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Please see below the daily update article from WH Ireland, received this morning – 18/09/2026

The Federal Reserve has started raising interest rates again. Inflation remains too high and domestic spending resilient. But there is something unusual about this tightening cycle. Fiscal and monetary policy are pulling in opposite directions.

Washington is running a budget deficit approaching 6 per cent of GDP, despite an economy close to full employment. The Trump administration’s tax and spending changes are expected by the IMF to add about 0.75 per cent to GDP in 2026-27 while increasing the deficit.

Fiscal policy is supporting demand just as the Fed is trying to restrain it. The government is pressing the accelerator while the central bank presses the brake.

That makes a 45-year-old piece of economics suddenly relevant. In 1981, Thomas Sargent and Neil Wallace published Some Unpleasant Monetarist Arithmetic. Their conclusion was uncomfortable: under the wrong fiscal conditions, tighter monetary policy today can create problems for monetary policy tomorrow.

The arithmetic is straightforward. When a government spends more than it collects in taxes, it borrows the difference by selling bonds.

But bonds carry interest. Governments feel higher rates more slowly than households because existing debt does not reprice overnight. Instead, cheap bonds mature and are replaced by more expensive ones. Unless taxes increase or spending falls, the government must borrow more to meet the rising interest bill.

This creates a peculiar circle. Fiscal policy supports demand, contributing to the conditions requiring tighter monetary policy. Higher rates then increase government borrowing costs, adding to future deficits and debt.

The numbers are uncomfortable. The Congressional Budget Office projects federal debt held by the public rising from about 101 per cent of GDP this year to 175 per cent by 2056, against just 35 per cent before the financial crisis. Net interest costs rise from 3.3 per cent to 6.9 per cent of GDP. The debt is not only larger; it is becoming more expensive to carry.

The Fed can raise rates to fight inflation, but it cannot fix the budget deficit. If fiscal policy continues to support demand, the Fed may instead have to raise rates further to offset it — exactly the opposite of the lower rates the Trump administration is calling for.

That makes the circle still more unpleasant. Larger deficits can require higher interest rates; higher rates increase the government’s interest bill; and a larger interest bill adds to the deficit.

Sargent and Wallace argued that this cannot continue indefinitely. There is ultimately a limit to the government debt private investors will absorb. Once that limit is reached, something has to give.

In their model, the government refuses to cut spending, raise taxes or default. Eventually the central bank has to create money to finance obligations that can no longer be funded with more debt.

That does not mean higher rates are ineffective. They can reduce demand and inflation today. Sargent and Wallace’s warning comes later. If fiscal policy still does not adjust, eventually the combination of loose fiscal policy and tight monetary policy cannot be sustained.

America has other choices. Taxes can rise, spending can fall, or regulation can encourage domestic institutions to hold more government debt. Inflation itself can reduce the real value of nominal liabilities.

But the central insight survives. The Fed can determine interest rates. It cannot determine how much Washington borrows. If fiscal policy does not adjust, it can eventually dictate what monetary policy is able to do.

For decades, developed-market government bonds have been treated as the “risk-free” assets against which everything else is priced. Sargent and Wallace turn that relationship around.

For investors, the question is no longer simply where interest rates are going.

It is whose balance sheet they want to lend to.

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

Cherise Lancaster

18^th September 2026

Please see this week’s Markets in a Minute update below from Brewin Dolphin, received yesterday afternoon – 15/09/2026.

What’s driving the surge in bond yields?

Oil has accelerated the sell-off, but it’s not the only force pushing yields higher.

Key highlights

• Global bond yields surged, as higher oil prices and hawkish central banks added to inflation concerns, but structural factors are at play too.
• The European Central Bank raised rates to 2.5% and revised up its inflation forecasts. Markets expect more rate hikes to come.
• U.S. inflation in August was broadly as expected but the monthly core Consumer Price Index (CPI) came in above estimates. This CPI does not yet capture the latest surge in oil prices as much of that happens in September.

Why are bond yields surging?

Bond markets were at the centre of market moves last week, with global government bond yields rising sharply across developed markets. The U.S. 10-year treasury yield moved close to 5%, while UK gilt yields reached nearly 5.4%, a level not seen since 2007.

Source: Bloomberg

The immediate catalyst was another rise in energy prices, a result of the conflict in the Middle East intensifying. Escalation in Iran-U.S. tensions has pushed Brent crude oil prices back above $100 a barrel while U.S. diesel prices have moved to over $6 a gallon.

Source: Bloomberg

Higher oil prices have renewed concerns about inflation and pushed investors to expect more interest rate hikes. But we think oil is only part of the story.

Governments are borrowing heavily to fund large fiscal deficits. At the same time, the enormous investment required to build AI infrastructure is creating another source of demand for capital.

Put simply, there are a lot of borrowers competing for the same pool of money. Investors are therefore demanding higher yields to lend for 10 or 30 years.

