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Please see below, an article from Tatton Investment Management, analysing the key factors currently affecting global investment markets. Received this morning – 08/12/2025

Waiting for a Santa Rally

Capital markets felt slightly better last week, with incremental gains. Underlying these moves was a genuine improvement in the outlook. Increased expectations of a Federal Reserve rate cut for December – a near certainty after ADP’s weaker-than-expected employment figures – were a big part of that.

Former Fed governor Rob Kaplan has argued that the Fed should wait until January, since it is better to move too late than move in the wrong direction. We could still find out the labour market is tighter than expected, given the White House’s deportation drive and lack of skilled labour. The Fed is struggling with internal division (Miran cuts a lone dovish figure, but could be joined by Trump ally Kevin Hassett as Fed chair) and a mixed “K-shaped economy”, as discussed below.

US companies, particularly small and mid-cap, are already revising earnings upwards – prompting outperformance of smaller stocks this week. Investors are still worried about valuations. These are stretched almost everywhere relative to history, but after a long upward trend, historical comparisons might not be the best guide. The fundamentals are improving but retail investors still aren’t buying the dip. The cryptocurrency sell-off might have something to do with that, since crypto owners have often been marginal equity buyers. Institutional investors that feel schadenfreude at crypto sell-offs should bear in mind that billions in lost value will inevitably impact stocks too.

Many UK investors that moved to cash ahead of the budget still haven’t bought back into markets – perhaps due to negative budget perceptions in Britain. That’s at odds with the market reaction; UK yields are below pre-budget levels and stocks are holding up decently. Retail stockbrokers have are concerned that those sitting in cash could miss out on the next leg up in global stocks.

The ingredients for a Santa rally are still here, but it’s not happening yet. Thankfully, after such a strong run for most of 2025, it isn’t needed.

November Asset Returns Review

Global stocks were volatile in November but ended just 0.9% down in sterling terms. The longest US government shutdown ever ended midmonth – a relief for market liquidity, as it means money flowing back out of the Treasury General Account (TGA). US stocks recovered somewhat late November but still finished 0.6% down.

The lack of liquidity earlier in the month forced many retail investors to sell assets and crystallise profits from a strong post-April month. The sell-off was clearest in cryptocurrencies, but even Bitcoin stabilised into the end of the month. The Federal Reserve also helped by ending its quantitative tightening (QT) and signalling an interest rate cut in December. The Fed’s minutes suggested “strongly differing views”, but weak consumer data turned the balance dovish. The Bank of England and ECB also signalled lower rates.

That pushed down bond yields, with global bond prices (inverse of yields) gaining 0.2%. UK bond prices gained 0.1%, but with significant variation around the autumn budget (particularly the OBR’s accidental early release). There’s a disconnect between Britons’ negative view of the budget and positive reception from international investors: UK stocks gained, yields fell and sterling strengthened.

Nvidia posted strong Q3 earnings, calming AI bubble fears. They were replaced by fears of weak US consumer-focussed companies and the supposed “K-shaped economy”.

Japanese stocks lost 1.5% last month, yields rose and the yen weakened. This came after Prime Minister Takaichi’s tensions with China and pressure to loosen fiscal and monetary policy. But the Bank of Japan looks more likely to raise rates. China is keeping policy tight too, to strengthen the renminbi. Given Chinese weak economy, stocks fell 3.4%.

Overall, there was a notable role reversal from retail and institutional investors. Unlike earlier in the year, institutional investors are bullish while retail is nervous.

K-shaped economy

Everyone’s talking about the “K-shaped economy”. It’s the idea that most growth is coming from AI, while the rest of the economy languishes. You can see this in the stock outperformance of the ‘Magnificent Seven’ and the recent struggles of consumer-focussed US companies.

It’s not just about tech versus old industry; it’s also about improved spending power of high earners versus stagnation for lower earners. The FT questioned this aspect of the K-shaped economy (US wealth inequality hasn’t moved much in the last few years), but inflation affects lower income consumers differently – typically more – due what gets included in the headline price index. We suspect the popularity of the K-shaped narrative is that this disparity also ties into increasingly polarised politics.

It’s not just the US that’s K-shaped. Global manufacturing has struggled for years while global tech reaps the rewards of AI investment. The headache for monetary policymakers is that the struggling industries need lower rates, but that could overheat the debt cycle for tech companies. Trump’s tariffs are aimed at rebuilding that old industry. The AI capex race could bridge the divide itself, by dragging money from financial assets into the real economy. AI buildout requires significant infrastructure investment which we are already seeing – already benefitting energy companies, for example.

The AI capex race won’t magically fix political division and inequality (neither will tariffs) but in terms of the AI-v-others, the prospects are better. We’re already seeing a big infrastructure push, particularly in Europe, while AI-related profits are seemingly plateauing (at a high level) as tech competition intensifies.

The change of fortunes could also be helped by the recent role reversal from institutional and retail investors – the former now feeling more bullish than the latter. Institutional investors tend to prefer a bargain, which benefits lesser loved stocks. Markets, at least, might not stay so K-shaped.

