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Please see below the daily update article from EPIC Investment Partners, received this morning – 05/06/2026

South Africa’s rehabilitation in the sovereign bond market is usually told as a fiscal story. S&P delivered the country’s first upgrade in almost two decades in November 2025. Moody’s has since shifted its outlook to positive. Consecutive primary surpluses, a likely peak in government debt and the improvement at Eskom have given the rating agencies reason to reconsider.

The more interesting change sits outside the government accounts. South Africa may still have the public finances of a sub-investment-grade sovereign, but it has quietly acquired a much stronger external balance sheet.

In 2007, its net international investment position was minus 28.3% of GDP. By 2015 it had moved into positive territory. Net foreign assets reached 26.9% of GDP in 2024, an improvement of more than 55 percentage points in 17 years.

This is the Pretoria paradox. Gross government debt reached almost 79% of GDP in 2025/26, growth has been anaemic and debt-service costs consume an uncomfortable share of revenue. Yet South African residents collectively own substantially more foreign assets than foreigners own South African assets.

Most belong to pension funds, insurers, companies and households rather than the Treasury. The position has also benefited from valuation effects, since a weaker rand lifts the domestic value of overseas portfolios. Even so, a country with a large pool of foreign assets is less vulnerable than one in which the government, banks and private sector all depend on external financing.

The operational improvement at Eskom strengthens the case. The wholly state-owned utility remains South Africa’s dominant electricity supplier, operating most of its generation fleet and the national transmission system. Years of poor maintenance, plant breakdowns and delayed new capacity left it unable to meet demand, forcing scheduled blackouts known as load-shedding.

Those outages constrained mining and manufacturing, deterred investment and increased reliance on imported diesel. More reliable power removes an artificial ceiling on production and an avoidable drain on foreign currency. Freight and port reform could do the same for exports, much of which remains held back by unreliable railways and congested terminals.

It could also begin to unlock the labour market. Official unemployment stood at 32.7% in the first quarter of 2026, while fixed investment has fallen to roughly 14% of GDP. Both are severe weaknesses, but they also reveal the scale of unused capacity.

From such a low base, foreign direct investment in power, mining, manufacturing and transport could lift growth materially. More jobs would raise household income and consumption, while higher profits and wages would broaden the tax base.

South Africa’s positive external position gives it room to pursue such an investment cycle without immediately recreating the balance-of-payments pressures that have derailed many emerging-market recoveries.

The bond market still charges heavily for the country’s history. Borrowing needs are large, political risk remains and yields must absorb substantial supply. But large, liquid bonds can stay cheap even as the credit direction improves.

A return to investment grade is not guaranteed. S&P and Moody’s remain two notches away and will want proof that debt has peaked rather than paused. But another upgrade within a year, followed by a second as fiscal and growth gains become established, could return at least one major rating to investment grade within 12 to 24 months.

The public balance sheet remains strained. The national balance sheet no longer does. If fixed investment follows the improvement in electricity and public finances, growth, bond yields and sovereign ratings could move faster than the market expects.

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

05/06/2026

Please see below the daily update article from EPIC Investment Partners, received this morning – 04/06/2026

The OECD’s June 2026 Economic Outlook, subtitled Under Pressure, reinforces the case for maintaining positioning in high-quality sovereign and quasi-sovereign debt, particularly among issuers supported by strong net foreign asset (NFA) positions. The report highlights a materially weaker global backdrop as the ongoing US-Iran conflict and associated energy shock weigh on activity, with global growth projected to slow from 3.4% in 2025 to 2.8% in 2026 under the OECD’s baseline scenario.

Against this backdrop, the report states that investors face a combination of softer growth, elevated inflation, and heightened geopolitical uncertainty. While central banks are expected to remain vigilant against second-round inflation effects, policymakers are also confronted with weakening demand and rising downside risks to activity. This environment increasingly favours high-quality fixed income exposure, particularly sovereign issuers with strong external balance sheets, substantial reserve buffers, and positive net foreign asset positions.

Such issuers offer an attractive combination of defensive carry and fundamental resilience. Strong external creditor positions provide insulation from the fiscal, funding and currency pressures that often emerge during periods of elevated commodity price shocks and financial market stress. As a result, these markets are better positioned to withstand prolonged volatility than more indebted or externally vulnerable peers.

The investment case becomes more compelling when considering the OECD’s heavily emphasised downside scenario. Should disruptions to Middle East energy production and exports persist well into 2027, the OECD estimates that global growth could slow to just 2.1% in 2026 and 1.8% in 2027, accompanied by significantly higher inflation and tighter financial conditions. In such an environment, high-quality sovereign debt would likely be a primary beneficiary of global flight-to-quality flows as investors seek both capital preservation and liquidity.