This is also why the U.S. Treasury’s latest bond buyback failed to provide much relief. Buybacks can improve liquidity and help supply and demand at the margin, but they can’t address the fundamental issue of large fiscal deficits, heavy government borrowing and persistent inflation.

This is broadly consistent with our view that the latest geopolitical shock is only one part of a bigger, longer-term shift in bond markets.

For equity investors, higher yields are a near-term headwind. When investors can earn close to 5% from U.S. government bonds, equities face more competition for capital. Higher yields also reduce the present value of future corporate earnings, which can be particularly challenging for more highly-valued growth stocks.

This doesn’t change our longer-term constructive view on equities. But while bond yields remain elevated, we think equity markets could remain more volatile.

U.S. inflation adds interest rate pressure

The U.S. inflation reading adds pressure on the Federal Reserve (the Fed) to raise interest rates this week. Headline Consumer Price Index (CPI) inflation was broadly in line with expectations, coming in at 3.4% year-on-year, while annual core inflation eased slightly to 2.4%, the lowest since March 2021. But the more closely watched core CPI rose +0.3% month-on-month, above the 0.2% expected and the biggest increase since April.

This CPI data doesn’t yet capture the latest surge in oil prices, much of which occurred in the first half of September. Higher energy costs can also take time to feed through into other parts of the economy. Meanwhile, producer prices released last week pointed to continued pipeline inflation pressure and the latest U.S. jobs report was strong – both reinforcing the case for elevated inflation.

All this data adds pressure on the Fed to do its job to constrain price pressures.

Markets have responded quickly. Earlier this month, markets priced in a 70% probability of an interest rate hike, which rose to 90% immediately after the CPI release.

Interestingly, bond yields came in a bit lower and stocks reacted positively. The read is that if the Fed follows through with a rate hike, it would help restore its inflation-fighting credibility – anchoring long-term inflation expectations, which markets would welcome as a positive development.

Source: Bloomberg

The ECB turns more hawkish

The European Central Bank (ECB) added to the more hawkish backdrop last week, raising its deposit rate by 25 basis points to 2.5%, which was widely expected.

More important was its outlook. The ECB revised up its inflation forecasts, with inflation now expected to average 2.5% in 2027 and 2.1% in 2028. At the same time, it upgraded its growth forecasts for this year and next, reflecting a more resilient Eurozone economy.

That resilience is important. Higher energy prices are hurting consumers and businesses, but so far, the economy has held up better than feared. This reduces the immediate risk of stagflation and gives the ECB more room to focus on inflation.

Markets have responded by pricing in more rate hikes. However, we think there’s a risk that markets are overestimating how much tightening will ultimately be needed.

The key is wages. So far, there’s little evidence that higher energy prices are creating a second-round wage-price spiral. Eurozone compensation growth has slowed, while the ECB’s wage tracker points to only a modest 2.7% increase in negotiated wage growth in the first half of next year. Longer-term inflation expectations also remain anchored at around 2%.

And this is not just a European story. U.S. wage growth eased to 3.1% in August, while UK private sector wage growth has slowed to 2.8%. Resilient economic growth means central banks can’t ignore the inflation shock, particularly if oil prices remain high. But slowing wage growth suggests the second-round effects aren’t there yet.

That means central banks may need to remain hawkish in the near term, without necessarily delivering as many rate hikes as markets currently expect.

Given the ECB’s rate hike, the recent data and market pricing, it will be a surprise if the Fed remains on hold this week. If it doesn’t, it will face serious credibility challenges and Fed Chair Kevin Warsh will need to explain its rationale clearly to the market.

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

16/09/2026

Please see the below article from WH Ireland discussing how BRICS is attempting to strengthen supply-chain resilience, local currency trade and alternative channels for cross-border finance. received today – 15/09/2026.

The 18th BRICS Summit in New Delhi reinforced a gradual shift towards a more fragmented global economic and financial architecture. Rather than announcing a common currency or attempting to displace the dollar, the bloc focused on practical measures to strengthen supply-chain resilience, local currency trade and alternative channels for cross-border finance.

Trade fragmentation is perhaps the most immediate economic implication. BRICS criticised unilateral tariffs and non-tariff measures and called for greater participation by emerging markets in higher-value segments of global manufacturing. The declaration also emphasised resilient supply chains and technology transfer, particularly for critical minerals. For emerging economies, the objective is increasingly to capture more value domestically rather than remain exporters of raw materials.

Financial infrastructure is another part of this longer-term shift. BRICS is exploring interoperability between payment and messaging systems and encouraging greater use of local currencies for trade and investment. India’s UPI and Brazil’s Pix demonstrate the potential of low-cost domestic digital payments, although cross-border adoption remains relatively limited and practical obstacles remain. The significance is therefore less an imminent threat to the dollar and more the gradual creation of additional settlement channels alongside existing infrastructure.

