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

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

Please see below, an article from EPIC Investment Partners discussing the concept of an equilibrium interest rate and where it may lie in the future. Received today – 29/08/2025

On 25 August 2025, New York Federal Reserve Bank President John C. Williams addressed an audience in Mexico City with a message that resonated far beyond the confines of central banking circles. He argued that the neutral interest rate, or r-star, remains anchored close to its pre-pandemic level of around half a per cent. Despite high inflation in recent years, aggressive tightening, and subsequent cuts, Williams insisted that the long-run equilibrium rate has not shifted. “The era of low r-star is far from over,” he declared. 

For markets, the implications are significant. If the neutral rate really is this low, then policy remains restrictive even after recent rate reductions. That means the cost of capital is tighter than headline levels suggest, with knock-on effects for bond yields, valuations and currencies. It also raises the prospect that the Fed will once again collide with the effective lower bound in the next downturn, forcing policymakers back towards unconventional tools such as quantitative easing. 

Williams’s reasoning rests on structural forces that he argues remain intact. Demographics, including longer lifespans and falling birth rates, continue to elevate global savings while curbing demand for investment. Productivity growth, once the motor of higher returns on capital, has slowed sharply, limiting profitable opportunities. And the legacy of the global savings glut, reinforced by investor demand for safe assets since the financial crisis, keeps the equilibrium rate pinned down. None of these dynamics, he stressed, have been overturned by the pandemic. 

Central to his credibility is his reliance on the Holston-Laubach-Williams (HLW) model, which he co-authored. Originally developed as the Laubach-Williams framework in 2003 and later updated with Kathryn Holston in 2017, the model has become the benchmark for estimating r-star. By inferring the neutral rate from the observed relationship between output, inflation and interest rates, it seeks to capture the underlying structural drivers that markets often miss. For Williams, this is not simply a technical preference — it is his intellectual legacy. He openly contrasts it with market-based measures, which he derides as a “hall of mirrors,” distorted by risk premiums and sentiment rather than fundamentals. That scepticism matters for investors: policy may be guided by HLW’s slow-moving structural compass rather than the volatility of market pricing. 

The distinction Williams draws between cyclical fluctuations and structural anchors is crucial. Robust demand, resilient investment and stubborn inflation, he maintains, reflect temporary late-cycle dynamics and fiscal stimulus, not a permanent shift in equilibrium. To mistake heat for structure, he cautioned, would mislead both policymakers and markets. 

For bond traders, the message is sobering. A persistently low r-star caps the long-term trajectory of yields, shapes the curve, and means easing cycles are more likely to run into the lower bound. Williams’s Mexico City speech offered a reminder that, in monetary policy, the deepest currents are structural, not cyclical — and that financial markets ignore them at their peril.

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Alex Kitteringham

29^th August 2025

Please see the below article from Brooks Macdonald detailing their thoughts on the Nvidia earnings results and their current market input received this afternoon, 28/08/2025:

What has happened?

While the S&P 500 hit a new record in USD terms yesterday, ongoing concerns about the Fed’s independence and France’s fiscal outlook tempered the optimism. These worries led to a steeper US yield curve and pushed the Franco-German bond spread to a seven-month high. After the US close, Nvidia’s earnings received a lacklustre response from investors.

Nvidia growth outlook uncertain

Nvidia reported Q2 results that slightly beat expectations, with revenue of $46.7bn and guidance for the next quarter broadly in line with expectations. While sales were still up over 50% year-on-year, this marks a clear slowdown from the triple-digit growth seen in previous quarterly announcements. Revenue from the key data centre segment came in just below forecasts, and uncertainty remains around sales to China. Although the US has resumed export licenses for these chips, Nvidia noted that the revenue-sharing plan tied to those exports has not yet been formalised and this uncertainty disappointed investors. Looking forward, Nvidia’s expectations for $54.0bn (+/-2%) in sales for Q3 vs previous expectations of $53.8bn did not constitute the strong ‘beat and raise’ that some investors had hoped for and the shares fell approximately -3% post the close.

Trump maintains pressure on the Fed

Concerns about the Federal Reserve’s independence continued to influence markets, with investors pricing in faster rate cuts and higher inflation expectations. This led to a steepening of the yield curve, as 2yr yields continued to fall after the news earlier this week that President Trump was seeking to fire Fed Governor Lisa Cook.

French political uncertainty continues

French bonds remained under pressure ahead of the 8^th September confidence vote, as investors questioned the government’s ability to manage the deficit. Prime Minister Bayrou offered to negotiate with opposition parties, but the risk of the government falling—and potentially triggering new elections—remains high. This uncertainty pushed long-end yields higher, with the 30-year reaching its highest level since 2011 and the Franco-German 10-year bond spread nearing last year’s peak.

What does Brooks Macdonald think?

The reaction to Nvidia’s results last night, together with the MIT report released last week which found that 95% of organisations are currently getting zero return on their investments in Generative AI, reinforces our view that some AI related stocks appear fully priced. Given the resulting equity market concentration, adequate diversification by sector and region remains more important than ever.

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

Andrew Lloyd

28/08/2025

Please see the below article from Brooks Macdonald detailing their discussions on the Federal Reserve and concerns about the French fiscal situation. Received this morning 27/08/2025.

What has happened?

The Federal Reserve and its future independence were in focus again yesterday, and in France both equities and government bonds came under pressure due to the government’s upcoming confidence vote.

President Trump’s pressure on the Fed continues

President Trump’s continuing attempt to remove Fed Governor Lisa Cook has sparked legal and institutional pushback, with Cook’s lawyer announcing plans to challenge the firing and the Federal Reserve reaffirming that governors can only be removed “for cause.” With two current members already dissenting in favour of cuts and Stephen Miran nominated to fill another seat, replacing Cook could tip the balance. Reports also suggest Trump is exploring ways to exert more influence over the Fed’s 12 regional banks, whose presidents rotate onto the FOMC and are up for approval in early 2026. Markets responded with a notable further steepening of the yield curve as the difference between 2yr and 30yr yields rose to the highest since January 2022, as investors priced in a more dovish policy outlook with the futures markets now expecting over 100 basis points of rate cuts by mid-2026.

Concerns about the French fiscal situation mount

The focus on France intensified as Prime Minister Bayrou faces a likely no-confidence vote on September 8, with major opposition parties pledging to vote against the government. This political uncertainty has recently weighed heavily on French assets, with the CAC40 underperforming regional peers and major banks seeing sharp declines. The French 10-year yield moved to within 6bps of Italy’s, the tightest since 2003, highlighting investor unease.

What does Brooks Macdonald think

Despite this uncertainty, equity market investors remain sanguine, with the S&P500 closing last night only very marginally below its all-time high. Nvidia, widely seen as the bellwether AI stock, reports earnings today after the US market closes. Analysts’ revenue expectations have risen since June but given Nvidia’s c30% share price rise in USD terms year to date, any disappointment will spook investors.

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

27/08/2025