The EPIC Next Generation Bond Fund is well positioned for this backdrop through its exposure to sovereign and quasi-sovereign issuers in countries broadly characterised by strong external balance sheets and substantial net foreign asset positions. These allocations provide access to attractive real yields while maintaining exposure to some of the most fundamentally resilient credit profiles globally. In an environment where growth risks are rising and macroeconomic outcomes remain highly uncertain; this positioning offers both defensive characteristics and the potential to benefit from increased demand for high-quality fixed income assets.

By maintaining exposure to these structurally robust issuers, the Fund is positioned not only to weather near-term stagflation driven volatility but also to participate in any subsequent rally in high-quality duration should weaker global growth ultimately lead investors back towards safe-haven assets.

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

04/06/2026

Please see the below article from Brewin Dolphin, their weekly Markets in a Minute update, received this morning (03/06/2026):

Deal or no deal: Navigating the Strait of Hormuz crisis

Reports emerged late this week that the U.S. and Iran have reached a preliminary agreement to extend the current ceasefire by 60 days and open formal discussions on Iran’s nuclear programme Oil . prices fell on the news, with Brent crude dropping to around $92 a barrel. However, it’s worth noting that the Brent crude price was over $120 a month ago. This demonstrates how volatile prices have been, and how quickly they can shift from driving up to weighing down monthly inflation.

Crude oil prices falling on deal hopes

In details confirmed by multiple news agencies, an anonymous source suggests the memorandum of understanding between the U.S. and Iran would guarantee unrestricted shipping through the Strait of Hormuz, with Iran required to remove mines from the waterway within 30 days. Pakistan has been actively involved, acting as mediator. However, speculation over the reopening of the Strait of Hormuz increasingly feels like Groundhog Day. Potential sticking points remain unresolved. Beyond the nuclear question, negotiators must resolve how much of Iran’s $24 billion in frozen assets will be released, and who controls traffic through the Strait of Hormuz in the future.

The most pressing issue of the moment has become how to resolve Israel’s active conflict with Lebanon. Iran’s semi-official Tasnim news agency reported that Iran would withdraw from negotiations with the U.S. while that conflict continues. Last week, the U.S. also acted against Iran’s Persian Gulf Strait Authority, accusing it of extorting vessels seeking passage, with some ships receiving payment demands of up to $2 million for safe transit. Some factions within Iran believe this shows the country’s bargaining position is improving as summer approaches and inventory pressures intensify (see below for more detail). This is because Iran receives revenue through sanctions waivers and Strait transit fees, while using the ceasefire to rebuild military capabilities. Over the weekend, the U.S. struck Iranian command and control sites in response to the downing of a U.S. drone. Iran, in turn, responded by targeting a U.S. base in Kuwait. These incidents continued alongside ongoing negotiations without breaking the current ‘ceasefire’. Progress seems to have been made, even while the ceasefire itself comes under increasing strain. The summer months of June, July, and August represent the first genuine stress test of whether markets have been right to assume an early resolution.

The ticking clock

If a deal is eventually reached, the damage already done to global energy markets is considerable, and the window to prevent a crisis is narrowing. The effective closure of the Strait of Hormuz since late February has removed up to around a fifth of the world’s oil and liquefied natural gas supplies from normal circulation. Global oil inventories, the buffer that allows the world to keep functioning when supply is disrupted, are approaching all-time lows. The Strategic Petroleum Reserve, a U.S. government-held stockpile, has been softening the impact. The timeline, as RBC Capital Markets analysis makes clear, is stark. If inventory drawdowns continue at their current pace, the world could reach critically low levels of what analysts call ‘inventory cover’ – the number of days refineries can keep operating on existing stocks – by as early as October and potentially even sooner. At below roughly 30 to 40 days of cover, normal industrial operations begin to break down, as refineries run short of the crude oil they need to function. RBC Capital Market analysis also suggests that the true pace of drawdowns may be understated, since inventory data from less transparent markets, such as China, is difficult to verify.

Collateral damage

The energy shock has created a deeply uncomfortable situation for central banks around the world. Their primary mandate is to keep inflation under control – typically targeting a rate of around 2%. The conventional tool for doing so is raising interest rates, which makes borrowing more expensive and cools economic activity. The problem is that several major economies are already weakening, making aggressive rate rises potentially damaging. Inflation data released last week confirmed that energy-driven price pressures are spreading. In Europe, inflation reached 2.8% in France, 3.3% in Italy, and 3.6% in Spain in May. The European Central Bank is likely to increase rates at its June meeting even as the Eurozone economy weakens. The composite purchasing managers index, a broad measure of business activity, fell to a 31-month low in May, and France’s economy shrank in the first quarter of 2026.