The New Development Bank is also being positioned to play a larger role, with BRICS encouraging it to expand local currency financing, diversify funding sources and support infrastructure and economic integration. If these initiatives develop at scale, they could reduce some dependence on dollar funding and Western capital markets at the margin, particularly for intra-BRICS trade and investment.

The critical-minerals agenda adds another layer. BRICS is calling for reliable and diversified supply chains while explicitly supporting value addition and economic diversification in resource-rich countries. Combined with the push into higher-value manufacturing, this could support industrial investment and domestic growth over time.

The bigger takeaway is therefore evolution rather than revolution. BRICS is not replacing the existing financial system, but it is building more options around it. For markets, the longer-term consequence could be a more multipolar system of trade, payments, financing and capital flows, with implications for FX, sovereign credit and the allocation of global capital.

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

Alexander James Roberts

15^th September 2026

Please see the below article from Tatton Investment Management discussing the impact of the Middle East energy shock, tighter monetary policy, UK gilt resilience and the fragile US–China trade truce, received this morning – 14/09/2026.

Tightening up
Bond pain spread to stocks last week. Middle East re-escalation pushed Brent crude oil well above $100 a barrel with natural gas also sharply higher, even as US core inflation held steady at 2.4%. That was enough to push the European Central Bank into its second rate rise of the year, ahead of the US and UK decisions this week. The larger cap tech stocks stayed relatively calm, helped by strong Oracle earnings, but rate-sensitive sectors outside tech struggled and, generally, broad stock performance is weaker.

Separately, markets are unsure of what to make of Anthropic CEO Amodei’s request that major AI model developers jointly slow progress. Other AI firm leaders have agreed with his call, citing worries about uncontrolled model “breakouts”. However, Trump has said work must continue so that the US can stay ahead of China. Others suspect that the AI modellers are struggling to find resources and may be seeking to behave as an oligopoly.

The US and Iran traded strikes last week as Tehran tries to extend its Strait of Hormuz leverage across the Gulf. Flow through the Red Sea is sharply down after damage to the Saudi Arabia East-West pipeline and Houthi gains in Yemen. As we start the week, Brent is above $105pb and European gas is at its highest since late 2022. Gulf State-Iran talks and a rumoured deal to open a route through the Strait of Hormuz were planned for today (Monday 14th) and offered a sliver of hope but have been “postponed” from today.

With Eurozone energy inflation at 14.3%, the ECB felt it couldn’t wait out the crisis. We expect the Federal Reserve and Bank of England to follow this week with, at least, hawkish signals of their own. While the Bank of England may wait to hike at the start of November, the US Federal Reserve is more likely to raise rates this week.

Short-term yields rose to match rate expectations, but long yields rose just as much – a little counterintuitive, as you would expect hawkish policy to compress long-term inflation. Long-term bonds suffered partly from the liquidity effect (less money around to buy them) but also because ‘risk-free’ government debt is looking riskier, as energy costs strain public finances.

That tension showed up in UK political rhetoric over defence versus welfare spending, but much more flagrantly in Donald Trump’s pledge of $5,000 per adult, should Republicans win both houses of Congress in November’s midterms. No one expects that to happen, but it shows the White House’s disregard for fiscal restraint.

We’d still point to reasons for optimism: corporate earnings remain resilient, equities are only marginally off July’s highs, and a Trump-Xi summit later this month could deliver good news on trade. But tighter policy means tighter market liquidity – a real risk heading into autumn.

No Goodbye For Great Britain
With gilt yields at multi-decade highs, talk of a ‘doom loop’ in UK government finances is rife, with comparisons drawn to the 1976 sterling crisis and IMF bailout.

Gilts are what traders call a “high beta” bond market: they react more violently than others to bond volatility, due to structural imbalances (long average maturity and heavy inflation-linkage). Global bonds are suffering from tech-driven capital demand and the oil shock, but gilts are suffering more.

That sensitivity feeds back into borrowing costs – higher yields mean higher debt-servicing bills, which is more painful given debt sits at 93.8% of GDP. Sensitivity also amplifies the usual media talk of profligate government spending. This is the mechanism by which a doom loop can happen (higher yields force more borrowing, forcing higher yields) but that doesn’t mean the UK is in one or will be soon.

The 1976 comparison, though evocative, doesn’t hold up well. That crisis was fundamentally a currency crisis: an overvalued sterling, propped up under a fixed trading band after the gold standard’s collapse, became untenable once the current account and budget both swung into deficit following the 1973 oil shock. The Bank of England’s attempt to guide sterling lower coincided with traders already selling it, triggering a collapse that only an IMF loan could stem.

Nothing similar threatens sterling today. The chief risk to gilts now is contagion from higher US Treasury yields, which would actually tend to strengthen sterling against the dollar, cushioning the blow. And unlike Denis Healey’s 1970s Treasury, today’s fiscal policy is comparatively restrained – the UK’s primary budget (excluding interest costs) is close to balanced and forecast to move into surplus. Gilts are fragile, but not fractured. The conditions that led to the Wall Street Journal’s famously scathing headline “Goodbye Great Britain”, preceding the 1976 crisis, are largely absent this time.

