News

Please see below article received from EPIC Investment Partners this afternoon, which offers an interesting insight into the US economy.

The narrative around the US economy often fixates on the latest employment figures as the primary indicator of inflationary pressure. However, this view overlooks a deeper, more significant force at play: demographic change. While a tight labour market is traditionally seen as a driver of wage-led inflation, the reality of an ageing population suggests a different, more nuanced outcome. The US, like other advanced economies, is experiencing a fundamental shift in its workforce, and this structural trend is likely to result in lower inflation than many would assume. The contradiction lies in how a shrinking pool of workers, which should theoretically boost prices, is being offset by a decline in overall consumer demand as the population gets older. 

This demographic weakness is becoming increasingly evident in the latest economic data. The most recent US labour market figures from July point to a greater slowdown than the headline suggests. Non-farm payrolls rose by just 73,000, and significant downward revisions of 258,000 to the May and June data reveal a much weaker underlying trend. While the unemployment rate stayed at 4.2 per cent, the broader picture is less positive. The labour force participation rate has fallen to 62.2% from a year ago, and the employment-population ratio is also lower. This indicates that a large number of people are leaving the workforce, a trend partly driven by an ageing population. 

This cyclical weakness is unfolding against a deeper structural shift. Between 2000 and 2020, all net job growth in the US came from workers aged 60 and above, with younger cohorts seeing net losses. The retirement of the Baby Boomer generation, combined with low birth rates, means the working-age population is barely expanding. Congressional Budget Office projections show that without immigration, population decline could begin after 2033, making migration the only source of workforce growth. 

The implications for inflation and demand are finely balanced. The supply-side view, rooted in the Phillips Curve, argues that a shrinking labour pool forces up wages, lifting prices. Labour-intensive sectors like healthcare are particularly exposed. However, the demand-side case points the other way. As the share of retirees rises, consumption growth slows. Japan’s experience since the 1990s demonstrates how this can dominate: despite a dwindling workforce, wages have barely risen and inflation has stayed near zero. Similarly, China’s rapid ageing is already weighing on consumption and contributing to disinflation. 

In the US, the next few years will be shaped by these opposing forces. Labour scarcity is likely to keep unemployment low and support wages, but ageing will sap demand, flattening the relationship between employment and inflation. This will also affect productivity and keep the neutral real interest rate low, leaving central banks with less scope to cut rates in downturns. While immigration and flexible markets can temper these effects, slower growth, modest inflation, and persistent labour tightness are the likely outcome, challenging conventional economic models. 

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Chloe

15/08/2025

Please see below article received from Brooks Macdonald this morning, which provides a global market update for your perusal.

What has happened

Markets bounced on Monday, but only partly unwinding the bigger falls from Friday. For the US S&P500 and the pan-European STOXX600, both equity indices still closed yesterday below where they had closed last Thursday. Furthermore, not all stocks saw a bounce – of particular note, US ‘Magnificent Seven’ megacap tech stock Amazon, which fell -8.27% on Friday, dropped a further -1.44% yesterday (all in local currency price return terms).

US dollar resumes its slide

The US dollar fell again yesterday, with the DXY index (which tracks the dollar against a basket of major global currencies) down for the second day in row. For context, while the DXY index had a relatively good July, its best month since last year, that was only on the back of the dollar suffering its weakest calendar 1H performance since 1973. Trying to make sense of the moves, some market watchers are suggesting that dollar weakness this year is in part reflecting ebbing investor confidence in owning US assets given US President Trump’s tariff policy consequences in particular.

Trade tariff escalation

US President Trump threatened higher trade tariffs again India yesterday, saying that he would be “substantially raising” tariffs on India’s goods coming into the US because of India’s continued willingness to buy oil from Russia. That would be over and above the 25% tariff rate on India announced last week. India’s stock market has been weak recently, arguably reflecting a marked recent deterioration in US-India relations. Highlighting the war of words, Trump said last week that if India maintains its close ties with Russia, then “they can take their dead economies down together”.

What does Brooks Macdonald think

According to data complied by the ‘Washington Service’ research company and reported by Bloomberg, only 151 US S&P500 constituent company executive insiders bought their own shares in July, the fewest in a month since 2018. Furthermore, the ratio of insiders’ buying-to-selling was the lowest in a year. While it is important not to try to read too much into one month’s data, a cautious stance among those that likely know their businesses best might be signalling concerns around either relatively high valuations and/or slower economic growth expected ahead.

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Chloe

05/08/2025

Please see below article received from Brooks Macdonald this morning, which provides a global market update for your perusal.

What has happened

Yesterday saw US and European equity markets largely unwind their earlier intraday-gains as investors focused on negative ramifications from the US-European Union (EU) trade deal that was announced over the weekend. The share prices of German auto makers, which are especially sensitive to US trade access, reflected the evolving investment mood that the EU had struck a weak deal: Volkswagen shares, which had surged over +3% in the opening minutes of yesterday’s session, ended up closing more than -3.5% down by the end of the day (all in local currency terms).