Raising rates in a weakening economy to control prices affected by global supply, rather than local demand, seems futile to some.

That debate is raging in the U.S., where professional forecasters have revised up inflation expectations to 3.6% for the end of 2026, and where inflation has been above the Federal Reserve (the Fed)’s 2% target for more than five years. Former New York Fed President William Dudley warned last week that the Fed risks losing credibility if it continues to hold back. However, Minneapolis Fed President Neel Kashkari, currently a voting member, argued the opposite – that it’s too early to act without more data. The broader picture is one of a world where supply disruptions – of which the Strait of Hormuz is the most consequential current example – are recurring often enough to be considered a feature, rather than a temporary shock. There are persistent sources of potential inflationary pressure, and central banks will continue to feel compelled to tighten policy even when growth is fragile. A durable resolution to the Iran-U.S. war would provide meaningful relief. But as last week’s cautious, unconfirmed, still-contested reports remind us – that resolution remains some distance away.

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

Andrew Lloyd

3^rd June 2026

Please see below, an article from EPIC Investment Partners which discusses the ongoing stagnation in the US housing market. Received today – 02/06/2026

The US housing market remains trapped in one of the most prolonged periods of stagnation in modern history. More than three years after activity collapsed in 2022, both new and existing home sales continue to languish near recessionary levels, leaving the market effectively paralysed.

The scale of the downturn is striking. New home sales have fallen 23.8% from their December 2021 peak of 816,000, while existing home sales have plunged 36.6% from their January 2022 high of 6.34 million. Since early 2023, transaction volumes have largely flatlined, defying traditional market dynamics and showing little sign of a sustained recovery.

What makes this standstill particularly unusual is that it has persisted despite a substantial decline in mortgage rates. Between October 2023 and March 2026, average mortgage rates fell around 2% from above 8%. Under normal circumstances, such easing in financing costs would unleash pent-up demand and reignite housing activity. Instead, new home sales declined by a further 7% during the same period.

The explanation lies in affordability. According to the Case-Shiller Home Price Index, home values have continued to climb to levels that overwhelm the benefit of lower borrowing costs. While mortgage payments may have become cheaper, the underlying cost of purchasing a home remains prohibitively high for many households.

This has created a crisis on both sides of the market. Prospective buyers are increasingly priced out by elevated home values, while existing homeowners remain reluctant to sell. Millions refinanced into mortgage rates near 3% during the pandemic and now face a steep financial penalty for moving. Selling would often mean replacing a low-cost mortgage with one carrying significantly higher monthly payments on a more expensive property.

These so-called “golden handcuffs” have severely constrained supply, reducing turnover and reinforcing the market’s paralysis. With fewer existing homes available, buyers face limited choice, while sellers remain locked into place.

Recent data suggest the pressure is mounting. Existing home sales remain weak, new home sales fell another 6.2% in May, and builders are grappling with rising inventories of unsold properties. Although national home prices recorded a modest month-on-month decline, the adjustment has been far too small to restore affordability or meaningfully stimulate demand.

The result is a housing market caught in a self-reinforcing cycle. Buyers cannot afford to enter, sellers cannot afford to move or leave, and transaction volumes remain stuck at historically depressed levels.

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

Alexander James Roberts

2^nd June 2026

Please see the below article from Tatton Investment Management discussing improving market sentiment driven by lower oil prices and strong tech performance, despite ongoing global risks, received this morning – 01/06/2026.

Calmer markets

Global stocks pushed up last week and have continued to move higher as this week starts, powered by semiconductor companies. News of a 60-day US-Iran ceasefire extension saw oil prices fall to $90pb, calming nerves and lowering bond yields. May turned out to be another strong month for markets, with falling volatility.

A US-Iran deal has been “imminent” for weeks, but Trump seems to want it wrapped up before the midterms at least. Even without one, energy markets have been surprisingly resilient, with the Middle Eastern oil shortfall ameliorated by other sources and falling demand. Western countries have muddled through, though other regions have felt real pain. The sense of crisis has abated, but longer-term oil prices still suggest traders expect tight supply into the winter. We would certainly feel the effects then (Europe’s gas storage is low, seasonally-adjusted) but, for now, markets have fared better than many expected.

Chinese oil demand has fallen and the government has tightened liquidity (bond issuance has increased as Beijing has ordered companies to pay suppliers quicker). The oil shock is directly hampering Chinese growth, rather than indirectly through inflation. That’s now reflected in weaker Chinese stocks. Beijing could spur growth by pressuring Tehran to accept a US deal. Rumour has it that’s already happening, but China’s malaise isn’t bad enough for Beijing to really lean on Tehran.