Don’t be fooled by US-China détente
Xi Jinping and Trump will meet in Washington on 24 September, against a backdrop of relative calm between the two powers. That calm will likely continue through the summit, but the trade truce probably won’t continue indefinitely.

Tariffs have been less central to Trump’s 2026 agenda than in 2025. He imposed new levies in July – but these mostly just replaced tariffs struck down by the Supreme Court’s IEEPA ruling. The administration’s lighter touch on tariffs is partly due to their unpopularity – ahead of November’s midterm elections and amid the president’s unpopular Iran war. It’s also because the current regime works relatively well for Washington: steady revenue but limited economic pain.

So, we expect little of substance from the summit itself, with effective tariffs on China likely to stay near their current 22.8% average. Still, extending the trade détente that has informally been in place since May’s summit is significant.

It’s slightly odd that Beijing has escaped Trump’s recent ire, considering China has under-delivered on its purchase pledges. Many US partners have done the same, but China still buys 90% of Iran’s oil – exactly the behaviour Washington claims to be targeting with sanctions. The fact China hasn’t been more seriously sanctioned shows how important Chinese imports remain to US consumers and businesses.

We’re also sceptical that China’s negotiating position is as strong as it looks. Its trade surplus and reluctance to buy more US goods stem largely from a weak domestic economy that Beijing is still firefighting, including by shifting bad bank debts onto the state’s balance sheet. That leaves Xi needing exports, and hence trade détente, at least as much as Trump needs a deal. We suspect the White House may simply be waiting out the midterms – after which, in our view, tariffs could return to the top of the market’s worry list.

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

Marcus Blenkinsop

14^th September 2026

Please see the below article from WH Ireland discussing the growing risks of sovereign debt and opportunities in financially stronger sovereign bond markets, received late yesterday – 10/09/2026.

Major developed economies are increasingly devoting substantial resources to servicing sovereign debt, challenging the assumption that developed market government bonds are inherently lower risk. In the US, net interest payments on federal debt have risen to close to $1 trillion annually and now exceed defence spending. In the UK, debt interest costs are significantly higher than defence spending and consume around one pound in every ten of government revenue. France faces a similar challenge, with debt servicing costs rising as higher interest rates feed through into a large and growing public debt burden.

These examples do not mean that developed market sovereigns are equivalent to emerging markets. Reserve currency status, deep domestic capital markets and institutional strength remain important sources of resilience. Rather, they demonstrate why traditional economic classifications can obscure meaningful differences in fiscal and external strength. For bond investors, the more relevant question is whether an issuer has the balance sheet capacity to withstand higher funding costs, weaker growth and fiscal shocks.

This creates opportunities from a relative value perspective. Selected emerging market sovereign and quasi-sovereign bonds can trade at meaningful premiums to developed market debt even where their underlying external positions are stronger. The opportunity is therefore not simply to seek higher yields, but to identify where the market appears to offer insufficient compensation for the risks of one issuer relative to another. We focus on the relationship between spread and financial strength, rather than yield in isolation.

This is particularly relevant to passive fixed income investing. Market capitalisation weighted bond indices allocate capital broadly in proportion to debt outstanding, meaning that countries issuing more debt tend to command larger index weights. Investors tracking such indices can therefore become structurally exposed to the largest borrowers, irrespective of whether their underlying balance sheets are strengthening or deteriorating.

We therefore look beyond conventional market classifications and focus on Net Foreign Assets (NFA) as an important measure of national financial strength. NFA captures the difference between a country’s external financial assets and liabilities, providing insight into whether an economy is a net creditor or debtor to the rest of the world. In our view, this creditor–debtor distinction can be more informative for sovereign bond selection than a simple developed or emerging market label.

By combining NFA analysis with an index agnostic, relative value approach, we seek to identify sovereign and quasi-sovereign issuers where valuations do not fully reflect underlying financial strength. This includes opportunities across Abu Dhabi, Qatar, Norway, Mexico and Chile, where strong external positions and sovereign resilience can, in our view, create attractive relative value compared with more highly indebted developed market issuers.

The objective is not simply to find the highest yield, but to determine where investors are being best compensated for the risks they take.

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

Marcus Blenkinsop

11^th September 2026

Please see below the daily update article from Brooks Macdonald, received this morning – 10/09/2026:

What has happened?

