Please see the below article from Brooks Macdonald detailing their discussions on further developments in the Macro environment. Received this morning 28/05/2025.
What has happened
Following the US and UK holidays, global equities delivered a strong performance yesterday. The rally was partly driven by a delayed market response to President Trump’s decision to postpone 50% EU tariffs until July 9. The S&P 500 surged 2.05%, snapping a four-day losing streak, with the Magnificent 7 stocks leading the charge, gaining 3.24% ahead of Nvidia’s highly anticipated earnings release. The rally was broad-based, with the Russell 2000 small-cap index climbing 2.48%. Globally, Germany’s DAX and Canada’s S&P/TSX hit record highs, while Europe’s STOXX 600 posted a second consecutive day of gains. Meanwhile, the 10-year US Treasury yield fell 6.7 basis points to 4.45%, signalling a pause in recent upward pressure on yields.
Global bond yields lower
A big catalyst for market rally was developments in Japan. The 30-year Japanese government bond yield fell by 19 bps, which was the largest single-day drop since the regional banking crisis of March 2023. This movement reversed recent upward trends, as the 30-year bond yield had previously reached their highest levels since the bond’s issuance. The decline followed reports that Japan’s finance ministry circulated a questionnaire to market participants, leading to speculation of reducing long-dated bond issuance. The rally in Japanese bonds produced ripple effects globally. The US 30-year Treasury yield dropped 8.6 basis points to 4.95%. In Europe, 30-year yields also declined, with Germany (-6.1bps), France (-5.6bps), and Italy (-5.8bps) all seeing notable pullbacks.
May consumer confidence rises sharply
Adding to the positive momentum, the US Conference Board’s May consumer confidence index rose sharply to 98.0, exceeding expectations of 87.1 and marking the first increase in six months. The expectations component soared 17.4 points to 72.8, the largest monthly gain since May 2009, reflecting optimism as trade tensions eased. This piece of data cemented the view that a significant economic downturn is unlikely, hence further supporting risk assets across the board.
What does Brooks Macdonald think
The combination of easing trade tensions, resilient consumer confidence, and falling bond yields provides a supportive backdrop for equities and other risk assets, particularly in sectors tied to economic growth. However, uncertainties around upcoming corporate earnings and potential shifts in monetary policy warrant vigilance.
Bloomberg as at 28/05/2025. TR denotes Net Total Return.
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Please see below article received from Tatton Investment Management this morning, which provides a global market update for your perusal.
We probably should have expected some stock market pullback, after weeks of recovery. We certainly should have expected that Trump wasn’t done with tariff threats – his, now delayed until 9 July, 50% EU tariff threat hit markets on Friday – but stocks were falling even before that, thanks to higher government bond yields (resulting from planned US tax cuts and the resulting fiscal instability).
This has echoes of 2022, when higher yields put a ceiling on equity returns. Our equity valuation model is sensitive to long-term real rates, which are themselves sensitive to measures of government fiscal risk. That risk isn’t just a US problem: deterioration in the world’s largest bond market would push up yields everywhere – much more than the UK’s budget fiasco of 2022.
Trump’s tax cut plans will reportedly cost $3.3tn in lost revenue over 10 years. Bond buyers hope that tariff revenues will make up much of the shortfall – the inevitable conclusion being that the president can’t afford to lower tariffs any further, which may even explain the EU threat. But lower tariffs are what excited US stock markets over the last month. It’s a rock and hard place: stocks tantrum when tariffs go up; bonds will tantrum if they go down.
This suggests that US stocks and bonds are competing for the same capital. In the past, capital inflows to the US meant they didn’t have to. But with America’s safe haven status under threat, US underperformance is becoming a trend that will be hard to reverse. Higher bond yields have room to come down, for example, but that requires policy stability – which has already deteriorated.