US Q1 growth figures disappointed, particularly personal income. The resilience of retail sales therefore means Americans are running down their savings. AI infrastructure investment is raising chip prices – buoying semiconductor stocks – and industrial metals. Iron prices are curiously low, however, reflecting weak construction. That tells us AI companies are stockpiling datacentre components but not actually building them yet.

Construction should start soon, but the delay means weaker growth right now. That should help with inflation at least, reinforcing the helpful drop in bond yields. It reverses the inflation worries from a few weeks ago. We have some gloom, but no doom.

SpaceX: rocket ship to the moon or rapid disassembly?

Elon Musk’s SpaceX is gearing up for the biggest IPO in history – a reported $70bn fundraising target for about 4% of shares, implying a $1.75tn valuation. That would instantly make it one of the world’s most valuable companies, despite its estimated $19bn revenue barely cracking the top 500.

The investor prospectus reads like science fiction – Moon flights, asteroid mining, orbital datacentres and a reward for Musk building a million-strong colony on Mars. SpaceX’s actual business is a little more down to earth. It’s a tech conglomerate covering satellites (Starlink broadband, which generates 60% of SpaceX revenue), AI and rocket launches.

Martin Peers of The Briefing suggests SpaceX should be worth about $700bn if valued like those in its sectors. The remaining $1tn is essentially the ‘Musk factor’ – investors’ belief that Musk’s companies will take humanity’s next giant leap. That’s not to be scoffed at; Tesla shareholders have been consistently rewarded by the Musk factor.

In what feels like a major scoop for Musk, Nasdaq has changed its inclusion rules and weighting methodology in preparation for SpaceX, with a just 15-day fast-track inclusion post-IPO and a new 3x free-float weighting rule for companies with free-floats less than 1/3 of valuation. Passive funds tracking the Nasdaq could therefore be forced to buy more SpaceX shares than are available – squeezing up prices. Active investors can front-run this, but passive investors can’t.

After that initial squeeze, the balance could reverse. SpaceX is just one of several trillion-dollar listings expected this year, including OpenAI and Anthropic. That’s expected to add a record $210bn of fresh US equity supply to the market. More supply than the market can comfortably absorb tends to weigh on prices. We could therefore see a sharp rally at launch followed by considerable volatility. SpaceX might be a rocket ship to the moon; it risks “rapid unscheduled disassembly”.

Commodity nationalism

Guinea’s plans to cap bauxite exports (the ore refined into aluminium) are a problem for China.

Guinea is the world’s largest bauxite exporter, and the vast majority of its ore ships to China. China depends on Guinean ore for a refining industry far larger than its own domestic mining output. The interdependence used to benefit the West African nation but Chinese import prices fell 50% from January 2025 to March 2026, despite surging volumes. The Guinean government now feels like it’s in a one-sided relationship. That’s why Mines and Geology Minister Bouna Sylla declared export controls from June to “raise prices back to reasonable levels”.

This is the latest in a string of interventions from commodity-rich nations. DR Congo has capped cobalt exports, Zimbabwe has banned raw lithium exports, and Indonesia is setting up a state body to control coal and ferroalloy sales. China itself restricted rare earth exports last year. The motivations vary: some nations want to support prices, others want to encourage development and move up the value chain, and China’s rare earth ban was a geopolitical flex against the US. The common thread, though, is producers recognising their pricing power. They saw China’s rare earth ban and Iran’s Strait of Hormuz closure and realised how effective cutting off the tap can be.

Export controls were less effective during the growth of globalisation from the 1990s-2000s. Interchangeable supply chains meant commodity buyers could just switch providers. A decade of deglobalisation and several supply chain shocks have made switching harder. This is a particular problem for China, with its network of bilateral relations (rather than the multilateral market system dominated by the US) that often sour over time as partners feel short-changed.

For the global economy, the implication is straightforward: commodity nationalism adds another layer of inflation risk.

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

Marcus Blenkinsop

1^st June 2026

Please see below, an article from EPIC Investment Partners which discusses the health of the consumer credit market in the US. Received today – 29/05/2026

American consumers appear healthier than they feel. Payrolls are still growing, unemployment remains low and household wealth is close to record highs. Equity markets trade as if the economy has absorbed higher rates, sticky inflation and geopolitical shocks with little lasting damage.

The credit data are less comforting. Delinquencies on credit cards and auto loans are rising. Student loan defaults are climbing. Savings have fallen and more households appear to be borrowing simply to maintain spending.