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

Marcus Blenkinsop

8^th December 2025

Please see below, an article from EPIC Investment Partners which discusses the opportunities for investing in sovereign debt of the Gulf States. Received today – 05/12/2025

The way global markets classify countries is looking increasingly detached from economic reality. Nowhere is that clearer than in the Gulf, where Saudi Arabia, the United Arab Emirates and Qatar remain grouped with emerging markets despite having balance sheets that many developed economies would struggle to match. The label has persisted largely through convention, and the result is a consistent mispricing of sovereign risk.

The characteristics usually associated with emerging markets—weak currencies, reliance on foreign lending and chronic external deficits—bear little relevance to these states. Saudi Arabia and the UAE run structural surpluses, maintain stable dollar-linked exchange rates and hold some of the strongest external positions in the global economy. Saudi Arabia’s net foreign asset position is roughly 140 per cent of GDP, while the UAE and Qatar both exceed 250 per cent. These are creditor nations: they have accumulated large external surpluses over decades and continue to compound them through sovereign wealth funds that rank among the world’s largest.

The comparison with much of the G7 is stark. The United States, despite acting as the world’s reference borrower, holds a net foreign liability position of around 75 per cent of GDP and carries a gross public debt burden of roughly 120 per cent of output. The UK and France run persistent primary deficits and face debt paths that have become increasingly sensitive to interest rates. If the IMF applied the same solvency tests to advanced economies that it routinely applies to emerging ones, several developed nations would find themselves in uncomfortable territory while the Gulf would pass without debate.

Yet the market continues to price these creditor states as though they share the vulnerabilities of far weaker peers. Saudi Arabia, rated A+, trades at a spread over US Treasuries despite having a cleaner balance sheet by almost any measure. Abu Dhabi’s yields routinely move with broader emerging-market sentiment even though its external position is stronger than that of Germany, France or Japan. Qatar’s bonds can be caught in the same swings despite its substantial excess of assets over liabilities.

Index construction plays a significant role in this anomaly. Passive flows are driven by benchmark classification, and if a benchmark groups these names with more troubled sovereigns, they will move together regardless of underlying strength. But the deeper issue is that the term “emerging market” has not kept pace with the economic transformation of the Gulf. When a country such as Saudi Arabia—with net foreign assets well above 100 per cent of GDP—is priced at a spread of about 70 basis points over a US sovereign that carries one of the world’s largest external liabilities, something has gone awry in the market’s calibration of risk.

The arbitrage window, however, will not remain open indefinitely. The sheer weight of capital recycling in the Gulf is creating a local bid that dampens volatility, gradually decoupling these bonds from broader EM betas. We are witnessing a slow-motion repricing where the market acknowledges that the safest credits in the emerging world are, in fact, safer than much of the developed world. Until the major indices redraw their maps to reflect this solvency reality, the Gulf will remain a singular opportunity: a region of fortress balance sheets trading at a discount, simply because the labels haven’t kept up with the money.

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

Alex Kitteringham

5^th December 2025

Please see the below article from EPIC Investment Partners detailing their discussions on global market growth and emerging markets. Received this morning 04/12/2025.

The OECD’s latest Economic Outlook presents a global economy that remains resilient, though increasingly strained by rising trade barriers and persistent policy uncertainty. Global growth is forecast at 3.2% in 2025, easing to 2.9% in 2026, with the OECD warning that this path is vulnerable to escalating trade tensions and possible market corrections if current AI-related optimism does not fully materialise.

In the United States, the OECD expects growth to slow to 2% in 2025 and 1.7% in 2026 before edging back to 1.9% in 2027. The moderation reflects cooling employment growth, sharply lower net immigration, the tariff-induced rise in consumer prices, and significant cuts to non-defence discretionary spending. As these effects fade and disinflation resumes, activity is projected to move back toward potential. A key downside risk is an equity market correction, given valuations supported by expectations of strong AI-driven earnings, though genuine AI breakthroughs could deliver upside. With labour market risks rising and underlying inflation appearing contained, some monetary easing in 2026 may be warranted. Fiscal policy remains on an unsustainable trajectory, requiring a multi-year consolidation alongside reforms to increase housing supply, upgrade infrastructure, and ease labour shortages.

China’s growth is projected at 5% in 2025, slowing to 4.4% in 2026 and 4.3% in 2027. Consumption is expected to soften due to elevated precautionary savings and the unwinding of recent durable goods incentives. Property investment and prices are likely to decline further as excess capacity is absorbed. The government’s anti-involution campaign is set to moderate business investment, though infrastructure spending should strengthen under the new Five-Year Plan. Export performance will remain constrained by higher US tariffs. Key risks include industrial overcapacity and persistent trade uncertainty, while new reforms could bolster private investment. Monetary policy remains supportive but constrained by pressure on bank profitability, leaving fiscal policy to play a larger role.

Emerging Markets remain the brightest part of the global outlook, with Emerging Market and Developing Economies projected to drive nearly two thirds of world growth over the next decade. Improved policy frameworks, stronger reserves, favourable demographics, resource endowments, and rapid digitalisation continue to support competitiveness, led by India, the fastest-growing major economy.

