update below from Brewin Dolphin, received yesterday afternoon – 30/09/2025.  

U.S. imposes fresh import tariffs

We explore the implications of new U.S. import tariffs coming into effect on 1 October.

Key highlights

• U.S. announces new wave of tariffs targeting the pharmaceutical sector: President Trump announced new tariffs on branded and patented pharmaceuticals, along with a range of other products, effective from 1 October.
• The impact of tariffs on U.S. jobs growth: U.S. jobs growth has slowed significantly since tariffs were announced in April. Forecasts expect only 50,000 new jobs in September, the lowest figure since the COVID-19 pandemic.
• A dramatic shift on the war in Ukraine: In a high-stakes meeting in New York, President Trump met Ukrainian President Zelensky and signalled a major change in his stance on the Ukraine-Russia war, openly endorsing NATO’s potential use of force to down Russian aircraft.

U.S. announces new tariffs

Last week wasn’t a stellar one for stocks, even if the worst fears of September’s seasonal weakness seem unlikely to materialise.

The calm in trade policy was broken once more with the latest announcement from U.S. President Donald Trump, who took to social media to reveal a slew of new tariffs set to come into effect on Wednesday.

The most eye-catching was the president’s declaration that “branded or patented” pharmaceutical products will be subject to a 100% tariff, unless the company in question is actively building production plants in the U.S. This move could have a significant impact on the U.S. effective tariff rate – ‘un-tariffed’ pharmaceuticals currently make up 8% of U.S. imports, so imposing a 100% tariff on them ought to boost the effective tariff rate by eight percentage points. The effective tariff rate refers to the total amount of duties collected by the U.S. government, which is expressed as a percentage of the total value of imports.

While some companies may be able to mitigate the effects of these tariffs by leveraging their existing U.S. production facilities, the full impact of the measures remains to be seen.

A multi-billion-dollar pledge

It’s worth noting that many pharmaceutical companies have already begun investing in U.S.-based production facilities, which may help reduce the sting of the tariffs. The Trump administration has secured promises of $325 billion in pharmaceutical capital expenditure (capex).

So far this year, America’s capex has been heavily concentrated on building out artificial intelligence (AI) capabilities, with other categories of investment being relatively weak. However, durable goods order data released last week suggested that orders for machinery manufacturing are increasing, which could be symptomatic of an increase in more general investment activity.

Increased investment would be welcome at a time when U.S. jobs growth seems to have almost ground to a halt and would otherwise weigh on growth.

At the time of writing, there has been no additional detail offered beyond the social media post, so it remains unclear how strictly the requirement to have started building production plants will be enforced.

Another factor that may limit the overall impact of these tariffs is the significant stockpiling that has taken place in anticipation of their introduction. The long period of speculation ahead of the ‘Liberation Day’ tariffs allowed companies to build inventories and muted their immediate effects.

A major trade victory for the European Union?

The imminent onset of the tariffs reveals the value achieved by the European Union (EU) in securing an exemption from sector-specific tariffs as part of its trade deal with President Trump.

This could prove to be a major victory, particularly for Ireland. In 2024, U.S. imports of medicinal and pharmaceutical products reached $234 billion – the top 10 exporters to the U.S. were led by Ireland ($65.7 billion, 28.1% of total imports). In contrast, the UK and Switzerland, which are not EU members, have not been afforded the same protection.

The UK deal included references to special rates being considered in the event of tariffs being introduced under Section 232, but no concrete agreement has been reached. As the situation continues to unfold, investors will be watching closely to see how these tariffs play out and what impact they will have on the global economy.

Considering the exemptions for U.S. production, the existing commitments to expand domestic manufacturing, the EU exemption, and prior stockpiling efforts, the tariffs are likely to have much less impact than their headlines suggest.

It would also be politically prudent to avoid causing the price of medications to double at a time when many Americans believe the president should be counting reducing inflation as one of his top priorities.

In addition to the pharmaceutical tariffs, President Trump also announced tariffs on a range of other products, including heavy trucks (25%), upholstered furniture (30%), and kitchen and bathroom furniture (50%).

Trump meets Zelensky

President Trump and Ukrainian President Volodymyr Zelensky met last week on the sidelines of the United Nations General Assembly in New York. The tone was dramatically different from that of the ill-fated February meeting between the two (and U.S. Vice President JD Vance).

The most significant outcome was a major public shift in Trump’s stance on the war. The president declared that Ukraine could win back all of its territory from Russia and explicitly endorsed the potential for NATO to use force to shoot down Russian aircraft.

Please continue to check our blog content for advice, planning issues and the latest investment market and economic updates from leading investment houses.

Charlotte Clarke

01/10/2025

Please see the below article from Brooks Macdonald detailing their daily discussions on markets and fiscal/political headwinds. Received this morning 30/09/2025.

What has happened?

Markets saw a global bond rally yesterday, with 10-year UST yields dipping 3.6 basis points, fuelled by a steep 3.45% decline in WTI crude oil. Signals that OPEC+ may boost production at next week’s meeting eased inflation fears and sparked fresh bets on deeper Fed rate cuts. This lifted most assets: US investment-grade credit spreads tightened 1 basis point to near post-1998 lows, while gold surged 1.96% to a fresh record of $3,834 per ounce. Equities edged higher across the board, as the S&P 500 rose 0.26%, inching within half a percent of last week’s record high. Tech led the charge, with the NASDAQ up 0.48%, but gains were generally broad-based with the equal-weighted S&P climbing 0.32%. In Europe, the STOXX 600 rose 0.18% to a two-week high, and the FTSE 100 added 0.16% to a five-week high.