At first glance, the numbers seem contradictory. Household wealth remains high, mortgage delinquencies are low and the banking system appears sound. Yet beneath the aggregate figures lies a growing divide. Auto loan delinquencies have already exceeded their financial-crisis peak. Credit-card delinquencies are moving in the same direction. The stress is concentrated among households with the least financial flexibility. America is not experiencing a balance-sheet recession. It is experiencing a cash-flow squeeze.

Normally, consumer credit weakens after the labour market turns. This time the order may be changing. Defaults are rising while payrolls still look respectable. That is the puzzle investors should care about.

Kevin Warsh’s enthusiasm for artificial intelligence offers one possible explanation. If AI allows companies to raise output while reducing hiring needs, employment data become less reliable. Firms do not need mass redundancies for labour income to weaken. They can hire less, replace fewer departing workers, cut overtime, slow promotions and use software to absorb work once done by junior staff.

None of that produces an immediate jump in unemployment. It does, however, reduce household income growth. Consumers do not experience the economy through GDP releases. They experience it through monthly cash flow. A worker may remain employed while real purchasing power falls. Another may keep a job but lose overtime, promotion prospects or bargaining power. Payroll statistics capture employment. They are less effective at capturing what is happening beneath the surface.

That makes consumer credit a potentially cleaner signal than payrolls. Credit cards and auto loans do not average together asset-rich households and stretched borrowers. They reveal where cash flow is failing. The upper-income consumer is still cushioned by equities, home equity and fixed-rate mortgages. The lower-income consumer is exposed to higher living costs and expensive unsecured debt.

This matters for the Federal Reserve. On the surface, policymakers face a familiar stagflationary problem: inflation remains too high while growth slows. But if Warsh is right, today’s inflation may be masking tomorrow’s disinflation. Energy shocks lift prices temporarily. AI-led productivity gains could lower costs more permanently, particularly if they weaken labour bargaining power and slow wage growth.

The danger is that the Fed spends too long fighting yesterday’s inflation while missing a demand problem already visible in household credit. Positive payrolls would then provide false comfort. Rising delinquencies would be the earlier warning.

This is not another 2008. The mortgage market is healthier, banks are better capitalised and household wealth remains high. But the absence of a banking crisis is not the same as the absence of consumer stress. The optimistic interpretation is that rising delinquencies merely reflect the final effects of an inflation shock. The more troubling possibility is that credit markets are detecting a labour-market transition before official employment statistics can see it.

For most of the past half-century, investors have looked to payrolls for the first sign of economic weakness. If AI is changing the relationship between output and employment, that habit may become expensive. The labour market still looks healthy. Consumer credit is beginning to suggest otherwise. The question for the Fed is which signal arrives first — and which one is telling the truth.

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

Alex Kitteringham

29^th May 2026

Please see the below article from Brewin Dolphin discussing market optimism driven by AI strength despite ongoing geopolitical and UK economic pressures, received yesterday – 27/05/2026.

Stocks rally on hopes for a U.S.-Iran deal and AI enthusiasm

Global stocks hit new highs this week. Investors were increasingly willing to look past geopolitical volatility, focusing instead on the strength of corporate earnings and the ongoing AI investment cycle.

The Iran-U.S. war continues to dominate the geopolitical backdrop. Oil prices have remained highly reactive to headlines surrounding ceasefire negotiations and the Strait of Hormuz. Oil prices have fluctuated sharply around the $100 per barrel level as markets weigh hopes of eventual de-escalation against the risk of prolonged supply disruption.

While negotiations remain complicated and unpredictable, investors still broadly believe both sides have incentives to avoid a sustained closure of the Strait of Hormuz.

Despite elevated oil prices and persistent geopolitical uncertainty, risk sentiment has remained remarkably constructive. A major reason is the continued strength of the AI ecosystem, which is increasingly driving both earnings growth and market leadership.

Recent semiconductor earnings (e.g. Nvidia’s results last week, which sizeably beat earnings expectations) once again reinforced that demand for AI infrastructure remains exceptionally strong. Companies across the ecosystem continue to report rapid revenue growth, strong pricing power and very high profit margins, supported by relentless spending on data centres and computing capacity.

One of the standout developments this week was semiconductor manufacturer Micron reaching a $1 trillion market capitalisation milestone, highlighting how enthusiasm has broadened beyond just the largest AI chip designers. Memory chips have become one of the clearest beneficiaries of the AI boom, as increasingly sophisticated AI models require enormous amounts of high-bandwidth memory to process and train data efficiently.

Importantly, this is both a demand story and pricing story. Tight supply conditions and surging demand for advanced memory products have driven sharp increases in memory chip prices, leading investors to significantly rerate valuations across parts of the semiconductor sector.

