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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 – 15/09/2025

Markets’ outlook preference turns positive

It was a slightly confusing week. US 30-year government bond yields dropped sharply – suggesting weaker growth expectations – but small cap stocks had a strong week, suggesting the opposite. In a sense, both narratives are true. Weaker US jobs data suggests slower growth, but locked in a Federal Reserve rate cut this Wednesday. Incoming tariff revenues also make the US a more reliable borrower, making treasury bonds look like good value. 

Stock markets, on the other hand, see decent corporate profits for large cap stocks. Small caps have struggled with high borrowing costs, but those will fall as the Fed eases and growth rebounds. Investors are looking through the current slowdown to improvement later on. 

Moreover, American business sentiment is still strong – and inflation is picking up. We calculate that 3-month annualised inflation is now running above 4%. Companies feel they can pass on tariff costs, so inflation will likely continue over the next few months. Does that mean the Fed shouldn’t cut? Not really, as their focus in on weak employment, which makes a wage-price spiral unlikely. US economic resilience means there is no emergency to cut rates – but on balance they are probably a little too high. 

The rosy stock market view doesn’t match up with current geopolitical tensions either. Neither Russia’s polish incursion of Israel’s strike on Qatar upset risk assets. Neither are likely to cause retaliation (and in Russia’s case, could restore a US-Europe alliance) but they do raise risks. Those risks aren’t themselves enough to upset the outlook; that would require clear signs of economic disruption. Global instability can make markets more volatile if and when there is a strong catalyst for a downturn. Without that catalyst, there’s nothing to stop equities grinding higher. With recession now highly unlikely, it’s no surprise that investors are focussed on the positives, not the negatives. 

Is China’s rally real?

Chinese stocks have outperformed all other major regions year-to-date and on a 12-month basis. That’s remarkable, considering the economic challenges it faces: tariff pressures, persistent deflation and weak consumer demand. Recent trade détente with the US can’t explain China’s rally alone. The usual explanations are government stimulus (including interest rate cuts) and a tech boom following DeepSeek’s AI release. Underpinning these has been a strong capital rotation into stocks – partly from property (the traditional Chinese savings vehicle) but also from low-yielding bonds. At the start of September, China set a new record for debt-financed stock ownership: ¥2.29 trillion. 

The record it beat had stood since 2015 – a year marked by a euphoric China rally and subsequent stock market collapse. Beijing was also trying to reduce excess production capacity back then, exactly as it is now. But we don’t think this is 2015 again. Debt-financed positions account for just 2.3% of market cap, compared with 4.7% a decade ago, and policymakers aren’t as gung-ho as they were – even trying to calm the rally by allowing more short-selling and cracking down on speculative buying. Beijing’s efforts to fight deflation are softer than in 2015 too. The government is trying to limit excessive price competition and support corporate profits, but isn’t shuttering capacity or forcing mergers. 

Beijing has struggled to support consumption over the past year, but the resolve is clearly there – evidenced by Premier Li Qiang’s recent promise to support a fledgling property market recovery. That’s good for China’s long-term prospects, and abundant liquidity is good for medium-term stock flows. 

Global investors should keep in mind that Chinese equity comes with an added risk of stranded capital – either from government crackdowns or Chinese-Western financial decoupling. But its stock market has a lot to offer: a well-supported rally now, and diversification benefits for the future.

Make Tesla Magnificent Again

The ‘Magnificent Seven’ US tech companies dominated the Q2 earnings season, but one member doesn’t look so magnificent; Tesla’s profit and share price performance has been dire this year. The electric carmaker is no longer in the top seven US companies by market cap, having been supplanted by Broadcom. 

Tesla talk often focusses on Elon Musk and his on-and-off friendship with Donald Trump, which hurt Tesla sales in Europe. Rumours of the board looking to replace Musk were quashed by its $1tn compensation offer. But Tesla’s struggles aren’t all about Elon: it has also lost market share to cheaper alternatives like China’s BYD. 

Tesla’s latest earnings call pivoted to newer tech like robotaxis and Optimus robots. Some of that is a sales pitch to investors (there are many hurdles to clear before techno-optimism turns into profit) but it’s also a long-term strategy. Tesla has always sold itself as a pioneer in a new landscape rather than a car manufacturer. Now that the rest of the EV market is catching up, Tesla is looking for even newer landscapes. 