We’ve warned before about US companies facing high debt costs, which are increased by higher ‘risk free’ government yields. For mid and large-cap borrowers, this hurts their refinancing costs and stock valuations. This isn’t recession point, but higher bond yields mean the risk isn’t negligible.
UK inflation unease
UK inflation was 3.5% in April – above expectations and the highest figure since January 2024. Most coverage focussed on tax impacts and Ofgem’s higher energy price cap, but planned one-offs typically don’t raise long-term inflation. More worrying for the Bank of England was surprisingly strong airfares and service prices, suggesting strong consumer demand and wages. They scuppered any remaining hopes of an interest rate cut next month. Even before the report, BoE chief economist Huw Pill argued that rate cuts to now had been too quick.
April’s surprise challenges our previous hunch that UK inflation would be weak, but the underlying numbers aren’t as clear cut. Core goods came in below forecast, for example, while the BoE’s own measure of service prices decelerated from March. Opinions on where UK inflation will be at the end of 2025 are mixed, and it’s worth bearing in mind that, prior to last month, UK price levels were growing at a similar rate to Europe and below the US. Bearing in mind one-offs and seasonal factors (like financial year-end rises indexed to past inflation) we would expect inflation to fall in the near-term.
Bond markets are unsure how much it could fall, though, which is why long-term government bonds sold off and, hence, yields rose sharply. But UK yields are still closely correlated with the US and the difference between the two is narrower than two months ago. Basically, the inflation surprise forced a bond adjustment, but not a panic.
We should also remember that inflation and growth are two sides of the same coin – and Britain’s stronger-than-expected Q1 growth would have contributed to price rises, particularly for wage-sensitive services. That’s why UK stocks didn’t move much in response. Even if inflation means higher than expected rates and yields, the resulting growth should support profits.
UK-EU trade deal a positive for investment
Economically, both the benefits and concessions of Britain’s “reset” deal with the EU have been overstated by politicians. Fisheries are a tiny fraction of the UK economy so, in pure trade terms, the agriculture and energy benefits outweigh the cost of giving Europeans access to our waters. But the long-term economic benefit is still miniscule compared to the estimated costs of Brexit – which is why both sides painted the deal as a starting point, rather than job done.
The real prize for the UK would be the ability to sell financial services into the EU – and Europe would benefit too. The UK has a highly developed capital markets framework, which the EU lacks. Both regions suffer from underinvestment problems: Europeans save too much, while UK investors – particularly pension funds – simply don’t buy enough UK stocks. This is arguably one of the reasons the UK and Europe have underperformed the US for so long.
The UK is trying to address this problem with its “Mansion House Accord”, through which pension providers agreed to invest £50bn in UK businesses. There are rumours of something similar in the EU.
British and European regulators would do well to act now – as both regions have benefitted from Trump-spooked investors moving money out of the US this year. Those flows have already dried up somewhat, after the US president backed down on tariffs. If policymakers want the short-term investment flows to turn into something more, structural changes are needed. Not only would this boost stock values, it would mean more money for smaller riskier ventures. That means investment in innovation, like AI. Indeed, the US’ strong investment impulse is one of the reasons for its economic and financial outperformance. In a Trump-shocked world, we suspect Britain and Europe’s political will to make these structural changes will be strong.
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Please see the below article from Brooks Macdonald detailing their discussions on global bond markets. Received this morning 22/05/2025.
What has happened
Both equity and bond markets were on the back foot yesterday. The catalyst was renewed investor angst around US debt sustainability with negotiations continuing over a US tax-cut and spending-cut bill – a bill which in its current form is expected to add to the longer-term US debt and interest cost burden. That backdrop drove a weaker-than-expected US government bond auction for 20-year maturity bonds yesterday, which in turn pushed longer-dated bond yields up in particular – the US 30-year government bond yield closed yesterday above a key psychological level of 5% for the first time since October 2023, and a fraction away from its highest level since 2007.