More broadly, markets are becoming increasingly optimistic that the AI investment cycle still has substantial room to run. U.S. hyperscalers continue to commit enormous capital expenditure towards AI infrastructure, reinforcing confidence that this is evolving into a multi-year structural growth theme rather than a short-term technology rally.

For now, that powerful combination of resilient earnings, expanding profit margins and sustained AI spending continues to outweigh concerns around geopolitics and energy volatility.

Markets remain hopeful that tensions in the Middle East will eventually ease and that shipping through the Strait of Hormuz can normalise. In the meantime, AI remains the dominant anchor for investor sentiment.

All eyes are on the UK economy

The UK economy is in focus as it’s at risk from higher energy prices, in turn causing higher interest rates and borrowing costs, while at the same time suffering from a political crisis.

Crucial to this is the outlook for inflation. Last Wednesday’s consumer price index (CPI) release showed headline inflation dropping to 2.8% in April, down from 3.3% in March. Core CPI also moderated to 2.5%, driven largely by downward pressure in housing and household services offsetting a sharp spike in motor fuel costs.

This softer-than-expected reading provides the BoE with some breathing space on interest rates. But it also highlights the cost of the war in the Middle East: without the geopolitical disruption to energy markets, inflation would likely have returned to the 2% target this month.

The reprieve is temporary: the energy price cap is set on a lagging basis and will shift from tailwind to headwind in June, and will be felt in July’s bills. Fortunately, for now there’s little evidence of second-round effects where fuel causes higher wage demands. In fact, the labour market seems weak, a far cry from 2022 when the last energy-driven price spike hit.

Last Tuesday’s Office for National Statistics release was materially worse than expected. Unemployment ticked up to 5%, but the real alarm was the early estimate of payrolled employees for April, showing a drop of 100,000 – far exceeding the roughly 20,000 decline economists had pencilled in, and the largest single-month fall since the start of the pandemic.

Source: LSEG Datastream

However, these data get heavily revised, particularly at this time of year. Each of the last three years have seen similar estimates of lost jobs, which have proven to be false when revised the following month. Nevertheless, the BoE faces a genuinely difficult balancing act and is now expected to defer interest rate increases until July or September.

Friday’s data showed UK government borrowing reached £24.3 billion in April, significantly exceeding the £20.9 billion forecast and applying further pressure to the national deficit.

Retail sales contracted by 1.3%, heavily concentrated in a striking 10% drop in fuel sales – indicating a clear behavioural shift as consumers actively drive less and dip into savings to manage sustained high energy costs. Consumer confidence slipped further into negative territory.

Thursday’s flash purchasing managers indices confirmed the pattern of divergence: U.S. manufacturing surprised to the upside, signalling resilience in the American industrial sector, while Eurozone indices remained largely in contraction territory. The UK services sector moved into deep contraction, though manufacturing held up.

This combination of softening inflation and strained consumer activity caused a slight recalibration in fixed-income markets. As the data suggested the economy is cooling, investors pared back expectations for prolonged elevated rates. In the UK, gilt yields fell marginally toward the end of the week, with the 10-year dipping to 4.9%.

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

Marcus Blenkinsop

28^th May 2026

Please see the below article from EPIC Investment Partners detailing their discussions on sustainable investing and the energy sector. Received this morning 27/05/2026.

For years, the prevailing approach to sustainable investing was built around exclusion. Capital flowed away from national oil companies, state utilities and mining groups as ESG mandates favoured lower-carbon sectors such as technology and services. Yet despite the rapid growth of ESG assets, global emissions have continued to rise, prompting a more pragmatic evolution in capital markets: transition finance.

Rather than divesting from carbon-intensive sectors entirely, investors are increasingly focusing on financing measurable improvements in emissions, efficiency and energy infrastructure. The logic is straightforward. Supporting incremental operational change at large scale emitters can often have a far greater real world impact than allocating capital exclusively to businesses that are already low carbon.

This shift is becoming increasingly important within global fixed income markets, particularly across sovereign and quasi-sovereign issuers where access to capital remains critical.

Mexico provides a good example. State-backed issuers such as Petróleos Mexicanos (Pemex) and Comisión Federal de Electricidad (CFE) have historically traded with elevated yields partly reflecting ESG related investor concerns. More recently, however, markets have begun to differentiate between static carbon exposure and credible transition pathways. Sustainability-linked and transition bond structures tied to emissions reductions, operational upgrades and energy investment programmes are increasingly helping broaden the investor base and improve refinancing flexibility.

A similar dynamic is visible in the Gulf. Abu Dhabi National Energy Company (TAQA), for example, continues to operate conventional generation assets, but its substantial investment into renewable energy, transmission infrastructure and water assets has attracted strong institutional demand for its debt. This has contributed to lower funding costs and stronger support across its credit curve.