This environment continues to support our EPIC Fixed Income strategy, which favours wealthy, undervalued EM sovereign and quasi-sovereign bonds. Notable examples include Pemex 2050s, up roughly 29% year-to-date (end-Nov), supported by strong government backing; similarly, Mexican utility CFE 2052s, have rallied 19%; the Saudi PIF-issued green bond, GACI 2052s, returned ~15%; and the strategically important Abu Dhabi Crude Oil Pipeline 2047s, up about 12%. Even credits that have moved closer to fair value, such as Chile’s state-owned Empresa Metro 2050s, have posted gains exceeding 14%. Taken together, these results highlight the compelling opportunities still available in select EM credit, particularly where balance-sheet strength and sovereign support remain under appreciated by global markets. By comparison, the Bloomberg Global Aggregate Index has returned 5.08%, underscoring the relative strength of select EM credit opportunities.

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

04/12/2025

Please see this week’s Markets in a Minute update below from Brewin Dolphin, received yesterday afternoon – 02/12/2025.  

What the Autumn Budget means for the UK economy

We dissect the Autumn Budget and how it’s impacting investor sentiment.

Key highlights

• Stocks rebound: Renewed expectations of a Federal Reserve rate cut supported stocks.
• UK Autumn Budget: Markets welcomed the enlarged fiscal buffer, which shows Chancellor Rachel Reeves’ commitment to her fiscal rules.
• U.S. data weakens: Economic data came in softer than expected across several fronts, including retail sales and consumer confidence.

Markets regained momentum last week, with global equities rebounding.

Sentiment was supported by renewed expectations of monetary easing in the U.S., as incoming data pointed to a softer economic backdrop.

While the overall market tone remains one of caution due to lingering concerns over high U.S. artificial intelligence (AI) stock valuations, investors cheered on improved rate cut expectations and signs of near-term fiscal clarity.

In the UK, all attention was on the Autumn Budget, which highlighted the government’s efforts to balance fiscal responsibility with the need to sustain near-term activity.

The Budget was broadly viewed as fiscally conservative. Chancellor Rachel Reeves announced a much larger fiscal headroom of £21.7 billion, a figure more than double the £9.9 billion previously projected. This headroom was achieved by a combination of more favourable forecasts from the Office for Budget Responsibility (OBR) and a sizeable package of tax rises.

Source: OBR Economic and fiscal outlook, November 2025

Markets interpreted this larger fiscal buffer as a signal of discipline, particularly at a time when gilt investors have been wary of potential policy slippage. Gilt yields fell modestly after the announcement, and the pound edged higher, reflecting a constructive reaction to the government’s strengthened capacity to meet fiscal rules.

Autumn Budget shows fiscal pain to be backloaded

It was well known that the chancellor would need to cut spending or raise taxes, as changes to the OBR’s growth forecasts meant she was no longer on track to meet her fiscal rules.

In response, she is increasing borrowing in the near term, while raising the tax burden later. In practical terms, this means ‘pain is backloaded.’ This will mainly be achieved through £26 billion in tax increases, three quarters of which won’t be implemented until April 2028.

Amongst the main measures announced were:

• Freezing income tax thresholds until April 2031, which will raise an estimated £8 billion in the 2029/30 tax year.
• Subjecting salary sacrificed pension contributions above £2,000 to both employer and employee National Insurance contributions from April 2029, which will raise an estimated £4.7 billion in the 2029/30 tax year.
• Increasing income tax rates on dividends, property, and savings by 2%, which will raise an estimated £2.1bn in the 2029/30 tax year.

On top of these revenues of almost £15 billion from personal tax increases, a further estimated £11 billion in revenue is to be achieved from a series of smaller measures.

While fiscal tightening is backloaded, spending measures were frontloaded, consisting mainly of £10 billion of welfare measures (including the expected removal of the two-child benefit limit).

Overall, the Budget remains modestly contractionary for growth across the forecast period. There’s frustration amongst businesses over the lack of a pro-growth spirit or constructive strategies to tackle dire productivity growth.

While the Budget isn’t expected to materially reshape the interest rate outlook, it also doesn’t stand in the way of the Bank of England (BoE) cutting rates in December. Against the mildly growth-supportive loosening of policy in the near term, the package announced also included measures which the OBR estimates will reduce Consumer Price Index (CPI) inflation by 0.5% in Q2 2026. This includes freezing rail fares, extending the fuel duty freeze, and an energy bills package that aims to reduce bills by an average of £150 per year from April 2026.

Source: OBR Economic and fiscal outlook, November 2025

Encouragingly, the OBR’s inflation forecasts show CPI inflation at 2.4% in Q2 2026, an improvement to the BoE’s forecast of 2.9% year-on-year made in its November Monetary Policy Report. Financial markets continue to price in a high probability of a BoE rate cut in December, citing muted growth and moderating inflation trends.

Looking beyond the near term, longer-term fiscal challenges remain. The OBR now projects the UK tax-to-GDP (gross domestic product) ratio to reach a new all-time high of 38.3% in 2030-31, markedly above its projection in March.

While the chancellor’s efforts may offer short-term reassurance to investors, structurally higher tax burdens risk reducing incentives for both businesses and workers. That could weigh on investment decisions and growth trends over time, particularly if economic momentum weakens more than anticipated. If tax receipts fall short because of weaker growth, this may reignite concerns for higher taxes or increased borrowing in the future.

For detailed commentary on the Budget and its implications for personal finances, please refer to our accompanying insight article here.

Weak U.S. data fuels December rate cut bets

Turning to the U.S., recent economic data came in softer than expected across several fronts, reviving expectations of a December rate cut.