US government shutdown jitters

With just hours to go, the US government teeters on the edge of shutdown unless a last-minute deal materialises today. The longest shutdown lasted 35 days across the 2018-19 year-end period. Historically, most fizzle out in 2-3 days, with only a few stretching beyond two weeks. Last night’s White House talks with Democratic leaders ended in deadlock, with no follow-ups scheduled. VP Vance hinted at openness to bipartisan fixes for expiring health subsidies (a Democratic priority) but only after reopening the government. Democrats dismissed the offer as too vague. Polymarket odds now peg an 79% chance of shutdown by tomorrow and 85% by year-end.

UK budget blues

In the UK, PM Starmer and Chancellor Reeves are laying groundwork for broader tax hikes, testing Labour’s election vows at the Labour Conference. Long-rumoured fiscal tightening now hints at ditching pledges to freeze income tax, payroll tax, VAT, and corporation tax. Starmer’s Tuesday speech is set to warn that ‘rebuilding Britain won’t come cheap’. Chief Secretary Jones stoked VAT rise chatter, while Reeves sidestepped her no-new-taxes refrain, doubling down on fiscal rules to woo markets. Investors, though, are wary: A Deutsche Bank poll ranks the UK second only to France among major economies for a debt crisis risk in the next two years.

What does Brook Macdonald think?

Amid these fiscal and political headwinds, trade tensions simmered anew as Trump outlined fresh tariffs: a 10% levy on imported timber and lumber. The sting is softened for trade partners with existing deals, whose rates stay capped by prior agreements. Meanwhile, US-China friction escalated with the White House expanding its export blacklist to snare subsidiaries of blacklisted firms, possibly affecting giants like Huawei and SMIC. These measures are likely to sustain uncertainty in global trade and supply chains. As the full effect of tariffs is yet to be captured by the real economy, investors need to stay vigilant ahead.

Please continue to check our blog content for advice, planning issues and the latest investment, market and economic updates from leading investment houses.

Alex Clare

30/09/2025

Please see below, an article from EPIC Investment Partners analysing recent movements in gold prices and bond yields. Received today – 26/09/2025

Gold has overtaken the Euro as the world’s second central bank reserve asset and the BRICS continue to ‘de-dollarise’. Overseas demand for US Treasuries is being quietly replaced by increasing demand for gold. Gold is not rising in price – it is the Dollar’s purchasing power that continues to fall and an increasing amounts of the currency are required to purchase an ounce of the metal.

The UK’s Monetary Policy Committee has the sole objective of adjusting Base Rate to achieve an annual inflation rate of 2%. The US Federal Reserve has a three-goal mandate from Congress:

• Maximising Employment: The Fed aims to foster economic conditions that promote the highest possible level of employment. 
• Stable Prices: This objective involves controlling inflation to keep the purchasing power of money stable. The Federal Reserve’s longer-run inflation objective is 2%. 
• Moderate Long-Term Interest Rates: The Fed works to keep long-term interest rates at levels that support economic growth and stability. 

The August UK Base Rate cut, was agreed by a slender 5:4 majority of the MPC, despite an inflation rate significantly above the 2% target. The August number was 3.8%. The Fed’s mandates currently appear mutually exclusive. US inflation at 2.7% although above target compares favourably with the UK, as does the unemployment number of 4.3% versus the UK’s 4.7%. However, downward revisions of US employment numbers over recent months have increased the likelihood of a September Fed Base Rate cut to a near certainty. 

Rising longer dated UK Gilt yields appear to have interpreted August’s quarter point drop as a surrender to above target inflation. The narrow majority in favour of the cut demonstrates the conflicting influences behind the decision. The narrative acknowledges that inflation will peak at 4% in September before falling ‘back to the 2% target after that’. No forecast of timing and no mention of confidence in this outcome. Despite relatively robust US GDP numbers, 10-year Treasuries have moved in the opposite direction, with yields falling back towards 4%. Gold and silver prices have taken the opposing view. Both cannot be right.

I repeat, the price of gold is not rising – it is the purchasing power of FIAT currencies that is falling. We measure returns from equities and bonds in FIAT currency terms, but if we had invested in the S&P 500 and reinvested our dividends from the end of gold’s backing for the Dollar in 1971, measured in gold, the return from the S&P has been zero. The total sum from the investment in US equities would today buy less gold than in 1971. Returns from monetary assets, cash and bonds, have lagged way behind, with 10-year Treasuries having generated negative real returns for the past 100 years. They will continue to do so.

The US dollar lost 75% of its purchasing power through the 1970s while the gold price rose by almost 2000%. It would be unsurprising in the light of the US debt spiral if this is repeated over the current decade. A yield of 4% from 10-year US$ Treasuries will provide no protection. Remember where Paul Volcker took rates last time the Fed faced a period of stagflation? In 1981 ‘The Volcker Shock’ took rates to 20%, unemployment rose and inflation fell and restored confidence in US economy, eventually contributing to a decline in the price of gold. What odds will you give me on the Fed and the MPC raising rates to 20% to restore confidence in the US and UK economies – and currencies?

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Alex Kitteringham

26^th September 2025