Stagflation concerns lingered yesterday as Brent crude rose above $100/bbl for the first time since July. The move led investors to price in a more hawkish path for interest rates, pushing sovereign bond yields to multi-year highs. US Treasuries also came under pressure after the Treasury Department’s announcement of up to $6bn of long-dated bond buybacks fell short of market expectations. By the close, the 10-year Treasury yield (+5.2bps) had reached a post-2023 high of 4.84%, while Germany’s 10-year Bund yield (+7.6bps) rose to its highest level since 2011 at 3.44%. Higher yields weighed on risk assets, with the S&P 500 (-0.48%) falling for a third consecutive session and the STOXX 600 (-1.41%) posting its worst day in two months. Market breadth was particularly weak in the US, where 404 stocks in S&P 500 declined. Energy (+1.09%) was the S&P 500’s only advancing sector, reaching a record high.

Energy fears

The latest rise in oil prices was fuelled by a further escalation in hostilities between the US and Iran. Reports indicated that the US had destroyed five Iranian tankers, while Iran later claimed it had targeted US vessels and oil tankers in the Persian Gulf in retaliation. Investors increasingly fear a prolonged conflict that could disrupt energy supplies and delay the reopening of the Strait of Hormuz. The impact extended beyond oil. Brent crude rose +3.36% to $101.21/bbl, while European natural gas futures gained +4.49% to their highest level since 2022. Gas prices were also influenced by reports of a fire at an industrial site in Russia’s Yamalo-Nenets region, a key gas-producing hub.

What does Brooks Macdonald think?

The renewed rise in energy prices has prompted investors to reassess the outlook for inflation and monetary policy. In the US, markets modestly increased the probability of a September rate hike, reflecting concerns that higher energy costs could feed through to broader inflationary impulse. European markets also priced in a more hawkish path for the European Central Bank. Attention now turns to today’s ECB policy decision, where a 25bp hike is widely expected. As a result, investors will focus less on the decision itself and more on the ECB’s guidance and updated economic forecasts for clues on how policymakers are balancing renewed inflation risks against a potentially slowing growth backdrop.

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

Cherise Lancaster

10/09/2026

Please see this week’s Markets in a Minute update below from Brewin Dolphin, received yesterday afternoon – 08/09/2026.

Are U.S. interest rates set to rise?

What will be the deciding factor for the Federal Reserve – the jobs market or consumer price inflation?

Key highlights

• The hawks take wing: Major central banks will announce their interest rate decisions over the next couple of weeks. The Federal Reserve and European Central Bank are expected to raise rates, while the Bank of England is expected to hold.
• U.S. hike: The implied odds of a U.S. rate hike moved from possible to probable as consumer price inflation, rather than an overheating jobs market, is pressing the Federal Reserve into action.
• Europe’s gas problem returns: European bond yields rose last week as gas futures climbed on fears of supply shortages due to continued tension in the Middle East.

The hawks take wing

As summer draws to a close, the heat remains for the world’s major central banks. This month, all of them set rates and for once, the outlook points in different directions.

The U.S. attempted to set the tone a couple of weeks ago, when Federal Reserve (the Fed) Chair Kevin Warsh spoke at the Jackson Hole Economic Policy Symposium. His message was uncompromising: the inflation target isn’t up for negotiation and rates may need to rise.

The market reaction was striking, with the dollar rallying and gold and bonds easing. Having talked tough on inflation before without following through, with his own credibility already under scrutiny, any hint of softness should have been unthinkable. The implied odds of a U.S. rate hike moved from possible to probable.

It’s consumer price inflation rather than an overheating jobs market that’s pressing the Fed into action. This message was underscored by a full week of U.S. labour market data, which suggested lower staff turnover as staff feel less confident about being able to move to higher-paying jobs. Meanwhile, surveys suggested staff demand remains healthy.

That culminated in a stronger-than-expected jobs report showing 167,000 new jobs created in August, and a small upgrade to last month’s surprisingly weak report. It’s likely enough to spur the Fed into action even though wage growth remained modest, and the unemployment rate was unchanged, with labour force participation increasing.

Source: LSEG Datastream

A different kind of U.S. policy shift occurred in relation to the Iran war. Having announced a shift from military to economic pressure, the U.S. has been drawn back into hot conflict, putting further upward pressure on consumer prices.

Europe’s gas problem returns

European bond yields pushed higher over the week as gas futures climbed on fears of supply shortages. Inventories have been low for the season, as buyers held off in the hope that peace in the Middle East would bring prices down. With the regional conflict dragging on, those hopes have been dashed.

It’s been easier for crude tankers to navigate the Strait of Hormuz, but shipping of liquefied natural gas (LNG) remains severely impaired given the danger of a potential strike on an LNG carrier (a specialised ship designed to transport liquefied natural gas).

Benchmark Dutch gas futures are now more than double their pre-war levels. For Europe, energy costs continue to drive the inflation story and help explain why the European Central Bank (ECB) is expected to raise rates next week.

The U.S. decision, which will be made in a couple of weeks, is tough to predict, but the central bank is expected to raise its federal funds rate. Meanwhile, the UK’s Bank of England (BoE) is likely to remain on hold. That’s despite last week’s British Retail Consortium shop price index showing the second-round effects of earlier energy price increases continuing.