September retail sales increased by just 0.2% month-on-month, which was much lower than both experts’ anticipations and August’s figures. Weakness was seen in motor vehicle sales and discretionary categories.

November data from the Conference Board showed that consumer confidence saw its highest decline since April, with forward-looking measures falling to their lowest in over a year. Part of that could be related to the prolonged government shutdown, but it also revealed rising concerns around income security and the labour market. For instance, the share of consumers that expect their incomes to rise in the next six months fell to the lowest level since February 2023. The views on current and future business conditions deteriorated.

In addition, U.S. regional manufacturing surveys like the Richmond Fed Manufacturing Index pointed to further moderation in activity. Meanwhile, producer prices came in below expectations, which indicated that tariffs haven’t materially impacted factory gate prices.

The broad U.S. data tone suggests that the economy is still expanding, but at a slower pace, and that price pressures will continue to ease due to the cooling labour market.

The Federal Reserve (the Fed) won’t receive another employment report before its December meeting, and visibility on inflation will also be more limited than usual. Traders initially viewed a December pause as the most sensible course of action. But last week’s range of weaker-than-expected data changed that narrative. The market is now pricing in an over 80% chance of a December rate cut.

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

03/12/2025

Please see below, an article from Brooks Macdonald, outlining the key factors currently impacting global investment markets. Received this morning – 02/12/2025

What has happened?

Markets stumbled at the start of December, with equities, bonds, and crypto all under pressure. Bitcoin slumped -5.2%, while the S&P 500 fell -0.53%, snapping a five-day winning streak. The Russell 2000 dropped -1.25%, and nearly three-quarters of S&P constituents ended lower. Tech held up better, with Nvidia rebounding +1.65%. The sell-off was driven by a surge in global bond yields, sparked by hawkish comments from Bank of Japan Governor Ueda that pushed 10-year JGB yields to their highest level since the Global Financial Crisis. US Treasuries followed suit, with 10-year yields jumping +7.2bps, which was the biggest daily rise in nearly four weeks. Stagflation fears added fuel, as the US ISM manufacturing index disappointed and higher oil prices compounded concerns.

Japan triggers global bond repricing

Ueda’s remarks have investors pricing in a near-certain December rate hike from the BoJ, sending Japanese yields to multi-decade highs. The 10-year JGB closed at 1.86%, its highest since 2008, while the 30-year hit 3.37%, a record since issuance began in the late 1990s. Even the 2-year breached 1% for the first time since the Global Financial Crisis.

Europe and UK also under pressure

European markets mirrored the global risk-off tone. The STOXX 600 slipped -0.20%, while the DAX fell -1.04%. Bond yields climbed across the region, with 10-year Bunds up +6.1bps and OATs up +7.5bps. Data offered little relief as Eurozone manufacturing PMI was revised down to 49.6, still signalling contraction. In the UK, the FTSE 100 eased -0.18%, broadly in line with European peers. The head of the OBR resigned following a premature release of budget analysis.  However, that wasn’t a market moving story, and the rise in 10yr gilt yields (+4.1bps) was more muted than in other countries yesterday. Data-wise, UK mortgage approvals for October came in at 65k, slightly above expectations but still within the 18-month range of 60–70k, underscoring a housing market that remains subdued amid higher borrowing costs.

What does Brooks Macdonald think?

Today’s focus may shift to geopolitics, as Trump’s envoy meets President Putin in Moscow to discuss US proposals for ending the war in Ukraine. While recent talks have been described as “productive,” Kyiv remains firm on territorial issues, suggesting any breakthrough is still some way off. Markets will watch closely for signs of progress, but for now, rate expectations and growth concerns remain the dominant drivers.

Bloomberg as at 02/12/2025. TR denotes Net Total Return.

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

Marcus Blenkinsop

2^nd December 2025

Please see below, an article from Tatton Investment Management, analysing the key factors currently affecting global investment markets. Received this morning – 01/12/2025

Markets give thanks to central banks

Capital markets had a good week. Headwinds are abating and optimists see a Santa Rally building, while pessimists see only markets not going higher.

We talk more about the UK budget below, but in short, markets took it well. Significant capital came out of UK portfolios in anticipation of wealth tax changes that never came. If that returns, it’ll boost UK assets. We also note that international investors see the UK as a better destination than many Britons. With the budget over, the government can issue more bonds and it’s skewing issuance towards the short end – taking pressure off long-term yields. Yields are also helped by the Bank of England’s likely interest rate cut in December.

Yields fell in most markets, thanks to a dovish Federal Reserve. Fed officials are still divided, but the dovish members are getting more airtime and recent consumer weakness has pushed the implied probability of a December cut up to 80%. The ECB is also split, but recently weak economic data suggests it will cut rates next year. Japan and China are the outliers: the BoJ disagrees with Prime Minister Takaichi’s wish for yen weakness, and Beijing is intent on pushing its own currency higher. That’s surprising, given China’s weak economy, but renminbi strength is more about status than economics.

US monetary policy is looser and the government reopening means its money will flow into the system again. This improves liquidity, helping risk sentiment. The good mood has spread beyond the big tech names – with smaller companies benefitting more from upcoming rate cuts. For most of the year, retail investors were bullish and institutional investors were nervous. Now, those roles have flipped: retail fears an end to the three-year bull market, while institutional investors see strong earnings, supportive policy and strong AI capex. This could create a capital rotation to the lesser loved stocks – as institutional investors tend to prefer a bargain to the momentum factor. That broadening of the market wouldn’t be a bad thing.