US-EU trade deal criticised

As we noted in our Daily Investment Bulletin yesterday, the 15% tariff rate that will now apply to most EU trade going into the US is significantly higher than the average trade-weighted pre-existing US tariff rate of under 2%. While European Commission President von der Leyen had previously conceded the deal “was the best we could get”, yesterday saw French Prime Minister (PM) Bayrou label it “a dark day” and a “submission” for the EU, while Hungarian PM Orbán called von der Leyen a “featherweight” negotiator, adding “[US President] Trump ate von der Leyen for breakfast’.

US Federal Reserve meets

Yesterday sees the US Federal Reserve (Fed), arguably the world’s most important central bank, kick off its latest two-day policy meeting. The Fed announcement on interest rates is due out 7pm UK-time tomorrow evening, with a press conference starting 7:30pm UK-time tomorrow. While no change in interest rates is expected (the Fed’s benchmark interest rate target range of 4.25-4.50% has been unchanged so far this year), markets will instead be on the lookout for any signalling around possible interest rate cuts later this year, not least given the huge pressure that Trump has put on Fed Chair Powell recently to cut interest rates.

What does Brooks Macdonald think

It is a big week for stock markets, with a lot riding on the latest US megacap technology results in particular. Microsoft and (Facebook parent company) Meta have results tomorrow, while Apple and Amazon results are on Thursday, all coming out after the US trading close on each day. High hopes for Artificial Intelligence has powered broader US and global equity index performance so far this year, but with the aforementioned four megacap tech stocks currently accounting for around a fifth of the market-capitalised weight of the US S&P500 equity index, there is significant near-term two-way performance risk.

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Chloe

29/07/2025

The Government is pushing ahead with plans to include pensions within inheritance tax (IHT) from April 2027, but has made some adjustments to its implementation plans.

The move is expected to raise £1.5bn a year by 2029/30, with the average IHT burden expected to increase by £34,000.

The plans were confirmed by the Government on Monday (21 July). From April 6 2027, IHT will be applied on unused pension funds and death benefits.

Chancellor Rachel Reeves first unveiled the plans in the Autumn Statement 2024.

Adjustments

The Government has adjusted its original proposals following a consultation on the mechanics of implementation, which closed in January.

One such change is that personal representatives, rather pension scheme administrators, will be liable for reporting and paying any IHT due, and death in service benefits payable from a registered pension scheme will remain out of scope of IHT.

As part of the Autumn Budget 2024, the Government announced measures to reform IHT and “deliver a fairer, less economically distortive tax treatment of inherited wealth and assets, including this measure”.

Comment

Personally, I think Labour have got it wrong again on this one.  They are penalising hard working people that have done the right thing and accumulated good pension assets for their retirement.

Having said that, for the majority of people funding pensions is still one of the best things to do to provide your retirement income, it’s tax efficient.

For a lot of married couples or for those in a Civil Partnership, you might not have an inheritance tax position unless your assets exceed £1 million, including your pension funds, from April 2027.

We can implement individual planning strategies as appropriate if you have an inheritance tax position now or in the future.

Generally, we caution against any knee jerk reaction to this legislative change.  Consider your position, think long term, and take independent financial advice. 

Steve Speed

IFA & Employee Benefit Consultant

22/07/2025

Please see below article received from Brooks Macdonald this morning, which provides a global market update for your perusal.

What has happened

Global equity indices were up yesterday (in US dollar terms), once again led by mega-cap tech. While the day’s rally did fade a little at the end, Monday still marked fresh record closing highs for both the US S&P500 and tech-focused US Nasdaq equity indices. In contrast, this morning the UK FTSE All-Share equity index is struggling and UK government bond yields are up across the maturity curve, following a dire set of UK public sector deficit numbers – outside of the pandemic, last month was the highest net borrowing for a June month since records began in 1993.

EU trade-talks

With the 1 August tariff-pause deadline next week fast approaching, the lack of progress in European Union (EU)-US trade talks is becoming a concern. While talks are continuing this week, there is speculation that the EU are already planning retaliatory moves in case talks fall apart. Adding to tensions was a veiled threat from US Treasury Secretary Scott Bessent, who said yesterday  “it doesn’t have to get ugly”, but “we are the deficit country, so the surplus country will always feel it more. We have a gigantic trade deficit with the EU, and so with the level of tariffs, it will affect them more”.

Middle East

News wires yesterday reported that Iran had agreed to hold talks with the UK, France and Germany to discuss Iran’s nuclear program, expected to take place this Friday in Istanbul, Turkey. However, there are low expectations for any meaningful progress. Ahead of those talks, Iranian officials are due to host a meeting with Russia and China representatives later today, while separately, Iran has yet to formally agree to fresh talks with the US.