That’s very different to the rest of the Mag7, most of whom are established players with strong cashflows. A promise to dominate driverless cars and future robots is a different investment pitch to the likes of Apple. That doesn’t make a bad pitch; Morgan Stanley researchers rate Tesla’s stock highly for its earnings potential. 

But we should question how useful it is to group Tesla in the Mag7. All those companies are pivoting toward frontier sectors, but none of them base their current valuation as highly on those sectors as Tesla. Its pivot to the future might make Tesla magnificent again one day, but in the here and now, investors should evaluate companies according to their risk-return profiles, not catchy names.

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

Marcus Blenkinsop

15^th September 2025

Please see below the daily update article from EPIC Investment Partners, received this morning – 11/09/2025

China’s government is taking significant steps to address a mounting issue of unpaid bills owed by local authorities to the private sector, a problem with estimated arrears reaching over $1 trillion. This initiative, which has the backing of President Xi Jinping, aims to complete a comprehensive settlement by 2027, restoring trust and stability to a private sector that has been significantly impacted by the financial delays. 

The core of the strategy involves leveraging state lenders and policy banks, such as the China Development Bank, to provide loans to local governments. This financial injection is intended to cover at least 1 trillion yuan ($140 billion) in a first phase, with the ultimate goal of clearing the substantial debt. The move acknowledges the severity of the situation, as President Xi has publicly warned that delayed payments can cripple businesses and erode public confidence in the government. 

While this plan offers much-needed relief to private companies and contractors, it also shifts a considerable financial burden onto the nation’s state banks. These institutions are already grappling with reduced profitability and a growing number of bad loans, a consequence of being enlisted to provide cheap credit to support the economy. Bankers are reportedly concerned about the potential for these new advances to turn bad and are seeking assurances from regulators. 

It is estimated that local government-related entities owe an astounding CNY 10 trillion ($1.4 trillion), a sum equivalent to 7% of China’s GDP last year. This new policy is not just a financial manoeuvre; it is a critical effort to stabilise the economy, support the private sector, and uphold the credibility of the government’s financial commitments. The success of this long-term initiative will be a key indicator of China’s economic resilience. 

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

11/09/2025

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

U.S. job market cools

Guy Foster, Chief Strategist, discusses seasonal weakness in equity performance and whether the adage “sell in May and go away, come back on St Leger’s Day” still holds true. Plus, our Head of Market Analysis, Janet Mui, analyses fresh U.S. jobs data.

Key highlights

• Bonds rally: Bond yields rose following record levels of borrowing in the U.S. and Europe.
• French government collapse: Prime Minister François Bayrou lost a confidence vote on Monday after his government failed to achieve sufficient support from the legislative chamber to pass a restorative budget. President Emmanuel Macron is likely to appoint a new prime minister.
• U.S. jobs growth slows: : The U.S. saw just 22,000 new jobs created in August, a significant decline from the previous month. However, the slowing jobs market bolsters the case for an interest rate cut.

Seasonal weakness – will it manifest?

An old investor’s adage used to be “Sell in May and go away, come back on St Leger’s Day” (an annual horse racing fixture that falls in mid-September), as the summer months would be among the weakest for the equity market. 

It was true that, on average, performance tended to be weaker during those months – though capitalising on that was difficult because, as another idiom runs: “a six-foot man can still drown crossing a river that’s five feet deep on average” – a reminder to not underestimate risk.

In any given month of any given summer, there’s a chance that seasonal weakness might not manifest, which has proven to be the case. Over the last five years, global equities have risen each month from May to August, while September has stood out as the worst month of the year for equity returns. This shows how easily investors can tie themselves in knots trying to take advantage of seasonal trends, particularly if you can’t explain why seasonal moves occur.

Source: LSEG Datastream

Seasonal weakness in September isn’t just limited to equities; bonds have been suffering from it too. As a result, there have been fears of a debt crisis this year – a situation in which investors are reluctant to lend because they think borrowers are overly stretched. 

The explanation for this seasonal weakness is that during the summer when liquidity and investor attendance are low, companies tend not to try and borrow money in the bond market. Instead, they hold their borrowing back and try to fill it in September when there are plenty of investors around to meet it. 

This year was a good example of that. The first day back after the Labor Day holiday in the U.S. (which this year fell on 2 September) tends to mark the reopening of the debt markets. This year, Europe and the U.S. experienced their largest and third-largest day of borrowing ever, respectively.