The mining sector is also seeing a reassessment. Global electrification and renewable infrastructure require significant volumes of copper and other critical minerals, placing issuers such as Chile’s Codelco in a strategically important position. As these companies invest in renewable power usage, fleet electrification and emissions reduction initiatives, they are increasingly attracting long-duration institutional capital that may previously have avoided the sector entirely.

For bond investors, transition finance is creating opportunities to access attractive yields from strategically important issuers while benefiting from improving market technicals and expanding investor participation. In many cases, these credits continue to offer meaningful spread premiums relative to developed market peers despite stronger balance sheets, sovereign backing or improving funding dynamics.

The broader implication is that transition finance is reshaping parts of the emerging market and global credit universe. Rather than treating carbon-intensive issuers solely as assets to avoid, markets are increasingly recognising that many of these entities will be central to the global energy and infrastructure transition itself.

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

27/05/2026

Please see the below article from Tatton Investment Management discussing inflation pressures, rising bond yields, and growing AI-driven capital demand, alongside fiscal and China growth concerns, received this morning – 26/05/2026.

Assuming growth will win

Global stocks and bonds have moved higher again after ending last week positively. Non-US markets led the gains and have maintained the outperformance at the start of this week. Bond markets were stronger, helped by falling energy prices following the progress towards peace around Iran and weaker economic data. Nevertheless, a sense of fragility remains. US tech stocks underperformed for the first time since March — despite Nvidia posting an eye-watering 85% revenue jump and one of the largest corporate payouts ever.

The good news was priced in, a pattern Nvidia shareholders are all too familiar with: the chipmaker’s share price usually drifts after earnings before rebuilding momentum ahead of the next announcement, the classic ‘buy the rumour, sell the fact’.

More broadly, tech companies are competing for capital. Big tech companies are increasingly issuing equity to fund the AI investment spree, not just bonds. That’s squeezing the cash once used for buybacks. The most striking example is SpaceX’s upcoming IPO, seeking to raise around $75bn at a valuation of up to $1.75tn — remarkable for a company generating just $19bn in revenue with modest growth.

OpenAI and Anthropic are expected to follow, and analysts estimate that we could see around $210bn of fresh equity added to the market. We haven’t seen such intense capital demand, relative to market size, since the dotcom bubble. Even if you believe these companies’ profit potential, equity issuance makes the balance of buyers and sellers more challenging.

AI’s demand for energy and materials is also boosting inflation. Even new Fed chair Warsh — a firm believer in AI productivity — will have a hard time arguing for lower rates in this environment. Betting markets now suggest a US rate rise is more likely than a cut before year-end.

Inflation has bumped up bond yields (see below), which are weighing on equity valuations. But higher yields are increasingly attractive for long-term investors. Even UK gilt auctions are being met with strong demand, and calmer bond markets are already giving UK equities a lift.

Long-maturity bonds suffer from fiscal risk

Bond investors have had a rough time. The oil shock raised inflation and interest rate expectations, triggering a sell-off in government bonds. Long-term yields were hit hardest, despite the fact that energy prices aren’t expected to remain elevated over the long run.

The ‘term premium’ (the extra return investors demand for lending over the long term) has risen. That doesn’t make much sense from a growth perspective (long-term real yields should reflect growth) or an inflation perspective (high inflation won’t last for 20 years).

One factor is the AI capex spree sapping capital from markets. Another is that the Iran war is a fiscal risk — forcing governments to spend when debt and deficits are already high. That makes bond investors nervous about government finances.

UK gilts have fared worst. Structural issues — a higher share of inflation-linked bonds, skewed long-term issuance, and the Bank of England still selling bonds from its QE stockpile — make gilts uniquely vulnerable. Political uncertainty around a potential Labour leadership change has rattled traders further, though recent gilt auctions suggest bond managers do see value.

High bond yields are attractive for investors. Barring an outright default, buying long-term gilts can lock in strong returns for decades. UK growth is holding up, inflation undershot in April, and the BoE is set to end net bond sales later this year. Unfortunately, most investors expect more volatility first — and may wait for yields to rise further before committing.

Meanwhile, higher bond yields aren’t tempting equity investors. US retail investors remain entrenched in stocks, buoyed by strong tech earnings and price momentum. A meaningful rotation back into bonds will likely need a credible threat to corporate earnings growth — something that’s been conspicuously absent in the US, even amid tariffs, AI disruption, and geopolitical shocks. But even without that rotation, strong returns are available for bond investors.

China stalls again

China’s economy stumbled in April, with retail sales growth slowing to just 0.2% year-on-year – far short of the 2% forecast and the weakest reading since 2022. Industrial production rose 4.1%, but that was well below the 6% expected. Most alarming was fixed asset investment, which fell 1.6% from the start of 2026 to April, against expectations of 1.7% growth.