A global rise in government bond yields
While yesterday’s rise in government bond yields included notable rises in longer-dated yields, it was not just a US-story. Yesterday saw a further nudge up in longer-dated government bond yields across developed economies, from the US, to the UK, to Japan. Looking at 30-year government bond yields, while the US topped 5%, the UK was over 5.5% yesterday and trading around its highest levels since the late 1990s, while over in Japan the yield at one point yesterday hit 3.185%, an all-time high.
Latest Purchasing Manager Index (PMI) data
A key focus today will be the latest preliminary PMI economic activity survey data across key economies globally for May – it is likely to be of particular interest as it will offer a snapshot on how the global economy is responding since US President Trump unveiled his trade tariffs back on 2 April. For Japan where the data was out earlier this morning, that picture is not overly encouraging – Japan’s overall composite measure (which includes manufacturing and services) fell into month-on-month contraction, while the manufacturing print has now chalked up its 11th consecutive print of month-on-month contraction. Elsewhere, the German PMI is also out this morning, recording a fall in composite activity in May, and marking the first contraction this year.
What does Brooks Macdonald think
Global bond markets are arguably sending some concerning signals currently. While governments around the world might be hoping to sustain spending commitments and manifesto promises to their electorates, against this, global bond markets, with higher yields, are as a result driving an unwelcome reappraisal of what level of government debt might be deemed sustainable and what is not. Given this investment backdrop, this morning’s UK government borrowing figures will likely only add to that broader market concern – the April numbers show an unexpected rise in UK public sector net borrowing to £20.2bn for the month, up year-on-year (versus £19.2bn in April 2024) and well ahead of a Reuters poll that had expected a fall to £17.9bn – the UK’s latest month’s borrowing figure is the highest, in any month, since April 2021, and is the fourth-highest borrowing figure for April since monthly records began back in 1993.
Bloomberg as at 22/05/2025. TR denotes Net Total Return.
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Please see below Evelyn Partners thoughts on this morning’s UK inflation announcement for April.
What happened?
UK April annual headline CPI inflation came in at 3.5% (consensus: 3.3%), versus 2.6% in March. In monthly terms, CPI was up 1.2% (consensus: 1.0%), compared with 0.3% in March.
Annual core CPI inflation (ex-energy, food, alcohol and tobacco) came in at 3.8% (consensus: 3.6%) vs 3.4% in March.
What does it mean?
An acceleration in UK CPI inflation for April was expected, driven by a triple-whammy of:
i) Large indexed and regulated price increases, including mobile phone charges, vehicle excise duty, and water & energy bills.
ii) A later-than-usual Easter weekend, which lifted airfare and accommodation prices.
iii) Businesses passing on the higher National Minimum Wage and employers’ National Insurance (NI) contributions to consumers.
Looking forward, it is unclear whether businesses can fully pass on higher labour costs to consumers through price increases. Given tight margins in the retail sector, food retailers are likely to pass on these costs, adding further complexity to the BoE’s Monetary Policy Committee (MPC) to make decisions on inflation and interest rates.
The Bank of England forecasts annual CPI inflation will average 3.4% in Q2 and peak at 3.5% in Q3. If inflation exceeds expectations, the MPC may delay interest rate cuts at its next meeting on June 19. In its May meeting, the MPC did not signal urgency to cut rates.
However, if services CPI inflation slows and pay growth eases, alongside a slightly rising unemployment rate, the BoE may resume rate cuts in the second half of 2025.
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Please see this week’s Markets in a Minute update below from Brewin Dolphin, received yesterday afternoon – 20/05/2025.
U.S. inflation slows beyond expectation
Explore how President Trump’s new tax bill and recent U.S. financial data could shape the economic landscape.
The equity rally continues
Source: LSEG Datastream
The S&P 500 reached its all-time high on 19 February – just three months ago. Since then, the market has been on a wild ride. The S&P 500 dropped nearly 8% between Inauguration Day and ‘Liberation Day’ (2 April).