Don’t bet against the budget

The Office for Budget Responsibility’s (OBR) accidental early release of its assessment was an appropriate finish to a leaky autumn budget buildup. We’ll keep our analysis to how the budget might affect UK growth and assets.

The budget aims to raise £26bn in extra revenue, with the biggest share coming from a freezing of income tax bands until 2031. The tax take will be delayed; no rises now but higher real (inflation-adjusted) costs later on. Other measures include a raid on pension contribution tax breaks and higher dividend taxes, while there was some relief for benefits and small businesses. The OBR now predicts £22bn fiscal headroom for Chancellor Reeves, but downgraded its 2026 UK growth forecast to 1.5%.
Markets considered this a decent growth-deficit compromise. Gilt yields were volatile on Wednesday – falling on the OBR’s early release then rising on fears of delayed fiscal consolidation (and the possibility the government might later cave on fiscal discipline). Yields ended the week significantly lower, proving the OBR’s mishap was much ado about nothing. The fact stocks rose and sterling strengthened proved markets approved, on balance.

We’ve written about the UK market’s liquidity problem before, and on the face of it you would think pension raids and dividend taxes might exacerbate it. But higher dividend taxes will likely encourage share buybacks. These are systemically liquidity-neutral but can be an important source of short-term liquidity.

Because UK investors aren’t lately heavily investing in their own assets anyway, Britain’s markets are more sensitive to international investor sentiment, which tends to be more positive than domestic sentiment. For international asset holders, the government’s aim of getting interest rates down and containing the deficit is a positive. It hasn’t been a smooth ride, but the market reaction suggests the Chancellor is getting there.

Almost all S&P 500 companies have reported Q3 earnings, and the blended average shows 13.4% year-on-year growth. The ‘Magnificent Seven’ tech stocks posted their lowest growth since Q1 2023, but the 18.4% profit expansion is still higher than the rest of the index. Future earnings forecasts show an acceleration for the Mag7. There’s life left in the AI boom yet.

Other American companies have closed the gap, with the so-called S&P 493 (500 minus Mag7) comfortably beating expectations to post 11.9% growth. Many thought the last quarter would be tough, with looming tariffs and unhappy US consumers, so the earnings beat is welcome.

Q4 looks tougher for the S&P 493, with only 3.4% year-on-year growth expected. It’s a crucial time for retailers, as tariff and consumer spending doubts remain. It was also the quarter of US government shutdown, hampering economic activity. We could get another surprise, though. Companies usually lower their earnings guidance to generate an earnings ‘beat’ and boost their share price – but that didn’t happen for Q3. Analysts downgraded forecasts after ‘Liberation Day’ but then many companies stopped issuing guidance altogether, so forecasts stayed static. We wondered if that sapped potential for a ‘surprise’ but Q3 delivered one anyway.

Q4 and Q1 2026 forecasts haven’t moved much either – perhaps because tariff effects are still uncertain and the government shutdown has prevented data releases, or perhaps because analysts are fed up of the old ‘downgrade and beat’ routine. It’s hard to know what the static forecasts mean: are companies more resilient than expected, or will future earnings not beat as usual (or perhaps even disappoint)? If Q4 earnings came in as they are forecasted now, it would be weaker than recent quarters. That would certainly add to the current ‘AI bubble’ fears. Fortunately, there’s not much evidence that will happen in the earnings reports themselves. Overall, it’s been a good earnings season for investors.

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

Andrew Lloyd

1^st December 2025

Please see below, an article from EPIC which provides some analysis of the possible economic effects of yesterday’s Autumn Budget, with our own thoughts at the end:

There were few surprises left for the budget after such extensive briefing beforehand of what we should expect. The forecasts are a bit more pessimistic, and the government did need to raise considerable extra tax revenue to help pay for its substantial increases in public spending. They plan to spend £185 bn more next year than in 2023-24, the last full year of the previous government. The budget has added to the costs with the announcement of ending the two-child limit on additional benefits and some other smaller items.

The 2024 budget put up taxes on employing people and on people with savings and investments. As a result, more people left the UK over the last year to seek a job or set up a business in a lower tax jurisdiction, or to take their current wealth to somewhere where they will keep more of it. Dubai, Italy and the US have been attractive places for people both with talent and with wealth. This budget mainly aims for more Income tax revenue in the later years of their forecast from continuing to freeze the tax thresholds. This means 780,000 more people will have to pay 20% tax, 920,000 more people will be pushed into the 40% tax band, and 4,000 more into the highest 45% band.

The strict limitations now imposed on salary sacrifice will bring in £4.7 bn of extra National Insurance. Taxes on dividends, property and savings will go up by an additional 2%, raising an extra £2.1bn. There will be a £5.6bn bonus for the government next year by valuing up the student loan book, given the policy of easier terms for repayment leading to an OBR improved eventual repayment level.

There will be a tax on driving an EV car at 3p per mile, a higher Council tax charge on homes over £2m in value following revaluations for Council tax purposes, an increased gambling tax for online betting, a reduction in writing down allowances for Corporation tax and less capital gains tax relief on employee ownership trusts.