Bonds rally

Once this wave of new borrowing was digested, bonds rallied over the rest of the week. It’s because demand for bonds has been so high that many corporate issuers are taking advantage of the relatively tight credit spreads.

In the UK, rising bond yields are incorporated into the Office for Budget Responsibility’s models, and increase the assumed cost of borrowing. This makes compliance with Chancellor Rachel Reeves’s fiscal rules more difficult and increases the need for spending restraint and, more critically, tax increases in the forthcoming Autumn Budget.

This year, the Autumn Budget will take place on 26 November, which is relatively late. This is presumably because it will allow more time for inflation to subside along with borrowing costs, which would reduce the pressure for tax increases. 

Meanwhile, French Prime Minister François Bayrou’s government collapsed after the prime minister lost a confidence vote on Monday. The ousting comes after the government failed to achieve sufficient support from the legislative chamber to pass a restorative budget. President Emmanuel Macron is likely to appoint a new prime minister, and the process will need to start again.

U.S. jobs growth slows

Like France and the United Kingdom, the U.S. also has an unsustainable budget deficit. But the latest set of employment data out of the U.S. provided further evidence that the jobs market is slowing and bolstered the case for an interest rate cut.

Source: LSEG Datastream

In addition to slower jobs growth, the average working week shortened, and hourly earnings slowed. That might seem bad news from a growth perspective, but lower interest rates are still considered good news for equity and bond investors alike.

Jobs growth slowed from 79,000 in July to just 22,000 in August, a mere month after President Donald Trump fired the previous head of the Bureau of Labour Statistics (which compiles the figures).

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

10/09/2025

Please see below, an article from Tatton Investment Management, analysing the key factors currently affecting global investment markets. Received this morning – 08/09/2025

Pause for thought

When traders return from their summer holidays, they reassess their outlooks, but while there’s no shortage in narratives, stocks moved very little last week. 

Long-term bond yields continued rising on Monday and Tuesday – fuelling more panic about inflation and debt – but even they fell back into the weekend. The main driver of bond moves is real yields, which reflect growth expectations rather than inflation or credit risk, so it’s unclear what message the ‘bond vigilantes’ are sending. They might be demanding a higher term premium (the return investors demand for tying in for longer), as you might expect when the long-term bond supply is set to increase. 

But this isn’t a panic signal. UK yields rose last autumn to similar derision, but quickly fell back. The US court ruling against Trump’s tariffs worsened the US debt outlook this week, but when 30-year treasury yields hit 5%, bond traders sensed a bargain regardless. 

For stock markets, higher yields make equities less attractive – and investors were already worrying about high price-to-earnings valuations (mainly the US). But high valuations come from high expected profits, and US earnings are rebounding (as are Europe’s, covered below). If the economy grows, companies usually beat their earnings forecasts, so factoring in growth expectations makes valuations look more reasonable. Earnings have been the main driver of the recovery rally from ‘Liberation Day’ after all. 

That long rally has paused, as investors weigh up mixed growth signals (Friday’s US jobs report was weaker than expected). Gold prices are rising, which could be about higher bond yields or lingering nerves. Higher gold prices are sometimes read as geopolitical stress, but we think it’s more a continuation of years-long momentum and uncertainty around risk assets. 

That makes sense. Markets are trying to work out whether the US’ mixed-to-weak economy is bad because it hurts profits, or good because it means more rate cuts – benefitting small and mid-cap companies. We think it’s good that markets are pausing to reflect; it sets up for well-founded gains when the outlook clears. 

August 2025 Asset Returns Review

August was a pretty flat month with low volatility: global stocks gained 0.4% and bonds 0.5% in sterling terms. It started with another US tariff deadline and brief sell-off, but Washington’s trade deals eased some concerns. Markets were also helped by expectations of Federal Reserve rate cuts, after weaker US jobs data and a dovish speech from Fed chair Powell. But US stocks still lost 0.1% in sterling terms, due to a weaker dollar. 

UK and European stocks climbed 1.2% and 1.3% respectively, thanks to improved business sentiment and suggestions of a ceasefire in Ukraine. An improved earnings outlook should help European equity regain some lost momentum from earlier in the year. For the UK and France, stocks fell into the end of August after a sharp rise in 30-year government bond yields. We don’t think this is a debt or inflation panic – contrary to the media – as the main driving force was higher real yields (which reflect growth expectations). 