When ‘Liberation Day’ came along, the confusing announcement of tariffs on every country America trades with – with rates varying between punitive and catastrophic – was taken poorly. The S&P 500 lost a further 12% of its value. Other global markets did better but still reacted negatively to the news.
Since then, U.S. President Donald Trump has announced the deferment of the most painful individual tariff rates, causing a sharp rally. China was hit with effective embargo tariff rates of 145% and the promise of additional curbs on the semiconductor supply chain, but a sharp decline in this tariff rate was announced last week.
President Trump now plans to overhaul the broad ‘AI diffusion rule’ implemented under former President Biden. The rule organises countries into three tiers, which all have different restrictions on whether advanced AI chips can be exported to the country without a licence. It seems that he plans on replacing it with individual deals negotiated with countries, however, the use of Chinese technology such as Huawei’s Ascend AI chips could prevent such agreements.
President Trump has been negotiating chips sale agreements with some Middle Eastern countries. The semiconductor deal-making continues to drive a huge rally in related stocks, which has been aided by the general equity rally and change in tone on trade.
All this leaves the U.S. equity market 4% above its ‘Liberation Day’ level, and just 4% away from a new all-time high.
Foreign exchange markets have seen less relief. Since Inauguration Day, the U.S. dollar has slipped 5%. Since ‘Capitulation Day’ (when President Trump deferred the higher individual tariff rates by 90 days), it has rallied 2%.
Investors shouldn’t forget the reasons for a widely-held overweight position to U.S. stocks. Some U.S. companies are exceptional and offer unparalleled access to the technology and AI-enabled changes that will transform the economy over a few years. But they should remain aware of the damage done to America’s reputation as a trading partner. Investors will rethink allocations to U.S. assets, while reserve managers will rethink the need to hold U.S. debt. Small changes here can have big implications.
This cocktail could allow the Federal Reserve to cut interest rates, but for now, it will want to see more evidence of modest inflationary pressures.
Trump trades are reversing
In addition to the above, other fallout from ‘Liberation Day’ has been dispersing. A hot topic is gold, which has shown signs of slipping following two failed attempts to decisively breach $3,400 per ounce.
A mellowing trade war is bad news for gold, but the seemingly intact trend of diversifying away from the U.S. remains supportive. After the enormous rise, a consolidation seems healthy.
Last week, bonds benefitted from the ebbing of inflation concerns due to reduced tariffs. The picture is very complicated with regards to U.S. treasuries, as they must balance worse inflation and worse growth. In addition to this and the potential reduced demand from overseas buyers, there’s also the prospect of changes in bond issuance.
The U.S. House Committee on Ways and Means (the Committee), which is responsible for writing tax law, released draft legislation last week. Although not all these proposals will become law – final legislation needs to be approved by Congress before going to the president to sign – it’s worth looking at what’s contained in this blueprint. By far, the costliest part of the tax package is the ten-year extension of the individual rate reductions, which are set to expire this year.
The Committee also included President Trump’s unorthodox tax cut promises of no tax on tips and no tax on overtime in the draft – but these are planned to last for only four years. President Trump had also promised to end taxes on Social Security benefits, but this has instead provided for a so-called ‘enhanced deduction’ for seniors on top of the regular tax deduction. The proposal also calls for no tax on car loan interest.
To offset the costs, the plan proposes reducing the state and local tax (SALT) deduction limit, which is currently capped at $10,000. Some Republicans from high-tax areas are likely to push back, as they favour higher deductions. The plan also eliminates several clean energy tax credits introduced under President Biden, including the $7,500 electric vehicle tax credit. Notably, it retains the current top tax rate of 37%, contrary to President Trump’s recent suggestion to raise it to 39.6% for those earning over $2.5 million annually.
Overall, the plan increased the deficit by $3.7trn over a decade. It could be bolstered if the administration can restrict Medicaid coverage, and there will be benefits to the Treasury from funds raised by tariffs, but they’re not scored because they’re emergency measures rather than legislative ones.