However, retail activity remains subdued and house prices have softened. Even the business surveys show momentum is fading and with UK interest rates being amongst the highest of developed markets, the BoE perceives them as restrictive.

Source: Bloomberg

Leaning into gold

Our European Investment Committee met last week and made one change: we’ve raised our gold weighting, funded by trimming absolute return. This reverses a move from a few months ago and reflects the shift in gold’s own fortunes.

Gold had been weighed down by negative momentum and worries over central banks drawing down reserves during the U.S.-Iran conflict. That has given way to renewed interest in the debasement trade, the idea that persistent fiscal pressures erode the value of paper money over time. Warsh’s hawkish speech knocked gold temporarily and fresh hostilities with Iran added a further headwind by slowing reserve accumulation.

Debasement can come through Fed inaction; but the greater concerns are around the Fed’s independence being undermined. In the absence of something transformative happening to the national debt, debasement will remain the path of least resistance and we’re happy to let the gold weighting float higher.

Correspondingly, we remain underweight in bonds. Long-term yields have been rising due to uncertainty about the future path of interest rates and inflation. A credible Fed, one that convincingly anchors inflation, would be helpful in restraining yields in time – that probably starts with a September hike.

On equities, valuation remains the perennial worry. U.S. cyclically adjusted valuations sit close to prior peaks, though they’ve been higher in other markets before. Look beneath the surface and the picture is more balanced: just over half of S&P 500 companies trade on lower price-to-earnings ratios than their five-year average.

The aggregate multiple has crept up largely because a few high-priced names, Tesla among them, now carry more weight, but some of the biggest and best performing stocks have become significantly cheaper because their prices haven’t risen with their earnings. This shows that investors are questioning whether this extraordinary run of earnings can be sustained.

The past two quarters have beaten even year-ahead forecasts, something usually seen only coming out of a shock. This sets a demanding bar for next year’s comparisons but also suggests that analysts have been expecting a cyclical slowdown during what’s so far been a period of secular growth.

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

09/09/2026

Please see the below article from Brooks Macdonald detailing their discussions on global markets. Received this morning 08/09/2026.

What has happened?

With US markets closed for Labor Day, trading was relatively quiet, leaving investors focused on oil prices and developments in Germany. Brent crude rose +0.75%, helping push the German 10-year Bund yield up +4.8bps to 3.39%, its highest level since 2011. Despite higher energy prices and rising rate expectations, European equities proved resilient. The STOXX 600 was little changed, with gains in France’s CAC 40 (+0.33%) offsetting declines in the FTSE 100 (-0.08%) and Germany’s DAX (-0.15%). Economic data was mixed, with Eurozone Q2 GDP revised up to 0.6% from 0.4%, while German industrial production fell -1.1% m-o-m, missing expectations.

Energy Markets Revive Energy Concerns

Geopolitical tensions in the Middle East continued to support energy prices. Following recent tanker attacks and reports of an attack on Saudi oil infrastructure, Brent crude rose to a six-week high of $97/bbl, while European natural gas futures gained +1.93% to €73.34/MWh. The move has rekindled inflation concerns across Europe. The one-year euro inflation swap rose 10.6bps to 3.37%, its highest level since May, while bond yields moved higher as investors reassessed how long central banks may need to keep policy restrictive.

Germany faces a difficult political balancing act

German politics also remained in focus after the AfD won 43.8% of the vote in Saxony-Anhalt’s state election, finishing just short of an outright majority. Chancellor Merz reaffirmed his commitment to the government’s reform agenda, ruling out any change in direction. Attention now turns to coalition maths. Neither the AfD nor the centrist parties can secure a majority alone, leaving the populist BSW in a potentially pivotal position. The most likely outcomes are either an AfD-backed minority government or a period of political stalemate that could ultimately lead to fresh elections.

What does Brooks Macdonald think?

With US markets reopening today, investors will have a fuller opportunity to react to the recent rise in energy prices and bond yields. So far, equity markets have remained relatively resilient, suggesting investors are still comfortable with the broader growth backdrop despite renewed inflation concerns. One area maybe worth watching is commodities. Copper reached a fresh record high on the London Metal Exchange yesterday, supported by supply concerns and the prospect of potential US tariffs. Alongside higher oil prices, this is a reminder that inflation risks have not disappeared entirely.

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

08/09/2026

Please see the below article from Tatton Investment Management discussing resilient markets, rising bond yields and why bond weakness is not solely inflation-driven, received this morning – 07/09/2026.

Pretty good, considering

We ended last week with global stocks a little higher and bond prices a little lower, as government bond yields keep grinding up. Higher yields usually make investors nervous, but equity markets have stayed remarkably calm even with oil risk and rate rises thrown into the mix.