The Office for Budget Responsibility sets out forecasts for the economy that determine how much the Chancellor needs to raise in taxes to keep the deficit under some control. They have downgraded their forecast of future productivity growth after years of overestimating it.

The government rightly wants to help create faster growth, as that brings in more tax revenues and cuts down on benefits for the unemployed. The bond market too wants faster growth to help bring down the deficit it has to finance. This budget is not helpful to growth with further tax rises on property, gambling and some processed foods with Income tax restricting real income growth in spending. The bond markets may be temporarily pacified by the fact the government sees the need to collect more revenue to pay for its higher spending and does not want to rely on more borrowing. It will however be concerned in case the same thing happens this year as last, leading to the need for even higher taxes in 2026.

The government will continue to seek growth from more defence orders with a benefit for domestic armaments manufacture. It will continue to run down the oil and gas industry faster, ban all new diesel and petrol cars from 2030 leading to rapid factory closures in vehicle making, and will see further decline in petrochemicals, steel and other high energy using businesses. It will promote more investment in renewables and grid. The public accounts will see further and bigger steel, rail, Post Office and Bank of England losses to pay for.

The UK economy has been performing well in business and financial services, legal and other professional advice, where exports have been growing strongly. These will continue to supply some offset to the bad news from industry and farming. The UK has been a ‘cheap’ equity market for some time, putting in a better performance this year as investors came to see some of the potential of the more successful companies. UK government bonds offer a better yield than other advanced countries, making them relatively attractive. Whilst the UK has budget deficit and spending issues, so do most of the other advanced countries.

This budget will disappoint many small business owners, property owners and savers who wanted some relief from high taxes. It does enough to avoid a market meltdown, leaving investors free to examine the pockets of value that are apparent in little loved UK sectors. The government has a productivity problem to resolve and needs to rebuild confidence after the damage done by tax rises and fears of more tax rises. Its growth strategy rests heavily on capital investment led by the public sector, concentrated on energy and transport. The OBR forecasts reveal that they do not think the government will achieve its 1.5 m new homes target in five years, given the sluggish state of the property market for its first two years in office. The jury remains out on how the UK economy can grow at a faster rate and this Budget does not make the way forward any clearer.

Comment

The Chancellor yet again opted for the ‘Smorgasbord’ approach to revenue raising in this Budget, making lots of adjustments across a wide range of taxes. The worry is that the tax rises will suppress economic growth, cancelling out any uplift in productivity or output from the spending increases.

The OBR’s downgrade of productivity growth reflects years of stagnation and overoptimism on their part, but the changes announced yesterday are unlikely to have any real positive impact. The Chancellor’s munificent tone in the first half of her speech was not backed up by the policies.

The bond markets weren’t spooked by the Budget and focused on the fiscal prudence, but without any broader changes to improve growth and productivity, we will be beholden to ever rising taxes to keep them in check.

With tax thresholds frozen, planning to maximise tax efficiency is more important than ever. Making use of all available allowances, as well as structuring assets across a range of tax wrappers, will help to preserve our assets against this backdrop.

With sound planning, we can navigate the changes and put ourselves in the best financial position.

Alex Kitteringham

27^th November 2025

AJ Bell Budget Update – How Budget changes might impact your money

Please see below, AJ Bell’s Technical Analysis of yesterday’s Autumn Budget, with a comment from us at the end:

Among a raft of changes, chancellor Rachel Reeves announced reforms to salary sacrifice as well as increases to income tax on savings and dividends as she attempts to bridge the gap between spending and revenue in the UK’s finances.

The protracted leadup to the Budget included rumours around gifting limits and a hike in employee income tax. However, these were not introduced. Instead, tax rises are centred on dividends, interest on savings, and additional council tax for high-value properties. Tax threshold freezes will also continue, and the rules around salary sacrifice are set to change so that contributions over £2,000 will be subject to national insurance.

The subscription allowance for Cash ISAs has also been reduced to £12,000 each year for those under age 65. Stocks and shares ISAs remain at the £20,000 limit.

Here’s a breakdown of the main policy changes in the Budget, when they come into play, and how they could affect your finances:

Limit on salary sacrifice

Beginning in April 2029, salary sacrifice will have a £2,000 limit on pension contributions each year that are not subject to national insurance. After this point, both employees and employers will face national insurance on their contributions. Salary sacrifice currently helps workers save up to 8% in employee national insurance on the cost of their pension contributions. The below table shows the impact on employee’s pay packets per year, assuming the employee has agreed to exchange 6% of their notional salary for a pension contribution, with a 6% matched contribution from their employer.

Despite the new national insurance cap, pension contributions will still be exempt from income tax and workers can continue to enjoy pension tax relief up to their marginal rate of tax. Plus, making pension contributions to schemes like SIPPs will still reduce a taxpayer’s ‘adjusted net income’, pulling them out of higher rate tax while also boosting their retirement savings.

Rather than making a formal arrangement to keep their salary below a certain level, workers will need to work out what extra contributions they need to make to reduce their ‘adjusted net income’. This will involve a little bit of extra admin but will still be well worth it when you consider the potential tax savings on offer.

Lifetime ISA scrapped

The government will be making a new product available in early 2026 to replace the Lifetime ISA. It will attempt to create a simpler ISA product, focused on helping first-time home buyers. The Budget does not mention if the refreshed vehicle will encompass the other main purpose of Lifetime ISAs, which is as a means of building a retirement pot.