Similarly, savings through the Department of Government Efficiency will reduce federal costs, but as the funds being saved have already been approved by the government, the administration is theoretically required to spend them. If these savings can be made to stick, that can be considered in future appropriations.
The outlook for U.S. fiscal policy is far from clear three months into the Trump administration’s mandate, and the quick win it sought continues to look elusive.
The economy remains robust
Source: LSEG Datastream
Is the U.S. economy reflecting the extreme pessimism from consumers? Yes, to an extent.
Retail sales growth was muted but hardly collapsed. There was weakness in some sectors, particularly those affected by Chinese tariffs which, prior to their relaxation, had been acting as an embargo rather than a tax.
Audio equipment and electronics saw sharp increases in prices when Consumer Price Index (CPI) data was released. Audio equipment prices rose almost 9% in a month, which was easily the highest increase going back to the beginning of the data series in 2009.
Retail sales data showed a slight increase in spending on electronics, which suggests that people have bought fewer goods for more money. In other categories, inventories are still masking the impact of measures. At a headline level, weak services prices – reflecting caution from U.S. consumers – are holding prices down.
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Please see below, Brooks Macdonald’s Daily Investment Bulletin which summarises the key factors currently impacting global investment markets. Received today – 20/05/2025
What has happened
If equity markets were looking to take a breather from the latest rally, yesterday saw only the briefest of pauses. Following news of the US sovereign credit rating downgrade from Moody’s last Friday, the US S&P500 equity index opened lower on Monday but rallied through the day to close up in positive territory in local currency price return terms – it was a similar picture in bonds, with US government bond yields higher early on, only to fall back through the day. Overnight, investor sentiment has been buoyed by news that China’s central bank, the People’s Bank of China, has cut its 1-year and 5-year interest rates for the first time since October last year, while over in Australia, the central bank there has also cut its interest rate (for only the second time this cycle) but this move from the Reserve Bank of Australia was widely expected.
Moody’s downgrade criticised
Yesterday saw criticism from the US Trump administration of Moody’s US sovereign credit rating downgrade. US Treasury Secretary Scott Bessent dismissed the move, saying that “Moody’s is a lagging indicator – that’s what everyone thinks of credit agencies”. That view was also shared by White House National Economic Council Director Kevin Hassett who said Moody’s decision was “backward-looking”, while noting the current US administration’s commitment to cut federal spending.
For context, the one-notch cut by Moody’s comes more than a year after the credit rating agency changed its outlook on the US rating to negative (back in November 2023) – furthermore, Moody’s was the last of the big 3 credit agencies to cut the US debt rating from the highest tier – Fitch downgraded in 2023, while Standard & Poor’s cut over a decade earlier in 2011.
US tax cut plans
The US Trump Republican administration are currently negotiating in Congress, a proposal to pass an extension to the 2017 Trump tax cuts which are currently due to expire at the end of this year, as well as introduce new tax cuts. Also tied to those tax proposals, are plans to cut back on government spending in areas such as healthcare, social security programmes, and green energy tax breaks. However, even though Republicans control both houses in Congress, there is disagreement between Republicans as to the scale of spending cuts in particular.
What does Brooks Macdonald think
After the rally from the April lows, the outlook for markets from here might arguably be reduced to the balance between two competing forces: US tax cuts versus US president Trump’s tariff plans. However, it is unfortunately not that simple, and while tax cuts can provide a shot in the arm for near-term consumer spending expectations, it might also store up concerns down the line as regards US government debt sustainability. Optimistically, tax cuts can stimulate economic activity so that the tax base of a country can grow, but it can also make an economy more vulnerable in an economic downturn.
Bloomberg as at 20/05/2025. TR denotes Net Total Return.