Japan led the way, gaining 4.8% after stronger data and a US trade deal. Japan is still benefitting from long-term corporate improvements. China wasn’t far behind (+3.1%) and is comfortably the best performer year-to-date (+20.4%). The Chinese economy is still struggling, but investors are betting on a turnaround. 

Low volatility would normally boost risk appetite, but markets fell flat instead. We see this as a liquidity story: there was a strong liquidity flow earlier in the summer – which made it easy to buy risk assets – but it’s tapering off. Much of this is related to the running down (and now building up) of the US Treasury General Account. Liquidity isn’t yet contracting but it might in September. Investors will need more economic growth to get excited about, if markets are to move higher. 

European Earnings Update

UK and European stocks have outperformed the US in 2025 – but company earnings are still lagging. Looking at the Q2 earnings releases, JP Morgan found that Eurostoxx 50 companies’ EPS fell 2% year-on-year, while Eurostoxx 600 (which includes UK companies) EPS dropped 1%. Revenues were hit worse, reflecting the challenging economic environment. 

Earnings did beat analysts’ expectations by 3% for both the narrow and broad indices, though. With tariffs and continued weakness in global manufacturing, last quarter was always going to be tough – and it wasn’t as bad as it might have been. Banks were the biggest source of earnings growth, while energy and automotives struggled. 

With US earnings staying strong and Europe’s staying weak, the rotation of capital from US to European assets we have seen this year looks harder to justify. JP Morgan analysts think investors got ahead of themselves on European growth and are now realising it – hence why US markets have outperformed recently. 

But European profits are better than expected and the sectoral breakdown (strong banks and weak energy prices) is a positive for growth. More importantly, 2026 earnings expectations have moved up – compared to a weakening of 2026 projections in the US.
 
US earnings strength is heavily concentrated in the biggest tech companies; other US companies have similar EPS performance to Europe’s. But US stocks have higher valuations. Higher valuations are fine if you expect earnings to outperform, but that’s no longer what the analysts are saying. That should mean European valuations catch up – which can only happen if stocks outperform. The earnings outlooks could change again of course (US companies have a habit of proving the doubters wrong) but the current outlook suggests improvement in Europe.

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

Marcus Blenkinsop

8^th September 2025

Please see below the daily update article from EPIC Investment Partners, received this morning – 04/09/2025

Following a weaker than expected job openings report, the futures market increased the probability for a rate cut at this month’s FOMC meeting to 95%. The weak data supports the case for a rate cut, as it shows a softening labour market with a broad-based rise in layoffs across many sectors, including construction, manufacturing, and transportation, rising to the highest levels in a year. It aligns with the Fed Governor Waller’s comments that the central bank should implement multiple additional cuts in the coming months, given that he expects inflation to approach the central bank’s target within the next six to seven months.

In another signal of a slowing US economy, the Fed’s Beige Book, released yesterday, reported that economic activity was flat or declining across most of the country. This slowdown is largely attributed to households cutting back on spending as wages fail to keep pace with rising prices. The report noted that nearly every region is experiencing price increases, with tariffs being a significant driver of higher costs for businesses, which are in turn being passed on to consumers. Furthermore, the report highlights a softening labour market, with employment levels seeing little to no change in most districts and several regions reporting a reduction in immigrant workers. This data reinforces the argument for the Fed to ease monetary policy, indicating that the economy is cooling more than previously thought. 

Bond yields rallied following the weaker jobs data and a subdued Beige Book, paring the losses experienced during the week’s bout of volatility. The recent sell-off had pushed yields on the 30-year Treasury to an attractive ~5% level, which has historically been a good entry point to secure long-term returns. The combination of these higher yields with the growing expectation of a more accommodative monetary policy creates an appealing environment for bond investors. 

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

04/09/2025

Please see the below article from EPIC Investment Partners by Jo Welman discussing the topic of silver and its fascinating pricing dynamics. Received this afternoon – 03/09/2025.

Silver

The performance of the silver price has defied logic for several months. The average long-term ratio between the values of gold and silver has been around 40:1, so you could buy forty ounces of silver by selling one ounce of gold. There have been times when silver has traded as low as 15:1, but the current ratio is near its all-time high in excess of 100:1, so one ounce of gold buys over one hundred ounces of silver. So why hasn’t silver followed gold to all-time highs?