In the 2024/2025 tax year, 87,250 individuals took money out of their Lifetime ISA to purchase a home and about 960,000 people subscribed to a Lifetime ISA, according to the Office for National Statistics. These wrappers currently allow for subscriptions of up to £4,000 each year with a 25% government top up.

Withdrawals can be used to buy a first home with a value of £450,000 or less or for an income in retirement after the age of 60. Withdrawals for any other reason are subject to a penalty charge except in a few exceptional circumstances.

Reduction of Cash ISA allowance

While Stocks and shares ISAs will maintain their £20,000 annual subscription allowance, Cash ISAs will have a £12,000 subscription limit each year beginning in April 2027. This limit will not apply to those over the age of 65.

For those searching for cash alternatives following the policy change, there are ways to create cash-like holdings within a Stocks and shares ISA. These include money market funds, treasury bills, or low-risk, multi-asset instruments which have large cash holdings.

Tax threshold freezes

Tax threshold freezes have been extended for another three years until 2031, meaning income bands will be on track to stay the same for the best part of a decade. The cumulative effect of the freeze means people are seeing their tax bills rise dramatically when compared to a scenario in which thresholds had increased in line with inflation each year. Extending the freeze until 2031 will cost individuals up to £1,293 in extra tax over the next three years, according to AJ Bell’s calculations.

The extent of the tax hit is dictated by how much you earn, with an extra tax bill of £683 over the three years for someone on £45,000 or £1,293 for someone on £70,000.

More than 8.3 million people are now paying higher or additional rate tax, up by 45% since 2021, and extending the freeze will push even more working people and pensioners into higher tax bands.

If there had been no freeze, the OBR estimates that the personal allowance would have been £17,470 by 2030/31 and the higher rate threshold would have been a whopping £20,100 higher – standing at £70,370.

If you take Reeves’ extension to the freeze alone, the personal allowance would have stood at just over £13,353 by the 2030/31 tax year – instead it will remain stuck stubbornly at £12,570.

Increased tax on dividends

Both basic and higher rate taxpayers will face an increase of two percentage points in the amount they pay on dividend income starting in April 2026. This means that basic rate taxpayers will now face a 10.75% tax while higher rate taxpayers face a 35.75% tax. There is no tax increase for additional rate taxpayers from their current 39.35% rate.

If dividend-paying investments are held in an ISA or pension, there will be no dividend levy to pay. Outside of these wrappers, investors will have a £500 tax-free dividend allowance before they begin to be taxed at the above rates.

For example, if a basic rate taxpayer was earning a 4% yield on a £100,000 portfolio, their tax bill would increase from £306.25 at the current 8.75% rate to £376.25 at the new rate (10.75% of £3,500).

Increased tax on savings income

Savings income will also see a 2% tax increase for all levels of taxpayer beginning in April 2027. Basic rate taxpayers will pay 22%, while those in the higher and additional rate brackets pay 42% and 47% respectively.

Thanks to the extended freeze on income tax bands, more people will be pushed into a higher tax band, resulting in a cut to or loss of their tax-free savings allowance. Basic rate taxpayers have a tax-free savings allowance of £1,000, but it decreases to £500 for higher rate taxpayers and there is no allowance for additional rate taxpayers.

For someone with £5,000 of savings interest above their personal savings allowance, the tax increase will cost them an extra £100 a year in tax.

Over 10 years, a higher rate taxpayer with a £50,000 savings pot earning 4% interest (£2,000) will face £380 of additional tax thanks to the increase. A basic rate taxpayer will face £135 in extra tax across the same period.

Additional tax for high value properties

Starting in April 2028, owners of properties valued at more than £2 million will be subject to an additional yearly charge on top of their existing council tax bill in a so-called ‘mansion tax’.

The surcharge will begin at £2,500 and scale in bands to £7,500 for those with properties valued at £5 million or more. These levies will increase over time on an annual basis in line with consumer price inflation.

OBR estimates that this tax will be factored into the price of properties over time and result in price bunching below each band on the scale.

Stamp duty waived for new shares

In a rare bright spot for investors, the Budget introduced an exemption of stamp duty for newly listed stocks in the UK for the first three years. Investors currently pay stamp duty of 0.5% on share purchases. The waiver aims to boost demand for new additions to the market and thereby increase the appeal of London to businesses considering a stock market listing.

Our Comment

From my point of view this Budget did not focus enough on growing our economy here in the UK.  Unfortunately, the factions within the Labour party appear to be constraining any real focus on business growth.

The impact of this Budget over the next few years is that we are all going to be paying more taxes.  This includes the core Labour voters.  As a result, domestic consumption could be impaired.

Businesses and individuals will need to plan to alleviate the impact of some of the Budget measures.  It is more important than ever that we use the allowances and reliefs available to us while we have them.

I’m hoping for more output focused on economic growth, we will see.  This morning I’ll be listening to a technical review of the Budget.  We will keep you posted.

Steve Speed

27/11/2025

Please see this week’s Markets in a Minute update below from Brewin Dolphin, received yesterday afternoon – 25/11/2025.  

Stocks rebound despite AI bubble concerns

Markets responded positively to new AI applications and tech firm earnings results following last week’s performance slump.