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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 – 19/05/2025:
A rally that requires belief
US large cap stocks have erased all of the year’s losses in dollar terms. Investors are split between ‘buy the dip’ bulls and still-sceptical bears. The former see lower volatility and rapid trade deals, and think profits will get back on track. The latter see roadblocks in US-China and US-EU negotiations, plateauing profits and consequently stretched stock valuations. Some paint the bulls as Trump-loving retail investors and the bears as measured professional investors – but that’s too kind to the latter. Many retail investors have done very well recently, after all.
Still, nerves are showing in bond markets (partly due to budget fears discussed below) and higher yields have stretched relative stock valuations on our model. This is hurting corporate lending, which a recent loan officers survey shows is already tight.
The increase in US yields once again spiked UK yields – but that doesn’t match the government’s tight fiscal policy and the Bank of England’s relatively dovish outlook. It could be about stronger than expected Q1 growth, but that strength came from retail sales which are already dropping off. Stock markets expect the UK to weaken in the second half of 2025 and they are probably right – but if economic data keep beating expectations it will boost UK equity.
As long-term investors focussed on risk and reward, we’re cautious on US stocks. US tariffs are still significantly higher than expected a few months ago, and price rises are year to be felt. They will hit prices later in the year, and in the meantime the US will have to deal with delayed business investment and tightening credit. The Trump show has had some feel-good episodes lately, but the fundamental picture hasn’t changed.
This doesn’t mean the rally can’t continue in the short-term. Our caution isn’t a near-term directional call but an assessment of higher risks without higher rewards.
European hope or hype?
European stocks have significantly outperformed the US in 2025 – the reverse of what many expected coming into the year. This is partly tariffs weighing on the US economy, but investors are also excited about Germany’s defence and infrastructure spending. Fiscal stimulus in Europe’s largest economy would go a long way to correcting Europe’s historic underinvestment, of which Germany’s old government debt rules were emblematic. It’s not just short-term spending markets are excited about, either. Investors hope that defence coordination will force Europe to integrate further and overcome competing national interests.
Capital Economics think Europe’s spending spree might be overstated, however. Germany can’t be the only fiscal source, but other nations – like debt-ridden Italy and France – don’t have the same spending capacity. Capital Economics estimate the Eurozone’s total budget deficit will be 3% after Germany’s increase, and growth will return to 1% annual growth beyond 2028. There’s also no guarantee that defence spending will boost productivity, as European nations typically spend just a fraction of their defence budgets on research and development.
The difference in spending capabilities could also reignite old tensions – especially after the US apparently softened its stance on tariffs and Ukraine. The EU still has significant non-tariff barriers between nations, especially in the services sector. There’s still no single capital markets regulator, for example, and very few pan-European banks.
Removing those structural barriers would be the real long-term prize for Europe. New German Chancellor Merz will know all about these from his time at BlackRock, and he has talked up the need for unity since entering office. But the rise of nationalism over the last two decades has pushed European leaders away from integration – so revitalising the European project will take more than the occasional show of unity. If leaders can pull it off, they could unlock the continent’s true potential.
Trump’s Big Beautiful Bill
Republicans in US Congress have drafted a tax cutting plan that President Trump calls his “Big Beautiful Bill”. It mostly extends time-limited measures from the Tax Cuts and Jobs Act (TCJA) Trump signed in 2017, but includes some new cuts: tax-free bank accounts for children under eight, and tax-free tips, overtime and car loan interest until 2028. Contrary to market expectations, the bill has no additional corporate tax cuts beyond TCJA extensions. But markets still hope for corporate giveaways as the bill makes its way through Republican-controlled congress.
Cuts will reportedly drain $3.7tn of federal funding over 10 years, and the costing proposals are controversial: Republicans want to strip $625bn from Medicaid insurance and $300bn from Biden-era green policies – many of which benefit Republican constituencies.
Trump suggested last week that Americans making over $2.5mn could face a higher tax bracket, but traditional low-tax Republicans shot down the idea, and they are emboldened by the party’s razor-thin majority. Many think tariffs could fund tax cuts, but Trump’s tariffs change too often to provide stable revenues.