That calm persists despite hawkish central banks. Fed Chair Kevin Warsh, the ECB and the Bank of Japan all struck a hawkish tone at last week’s Jackson Hole conference, and markets now expect all three to hike at their next meetings. The BoE’s Andrew Bailey was the dovish exception, but markets still expect a UK hike before year-end. Their hawkishness is about credibility. They have managed inflation expectations by talking tough during the Strait of Hormuz crisis; they may now need to back talk with action, even if it hurts growth.

Stock markets seem relaxed regardless. Maybe that’s because investors think hikes are ‘one and done’, maybe it’s because AI spending looks unhindered by interest costs, or maybe they just think 5% bond yields will tempt buyers – as they have before.

Governments are less relaxed. The US Treasury’s debt buyback plan betrayed real unease about long yields, while in the UK, Andy Burnham’s spending comments have rattled gilts and reportedly cost £14bn of fiscal headroom. It’s a reminder of how the structurally imbalanced gilt market makes the UK more vulnerable to debt spirals than most.

Bond fears were allayed by corporate earnings growth last month, but the Q2 reporting season is now over. Meanwhile, US-Iran strikes have resumed, Brent Crude is edging back towards $100, and Russia’s war on Ukraine looks increasingly desperate. Higher energy costs are feeding into food prices too. Still, corporate profits remain unequivocally strong. For now, we think investors are taking the good with the bad. It’s a rocky path up, but markets aren’t out of breath yet.

August asset returns review

Given the backdrop of Middle East escalation and rising government bond yields, August was decent for investors. Global stocks climbed 1.9% in sterling terms, while bonds edged up 0.1%. July’s market anxieties about peak AI earnings growth faded, helped by strong Q2 earnings reports. US tech stocks led the way with a 3.2% gain, while EM equities climbed 2.6%, thanks to the presence of large chipmakers in the index. Japan’s market also gained 2.6%, buoyed by AI positivity and ongoing structural improvements. That’s impressive, considering the yen slid again through August, following July’s US-Japan intervention.

China underperformed yet again (-0.7%) and the UK (+0.2%) and Europe (+0.9%) were in the middle. British and European markets were helped by their tech stock underrepresentation in July, but it was a drag last month – despite solid corporate earnings growth.

US-Iran tensions pushed Brent Crude 2.1% higher and broader commodities gained 5.3%, led by gold and silver. Gold’s gain was more about the ‘yen-tervention’ liquidity injection than a safe haven move, evidenced by Bitcoin’s 24.6% rally. If the intervention was supposed to devalue the dollar, it hasn’t worked out that way.

It didn’t help bonds either, with yields rising to decade highs on a confluence of factors: AI capital demand, risk perceptions around long bonds and central bank policy. At Jackson Hole’s central banking symposium, Fed chair Warsh dialled up his hawkish rhetoric, as did the ECB. BoE Governor Bailey went against the grain with some dovish remarks, but markets moved to price in higher interest rates for all three banks. UK bonds underperformed, partly down to structural imbalances, but not helped by Andy Burnham’s spending comments. Bond index returns were still positive – as yields are now high enough to compensate for price volatility. Higher bond yields also didn’t hurt equities, which were focussed on corporate earnings.

Bonds aren’t all about inflation

Bond yields are at multi-decade highs and commentators put it down to oil shock inflation, or central banks’ response. The story makes sense: ‘risk free’ government yields are supposed to reflect long-term growth and inflation expectations, and higher oil prices are inflationary. But bonds themselves say different. It’s growth-sensitive real yields that have spiked – not inflation expectations.

Neither the growth nor inflation explanations match the data. Core inflation has behaved despite the oil shock, and growth is slowing mildly. Even the rate hike explanation is complicated. While higher rates raise short-term yields, they should theoretically decrease longer-term yields by compressing growth and inflation.

We suspect it’s more about high overall capital demand and bond risk perceptions. Vast AI borrowing eats up bond demand, exacerbated by historically high government debts. It’s not so much that governments are fiscally irresponsible, but that higher debt servicing costs could force a ‘doom loop’ of borrowing to cover borrowing.

Historically high long yields aren’t tempting buyers yet – perhaps because investors are scarred by recent bond price volatility (volatility-adjusted returns are weak compared to equities, even if yields are attractive). Many think bonds are a bargain; they just think they might be a bigger bargain tomorrow.

Higher yields should eventually tempt investors, but the timing depends on central banks. They are currently hawkish, which is a slightly odd response to what should be a short-term supply shock – but is probably more about re-establishing credibility after the post-pandemic ‘transitory’ debacle. If the oil crisis continues and central bankers are serious about 2% inflation, the only logical conclusion is to deliberately weaken growth. So far, they’ve managed inflation expectations with words, which now need to be backed by action.

Bond struggles are less about inflation itself and more about the response to it – from policymakers and the economy.

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Marcus Blenkinsop

7^th September 2026

Please see below the article from Brewin Dolphin detailing their discussions on some of the factors driving market movement currently. Received yesterday 02/09/2026.