The National Bureau of Statistics blamed “complex and severe” international conditions, referencing higher oil prices from the US and Israel’s war on Iran. Until now, China’s ample oil reserves and export bans made the economy look surprisingly resilient – but the oil shock is now clearly hitting.

The government must do more to hit growth targets, but investors shouldn’t overreact. China’s growth data follows a well-established seasonal pattern: heavy stimulus at the start of the year, a step-back in the middle quarters, then renewed support heading into year-end. A degree of softness in April is not unusual.

There is a deeper structural concern, however. Beijing’s policy toolkit is built for boosting production and exports, rather than domestic consumption. That’s a key reason the post-property-collapse slump has lasted so long. Consumption measures tend not to last: the consumer goods trade-in subsidy has been scaled back, electric vehicle incentives have expired, and the People’s Bank of China is tightening liquidity.

The export focus is also a diplomatic problem. China’s record $1.19tn trade surplus in 2025 is not only angering Donald Trump; it’s stoking friction with the EU and even ASEAN neighbours.

Tech is the one bright spot, with Chinese chipmaker stocks surging again this week, propelled by Beijing’s investment in chip self-sufficiency. If policymakers can pair that pro-tech drive with a more serious commitment to boosting consumption, they could address both China’s diplomatic tensions and its domestic growth problem.

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

Alexander James Roberts

26/05/2026

Please see below, an article from EPIC Investment Partners which discusses the possibility of a changing landscape in credit markets. Received today – 22/05/2026

For much of the past two years, investors have treated high interest rates as a market problem rather than a balance-sheet problem. Equity multiples adjusted, bond prices fell, mortgage activity slowed and leveraged borrowers complained. But the assumption remained that the system could muddle through. If inflation softened, the Federal Reserve would cut. If growth slowed, long yields would fall. If companies struggled, they would refinance.

That assumption is becoming harder to defend. The US 10-year Treasury yield is back around 4.6 per cent, while the 30-year yield has recently pushed towards 5.2 per cent. The long end is no longer just expressing views on growth and inflation. It is also carrying a fiscal premium. Heavy Treasury supply and a rising federal interest bill are putting a higher floor under the global cost of capital.

That matters because a 5 per cent long bond is not just a problem for Washington. It is the benchmark against which every risky borrower must compete. If the US government pays more to borrow for 30 years, leveraged companies and private equity-backed borrowers must pay more again. That extra cost comes from margins, investment, employment or default.

Housing shows the pressure first. Mortgage rates above 6.5 per cent have preserved the lock-in effect that has frozen turnover. A homeowner with a 3 per cent mortgage does not move casually into a 6.5 per cent mortgage. Fewer sales also mean weaker activity in furniture, appliances, removals, renovation and local services.

Corporate credit is the bigger risk. The zero-rate era allowed companies to borrow cheaply and push maturities into the future. That future has arrived. About $12.4tn of global corporate debt is due to mature between 2025 and 2029, including roughly $3.4tn of speculative-grade debt. The wall is no longer a distant abstraction. It is now running through the rest of the decade, with pressure building into 2027 and 2028.

The issue is not whether every borrower can refinance. It is the price at which refinancing is possible. A company that borrowed at 5 per cent and refinances at 8 or 9 per cent has had its business model repriced. Debt service becomes a tax on operating income. Capital expenditure is delayed, hiring is frozen and cash once used for growth is redirected to keeping the capital structure alive. This is most dangerous in markets built for cheap money. Private equity deals that worked when debt was cheap may still own viable businesses, but the capital structures above them may no longer work. The balance sheet cracks before the payroll data does.

Credit markets still price a gentle outcome. High-yield spreads remain far from recessionary levels. That may prove right if growth holds and the Fed can ease without reigniting inflation. But spreads may also be flattered by modern credit structures. Covenant-lite loans delay intervention, liability management exercises postpone formal defaults and private credit can keep problems away from public markets for a while.

This is where the old developed-versus-emerging market distinction looks crude. The better split is between borrowers that depend on continuous refinancing and those with genuine external strength. A leveraged US company may be more fragile than a sovereign labelled emerging market but supported by strong net foreign assets, commodity revenues or conservative fiscal policy.

The market needs a better category for these issuers: wealthy nations. These are sovereigns with substantial net foreign assets, stronger external balance sheets and the liquidity to withstand a higher cost of capital. The trade is not simply to buy emerging-market sovereigns. That is too broad. The argument is to buy balance sheets that are mislabelled by geography.

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

Alex Kitteringham

22^nd May 2026