The $3.7tn cuts would therefore worsen the already high debt and deficit, which fiscally conservative Republicans warn could become unmanageable. Trump fought off this group in 2017, but Republicans had a stronger hold on congress and markets cheered on the cuts. We expect markets to be less receptive this time, given the rise in US bond yields. Our preferred measure of government credit risk shows fears are already rising.
Trump needs to deliver growth benefits to regain markets’ confidence, but that’s a tall order for a bill which mostly just extends the TCJA. True, many US investors still buy into the sugar rush of tax cuts, but they are increasingly outweighed by budget hawks warning about a fiscal comedown. Whichever way the narrative tips, it will significantly impact global markets.
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Please see the below article from EPIC Investment Partners detailing their discussions on the Labour Market. Received this morning 16/05/2025.
For nearly six months, weekly changes in continuing jobless claims have alternated consistently—rising one week, falling the next—for 24 consecutive weeks. The likelihood of such a precise pattern emerging randomly is extraordinarily slim, approximately 8.4 million to 1, strongly suggesting data quirks rather than genuine economic movements.
Continuing claims offer critical insights into labour market health, reflecting how swiftly unemployed individuals secure new employment. While regular fluctuations are normal, this remarkable alternation signals statistical anomalies more than actual shifts in employment conditions.
We attribute this unusual pattern primarily to flawed seasonal adjustment methods, designed to smooth predictable variations in hiring, such as holiday or seasonal cycles. Administrative factors—like staggered filing schedules or delayed reporting from certain states—could introduce consistent week-to-week volatility unrelated to underlying economic fundamentals. If filing schedules were to change, the previous seasonal adjustments would introduce this saw-tooth pattern in the data. We can’t be certain, but this seems the most likely explanation.
Yet beneath these statistical irregularities lies an important and genuine trend: continuing claims have been steadily edging upward, approaching their highest levels since late 2021. This increase indicates unemployed workers are facing longer job searches, a reality seemingly at odds with robust payroll employment figures. Such divergence suggests increasing friction and caution among employers, nuances not immediately apparent in headline job data.
Initial unemployment claims remain relatively low, reflecting minimal mass layoffs. However, the gradual rise in continuing claims highlights subtle but real softening in labour market conditions. Employers appear increasingly cautious, resulting in slower hiring and longer periods of unemployment for jobseekers.
In our view, the upward drift in continuing claims points to genuine but modest weakening in labour market dynamics. Should this trend persist, it could negatively affect consumer spending and corporate profitability, thereby influencing monetary policy considerations. Conversely, easing labour market tightness could help moderate inflationary pressures, potentially allowing the Federal Reserve greater flexibility in its policy approach.
Although the alternating weekly pattern is likely a statistical curiosity, it underscores the necessity of cautious data interpretation. By focussing on multi-week averages we get a clearer picture of the trend than the more volatile weekly data. Ultimately, the gradual but persistent rise in continuing claims is an early sign of potential economic softening that warrants careful attention in the months ahead.
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Please see below article received from EPIC Investment Partners this morning, which provides a re-assuring reminder to long-term investors.
In the world of investing, headlines often spark dramatic market moves—but it is the underlying fundamentals that determine lasting success. The recent rollercoaster of reactions to Trump’s policies offers a timely reminder for institutional investors: do not let short-term noise derail your long-term strategy.
Markets initially surged on Trump’s promises of tax cuts, deregulation, and a broadly pro-business agenda. The early rally reflected optimism around stronger corporate earnings and economic growth, with many investors positioning for reflation. But sentiment shifted swiftly as tariffs and trade tensions took centre stage. Uncertainty mounted, global growth forecasts softened, and defensive positioning became the consensus—not because fundamentals collapsed, but because narrative-driven fear took hold.