Key highlights

• Artificial intelligence (AI) bubble concerns grow: Nvidia’s earnings report impressed, but valuation concerns dominate sentiment.
• Foggy view of U.S. data: Markets think a December interest rate cut is less likely, as limited data visibility favours a pause.
• Nerves ahead of the Autumn Budget: Weak UK economic data lays bare the challenging backdrop that’s confronting the chancellor.

Markets hit a wall last week

Markets traded with a more cautious undertone last week, as concerns around stretched AI valuations linger despite Nvidia once again reporting an outstanding quarter. U.S. economic data provided little clarity ahead of the December Federal Reserve (the Fed) meeting, while UK indicators weakened further ahead of this week’s Autumn Budget.

Let’s kick off with AI, and markets were nervous ahead of the highly anticipated Nvidia earnings results on Wednesday.

As the poster child and arguably one of the biggest beneficiaries of AI, Nvidia is in a position to make or break the AI enthusiasm that has propelled global stock markets to record highs this year. But it once again beat high expectations and delivered a stellar report card. Revenue increased 62% year-on-year (YoY), and earnings per share surged 67% YoY against a tremendous base, both handily above expectations.

In terms of outlook, Nvidia highlighted continuously strong demand for AI data centres, high utilisation rates, and continued momentum in new platform deployment. CEO Jensen Huang said demand for Blackwell (its top AI chip infrastructure) is “off the charts”. Broader integration across software and networking reaffirms Nvidia’s competitive advantage. As a result of its moat (its long-term competitive advantage), the business is highly profitable, with an impressive 75% gross margin guided for Q4 2025, despite the surging cost of memory chips.

MSCI World Index showed a decline in performance

Source: Bloomberg

However, market reactions show sentiment has turned fragile on AI. Nvidia and the broader AI-related stocks initially rallied but reversed intraday to end the session lower. With Nvidia now comprising around 8% of the S&P 500 index, its price movement has a significant influence on the broader market. This behaviour suggests even companies with exceptionally strong fundamentals and growth prospects face a valuation reality check. It could simply come down to investors taking profits before year-end across a sector that has performed so well.

It’s too early to say that the AI rally is over, but we’re entering a stage where investors are putting more scrutiny on aspects such as return on investments and valuations.

The long-term AI opportunity remains intact. Demand for compute capacity (the total amount of computing resources available to process data), infrastructure upgrades and AI adoption continues to accelerate. However, the market discussion has shifted from pure growth momentum to valuation and over-investment risks.

While we believe that AI will be a transformative technology, there are lingering questions about whether the returns generated by providers of AI services will be high enough to justify both the massive levels of investment, and the extended valuations the AI picks and shovels plays trade on. In addition, the S&P 500, excluding the so-called ‘Magnificent Seven’, also trades on a large price-to-earnings premium compared to the World ex U.S. market. Therefore, we hold a neutral view of U.S. stocks for now.

The U.S. unemployment rate rose

Another highly anticipated event last week was the release of the September U.S. employment report, which was significantly delayed due to the U.S. government shutdown.

The report showed 119,000 new jobs were created over the month, well above the 51,000 expected. However, the unemployment rate edged higher from 4.3% to 4.4%. This was the third consecutive monthly increase, defying expectations of no change. This is likely to add to the dovish view within the Fed.

U.S. unemployment rose to 4.4%

Source: Bloomberg

However, the Fed will not receive another jobs report before its December meeting, and visibility on inflation data is expected to remain more limited than usual due to the previous government shutdown. With the labour market a bit weaker (but still generating jobs), and conditions not deteriorating sharply, most investors now view a Fed pause in December as the most appropriate and likely scenario.

Markets have reduced expectations for a December interest rate cut, and further policy easing is considered more likely from 2026 if inflation and growth slow.

Economic trouble for the chancellor

In the UK, the data flow remained weak ahead of this week’s Autumn Budget. October retail sales fell by 1.1%, while the private sector business survey (PMI) suggested the economy was stagnant. Fiscal indicators have deteriorated, with the fiscal deficit widening more than expected in October.

This is an economic backdrop that makes it hard to raise taxes without further dampening growth, but it’s widely speculated that this is what Chancellor Rachel Reeves will do.

One silver lining is that inflation is heading in the right direction, albeit slowly. Headline UK CPI (Consumer Price Index) slowed from 3.8% to 3.6% while core inflation slowed from 3.5% to 3.4% in October. Services inflation, which is closely monitored by the Bank of England (BoE) as a measure of domestic price pressure, softened from 4.7% to 4.5%, falling below expectations.

The UK Consumer Price index slowed to 3.6%

Source: Bloomberg

A lower inflation trajectory helps support the case for a rate cut in December. Markets are pricing in a very high chance of that happening. Ultimately, whether the BoE will proceed with that depends on Governor Andrew Bailey’s swing vote. The latest inflation figure probably ticked a box, but we still need to see how the Budget goes.

Overall, last week’s market action reflected a more cautious stance. AI remains the dominant structural theme, but greater scrutiny is being applied now, so the bar for a further rally is high at this stage.

In the U.S., job growth continues, but there are signs of cooling. In the UK, data confirms a weakening backdrop ahead of significant fiscal decisions that ultimately impact growth.

Staying diversified remains highly relevant in this environment.

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

26/11/2025