Last week saw Nvidia reporting earnings, which effectively lowers the curtain on the second-quarter earnings season. That means fewer obvious catalysts for uplifts until October, when third-quarter numbers begin to arrive. So, while the flow of corporate news ebbs, the controversies that remain are over what appear to be objectively high valuations and unproven business models.

For some time, market milestones have invited comparisons with valuations of the past. Over the summer, the Financial Times observed that U.S. equity valuations now sit higher than in September 1929, surpassed only by the peak of the dot-com bubble. It’s a comparison that demands respect, and we take the underlying caution seriously. But context matters.

The metric being cited is the analytically useful, cyclically adjusted price/earnings (CAPE) ratio, which measures the real price over the 10-year average adjusted earnings (with both price and earnings adjusted for inflation). While U.S. valuations have only reached today’s levels once before, during the tech bubble, there’s still a further 26% upside to the peak they eventually reached. Look beyond the U.S., though, and valuations are far less stretched. Global equity valuations are dragged down by their weighting towards other regions.

Anchoring to the tech bubble valuation peak is also unhelpful because the peak for equity valuations was neither in the U.S. nor in 1999, it was in 1989 Japan, when valuations reached multiples of the highest levels.

The deeper point is that valuations are just numbers that need to be reconciled against the pace of profits growth, not just their level. In early 2000, the market’s largest company, Microsoft, briefly touched earnings growth near 80%. Today’s largest, Nvidia, has now enjoyed multiple years growing much faster than that. Its valuation seems high looking backwards, as CAPE does, but less than 20 times 2027 earnings doesn’t seem demanding.

Its results, announced last Wednesday night, were strong, with quarterly revenue close to doubling year-on-year and a first-ever full-year forward guidance of 70% growth, which is only that modest due to supply constraints.

Is the AI trade resting on shaky foundations?

Source: OpenRouter

The more interesting debate is subtler. The performance gap between the frontier AI labs – OpenAI, Anthropic – and cheaper open-weight models has narrowed sharply, from perhaps 12–18 months to as little as three to six. That threatens the labs’ pricing power and they’ve made vast spending commitments to the hyperscalers (large cloud providers) who host them. Microsoft alone carries roughly $281 billion of contracted backlog tied to OpenAI, part of a group total near $700 billion.

So, it does make sense to wonder: what would the impact be if OpenAI and Anthropic found they couldn’t charge premium prices for their premium product? How does this affect the hyperscalers? Our read is measured.

Microsoft’s Azure platform is deliberately model agnostic. With over 11,000 models available, its economics are driven by total utilisation rather than any single customer. If OpenAI stumbled, that capacity would be redistributed to the enterprise demand queuing behind it, after a digestion period. Reduced demand from the AI labs, or reduced demand because of gains in model efficiency, would enable hyperscalers to slow their capital expenditure (capex).

So, does the real risk lie with the recipients of that capex? Back to the likes of Nvidia, which may also be at risk from greater efficiency in custom silicon as well? It’s a risk, but historical examples of this kind of technology show that efficiency gains tend to unleash more demand than they destroy.

Jevons’ paradox noted that as steam engines became more efficient, rather than reducing coal demand, they increased it because steam became a much more accessible technology. So far, that pattern seems to be holding for AI too. For Nvidia, cheaper open-weight models running on its highly flexible platform are a tailwind, not a threat.

Restoring credibility

It’s an open secret that public officials don’t always end up keeping their promises, but it feels like recent years have seen an unusual amount of policy flexibility. The UK’s debate over what increased taxes might mean for working people contributed to the change of its government. The U.S. plan to end military interventions has seen it mired in war in the Middle East.

Central bankers are assumed to be immune from the political pressures that lead to policy flexibility, but they can’t escape the financial pressures. So, inflation remaining persistently above target and governments delivering persistent budget deficits have created concerns that monetary policy is being directed at eroding debt burdens rather than managing inflation, a state known as fiscal dominance.

The relatively new Federal Reserve (Fed) Chair, Kevin Warsh, had the job of rebutting such concerns at last week’s Jackson Hole Economic Policy Symposium. He did so forcefully, acknowledging that inflation hasn’t meaningfully slowed and that the Fed has work to do. He reiterated the inflation target, said that short-term interest rates are the primary policy tool and acknowledged that the economy had strengthened. Without explicitly offering guidance, he gave the distinct impression that a rate hike was likely in mid-September.

That prospect saw a strong U.S. dollar and weaker bonds as Warsh affirmed the Fed’s commitment to controlling inflation with higher interest rates. That weighed on gold as it indicated the Fed won’t facilitate further inflating away national debt.

However, a lot could happen this week to tip the scales for or against a rate hike. A host of jobs data will come in on Friday – including the non-farm payrolls report, which was surprisingly downbeat last month.

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Alex Clare

03/09/2026