Silver has been used as a monetary asset in minted coins for thousands of years, but the metal differs from gold in that it also has many key industrial uses – and not just the manufacture of jewellery or to fill decaying teeth! You might remember that silver was once an important element in developing photographs, but of course in the digital age this use has long gone. However, silver remains the most efficient conductor of electricity and forms an integral element of every iPhone and solar panel, amongst hundreds of other electronic applications.

The price of silver is all the more extraordinary given its increasing scarcity. There are relatively few silver mines, with most silver being extracted as a byproduct from other mining processes, such as copper, zinc, lead and gold. Moreover, most of the planet’s silver has already been discovered, because unlike gold, it is an element found relatively near the surface of the earth’s crust. However, in common with gold, the price of silver is manipulated by the ‘paper market’ – through futures trading. Futures contracts offer buyers and sellers the right to deliver or receive physical delivery at the end of the contract’s term, but most are settled in cash, avoiding any need for traders to own large quantities of these metals. Daily trading volumes of this ‘paper’ silver are enormous, often multiples of all the silver in existence. This mechanism has enabled traders to use relatively small amounts of capital to control very substantial positions in the futures market.

The ‘Bullion Banks’ who trade in the paper metals markets have been consistent sellers of silver futures, obliging them to sell silver at a pre-determined price at a future date. This has long been a profitable activity, and unlike trade in the underlying metal, there is almost no limit to the volume of these trades. This has in turn facilitated the suppression of the silver price, despite both growing demand and a serious global shortage of the underlying metal. The other major use of silver in high volumes is in the defence and munitions sector, with 500 g of silver required for the manufacture of every Tomahawk Missile. This seems likely to have influenced America’s determination to prevent the silver price from rising in response to the current shortages of supply.

However, this situation has now changed – and very dramatically. China (already the world’s largest silver producer), India and Russia, among the other BRICS and several Far East central banks, have been aggressively increasing their stockpiles of gold and silver, and this is putting upward pressure on prices – particularly for silver which is much the smaller and less liquid market. At the same time, buyers of gold and silver futures have started to impose their right to demand physical delivery of the metals at the end of the contract term. This means that the short seller needs to source enough of the physical metal, rather than settle in cash at the end of the futures contract term. Because of the huge leverage used to short through the futures markets, there is not enough silver in existence to fulfil these delivery obligations and traditional western stockpiles are now all but exhausted.

Demands for delivery have removed the vast proportion of physical silver from storage facilities in London, Geneva and New York, to the extent that the Bank of England now takes eight weeks rather than the contractual three days to deliver both gold and silver bars. In effect, the Bank of England is already in default. I have myself witnessed this shortage because my attempts to add to my stock of 1 kg silver bars from the Royal Mint have been met with ‘not available’ messages.

This situation has been exacerbated by a steady repatriation of gold and silver by central banks due to the threat provided by the US weaponisation of the Dollar. Central banks hold US Treasury Bonds as Tier One assets – previously accepted as a safe, liquid and universally accepted reserve asset. Many of America’s adversaries and former friends have been spooked by both the exploding US deficits and the administration’s willingness to confiscate US Treasury bonds when America chooses to punish countries for some misdemeanour – as with Russia today. Gold is the only other Tier One asset, and so central banks have been selling down their holdings of US Treasuries, and to avoid any risk of confiscation, are repatriating their growing reserves of physical gold and silver from the main western repositories.

The suppression of the silver price by Bullion Banks through short selling has been successful, but when buyers of silver futures demand physical delivery of the metal, the global shortage of silver generates huge problems for them. Western stocks of silver appear to have almost run out, and the BRICS continue to increase their strategic stockpiles. Not only does this make it unlikely that the suppression of the silver price can continue indefinitely, if these banks cannot close and reverse short positions they could suffer significant losses.

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

03/09/2025

Please see below, an article from Tatton Investment Management, analysing the key factors currently affecting global investment markets. Received this morning – 01/09/2025

Refuelling pause in markets

It was another quiet week for markets. Nvidia’s Q2 earnings were expected to give some clues about the AI investment theme, but US markets didn’t react much. Nvidia shares themselves fell, despite the chipmaker exceeding its high expectations. There’s a sense that the company is plateauing, as big tech moderates its investment in AI infrastructure. But that tech money is now more likely to come back to shareholders as buybacks or dividends, benefitting investors. That doesn’t mean the AI theme is over; it just means that not all the AI spending will go to Nvidia. We see that as a positive.