Institutional investors felt the pain. Many de-risked portfolios amid fears of an economic hard landing—just as quality growth stocks began to recover. From late April, the market turned decisively, punishing underexposure to structurally advantaged names.
Take Meta, for example. Oversold on concerns that advertising demand was evaporating, the stock fell to $480. Those fears proved overstated: Meta rebounded over 37% to $659 within weeks, buoyed by strong earnings and upbeat guidance.
NVIDIA followed a similar path. It dropped below $95 amid worries that Big Tech would slash AI capital expenditure. But those concerns quickly dissipated as Microsoft, Amazon, Alphabet, and Meta reaffirmed AI investment as a long-term priority. The stock surged back to $135, underscoring AI’s structural growth potential.
This earnings season highlighted a clear bifurcation. While many companies tread water or guide cautiously amid ongoing macro risks—such as inflationary pressures and geopolitical uncertainty—a select group, particularly in tech, industrial automation, and med tech, is steamrolling ahead. The market is rewarding operational resilience, pricing power, and exposure to secular growth drivers.
The key takeaway? Headlines drive short-term volatility, not long-term returns. Real wealth is built by owning high-quality, resilient businesses through cycles—not by reacting to noise. The bigger risk for institutions is not volatility but being underexposed to the long-term secular winners. Portfolio construction should prioritise capturing enduring secular trends while not overreacting to transient macro noise or headline-driven swings.
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Please see below article received from Brooks Macdonald this morning, which provides a global market update for your perusal.
What has happened
US megacap technology shares had another good day yesterday. Nvidia was up +4.16%, pushing the ‘Magnificent Seven’ technology group of companies’ share prices (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla), up +1.75%. Elsewhere however, there was some investor buying fatigue creeping into markets after the rally over the past few weeks, with the equal-market-capitalisation-weighted version of the US S&P500 equity index down -0.62%. Over in Europe, without megacap tech to fall back on, the pan-European STOXX600 equity index was down -0.24%, while overnight Asian equity markets are a touch lower also (all in local currency price return terms).
UK economy stronger than expected in Q1
UK Gross Domestic Product (GDP) data for calendar Q1 is out this morning – the data shows the UK economy has been doing better than expected, growing at +0.7% in Q1 2025 versus Q4 2024. That is an acceleration from the +0.1% GDP growth rate in Q4 2024 versus Q3 2024 and was above forecasts looking for +0.6% in Q1 2025. Furthermore Q1 2025 was the strongest quarter-on-quarter growth rate since Q1 2024. That said, keep in mind that while GDP numbers are always backward-looking, perhaps this is even more the case currently given how US President Trump’s 2 April tariffs are reshaping the global economy more broadly.
Middle East geopolitics
There are news reports overnight that Iran is willing to sign an agreement around concessions for its plans for making nuclear weapons in return for a lifting of US economic sanctions. Specifically, Ali Shamkhani (an adviser to Iranian Supreme Leader Ayatollah Ali Khamenei) has confirmed that Iran would conditionally agree to limit future uranium enrichment to lower (sub-weapons grade) levels consistent with civilian energy generation use. That better geopolitical outlook is helping to push back on Brent crude oil prices, down -3% today currently at around US$64 per barrel – for context, those oil prices are well off their $80+ per barrel 2025-year-to-date highs back in January (as an aside, as we have written about before in our Daily Investment Bulletins, keep in mind that lower oil prices, if sustained, can have a material dampening impact on any inflation pressures elsewhere).
What does Brooks Macdonald think
This morning’s UK GDP data is more difficult than usual to extrapolate. Aside Trump’s 2 April tariff plans where the recent UK-US trade deal leaves 10% universal tariffs largely in place, the domestic UK economic picture is somewhat tougher now given the hike in employer National Insurance costs that came into effect last month. The Bank of England’s latest economic projections arguably reflect that picture, with UK GDP growth expected to effectively stall in calendar Q2, with an estimated growth rate of just +0.1%.
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