There was some suggestion that policy risks stopped markets from moving ahead, backed up by higher government bond yields (covered below). Trump’s attempt to replace a Federal Reserve governor is concerning, but even if he succeeds we don’t think it will give him full control over US interest rates. France’s potential government collapse is a threat to the euro, but judging by the currency’s strength this week, markets don’t rate the risk highly (though it does take the shine off European stocks). Meanwhile, UK stocks sold off, thanks to rumours of a tax raid on banks. 

The underlying story is that stocks are fizzling out everywhere. That’s partly about high bond yields making risk assets relatively less attractive, and partly about weaker liquidity than over the summer. The US government’s Treasury General Account (TGA) has been in drawdown for months (due to debt ceiling constraints) which effectively meant Washington was pumping money into the financial system. But the TGA is now building back up, tightening market liquidity. 

With less fresh cash around, investors have to sell assets if they want to buy stocks. They might do so, but they will need a good reason, and at the moment there are not enough new catalysts for extending the already healthy optimism much further. 

Who’s afraid of higher yields?

30-year government bond yields spiked last week. In Britain and France, this was presented as a story about stagflation and failing fiscal policy. In the US, the focus was on Trump’s attack on Federal Reserve independence, and its effect on future inflation. But looking at little deeper at how bonds moved, those narratives don’t stack up. 

We can break up bond yields by three major influences: inflation expectations (measured by comparing inflation-linkers to nominals), credit risk (comparing government bond yields to interbank swap rates with their central banks) and real (inflation-adjusted) yields, which are strongly linked to the market’s growth expectations. 

Neither the credit risk nor inflation components moved particularly to explain why long bonds spiked. If higher yields were a vote of no confidence in governments, credit risk would go up. But it barely moved in the US and UK. France’s did spike as we would have expected, but it’s still lower than the start of the year. The US saw a minor increase in implied inflation last week, but expectations are still lower than the start of 2025 – while Britian and France’s implied inflation didn’t move. 

Bond markets were driven by a substantial increase in real yields. So, if you ignored the doom and gloom and just looked at what bond markets are telling us, you would think growth expectations have improved. 

Market expectations could be wrong of course. But that would suggest real yields are too high and should come down – meaning long bonds are a good buying opportunity. Either way, there’s no reason to panic. You might think markets are underestimating inflation or credit risk, but few other signs back that up. The only sign of anxiety is the weakness of the dollar, but you could just as easily chalk that up to slower profits. In any case, we see last week’s bond moves as a curiosity – yes – but not a cause for particular concern. 

US Earnings Update

Most of the Q2 US earnings reports are in, and research house MRB found last week that S&P 500 companies showed 13% year-on-year growth, while 80% of the index’s companies beat analyst expectations. That analysis came before Nvidia marginally beat its sky-high earnings expectations – though the chipmaker’s good performance wasn’t enough to sate investors expecting the phenomenal. 

We expected a strong US earnings ‘surprise’ – given how analyst forecasts had been revised down by tariff fears. It was especially strange that, in Q1, better-than-expected earnings didn’t bump up the future forecast as it should. Any tariff reprieve was likely to mean better earnings, exactly as transpired. 

We should also keep in mind that US tariffs have not fully filtered through to company costs, either because they’re delayed or because US importers are still working through inventories. The inequality of US earnings is another important caveat: big tech still dominates, while most other sectors are middling. The weakness of the dollar in Q2 also helped companies with international revenues (again, big tech) while smaller domestic companies struggled. Russell 2000 earnings were lacklustre, for example. 

It’s not just tech that did well: financials also beat expectations by an aggregate margin of 13.9%. That’s an encouraging sign. If tariffs were compressing the US economy, you would see default rates go up – meaning non-performing loans and hence weaker bank profits. The fact banks did well suggests there are few signs of credit stress, especially with an interest rate cut coming up. 

This doesn’t mean everything’s fine. MRB point out that earnings forecasts for the next few years are pretty optimistic about profit margins – which will be hard to maintain once tariff effects are felt. There are challenges ahead, but for the moment the US earnings outlook doesn’t foretell any doom and gloom.

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

Marcus Blenkinsop

1^st September 2025