What does Brooks Macdonald think

It is hard to argue with recent comments from US bank JP Morgan CEO Jamie Dimon that as regards tariff risks “unfortunately, I think there is complacency in the markets”. It is certainly impressive that global equities (in US dollar terms) are hitting record highs, while at the same time we are still yet to navigate a significant amount of near-term trade tariff uncertainty and risk. Should next week’s 1 August tariff-pause cliff-edge see talks with the EU and other countries unravel, it is not obvious that markets are greatly prepared for such an outcome.

Please check in again soon for further relevant content and market news.

Chloe

22/07/2025

Please see below article received from Brooks Macdonald this morning, which provides a global market update for your perusal.

What has happened

Markets yesterday proved once again that they are sensitive to the latest twists and turns in tariff news. With US President Trump late in the day yesterday saying that on tariffs he was “always open to talk”, that proved enough for markets in afternoon trading to edge higher. The US S&P500 equity index finished up +0.14% yesterday to close within 0.2% of last week’s record high, while closer to home the UK FTSE100 equity index gained +0.64% to notch up a fresh record high, all in local currency price return terms.

Mixing tariffs and geopolitics

US President Trump arguably broke new ground yesterday, mixing tariffs with geopolitical deadlines. Trump said yesterday that as well as resuming supplies of US-made Patriot air-defence missiles and other weapons to Ukraine, the US would impose “secondary tariffs” of 100% on countries doing business with Russia unless Russia agreed to a ceasefire within 50 days. While thin on details, it appears that the planned action by Trump would effectively represent additional levies on countries (such as India and China) that buy, amongst other things, oil from Russia.

Gauging Trump’s tariff impact

Today provides another opportunity to gauge what impact Trump’s tariffs are having on both the economy and corporate profits. Later today, we get the most recent monthly Consumer Price Index (CPI) reports from the US and Canada, as well as the calendar Q2 corporate earnings results season kicking off led by the biggest US bank JP Morgan’s results (JPM’s numbers are due out before today’s US market open). On the US inflation front specifically, if the US CPI print is higher than expected (Bloomberg’s consensus estimate is for a US annual all-items CPI rate of +2.6% and a core ex energy and food rate of +2.9%), that could derail US Federal Reserve (Fed) interest rate cut hopes – currently markets (implied from US Fed Funds Futures derivative contracts) are pricing in close to two lots of 25-basis-points of interest rate cuts by December.

What does Brooks Macdonald think

US President Trump yesterday showed that that he is willing to broaden his use of tariffs. Up until now, tariffs have been rationalised by Trump as a means to correct perceived trade unfairness and imbalances. Yesterday saw geopolitics added to the mix, with Trump threatening secondary tariffs on countries that buy from Russia. While this might force Russia to the negotiating table, in doing so it might further cement tariffs as a policy tool that Trump can use across a wide range of other policy ambitions that we have yet to see – as such, tariff policies and tariff uncertainty, even if just a negotiating tactic, could be something of a long-term feature of Trump’s presidency that investors will have to get used to.

Please check in again with us soon for further relevant content and market news.

Chloe

15/07/2025

Please see below article received from Brooks Macdonald this morning, which provides a global market update for your perusal.

What has happened

One-day equity market performance was largely flat to small down yesterday, though a bright spot was US megacap tech stock NVIDIA which notched up a fresh all-time record high. For the most part though, despite Middle East risk moving into the rear-view mirror, investors appeared to be having a hard time finding new reasons to buy stocks. One benefit of the smaller moves yesterday was the market’s “fear-gauge” VIX volatility index (which reflects option-pricing derived annualised 30-day forward-looking implied volatility of the US S&P500 equity index) – that closed on Wednesday at a 4-month low of 16.76 index points – for context, the longer-term VIX average sits at just under 20.

Tax cuts and tariffs centre stage again

With the Israel-Iran ceasefire continuing to hold, markets are focusing back on other things near-term, and top of the list are tax cuts and tariffs. First up, is US President Trump’s tax and spending cut bill currently working its way through Congress, which Trump is pushing to get signed before the 4 July US holiday. Second, the 90-day reciprocal trade tariff pause that Trump put in place back in April with most countries apart from China is due to end on 9 July, less than two weeks away now – Trump’s National Economic Council director, Kevin Hassett, said earlier this week that “we’re very close to a few countries and are waiting to announce after we get [Trump’s tax and spending cut] Big Beautiful Bill closed”.

A new Fed Chair in the wings?

The Wall Street Journal reported yesterday that US President Trump might announce US Federal Reserve (Fed) Chair Jerome Powell’s replacement by September or October this year. If that proves to be the case, it would mark an unusually early appointment (Powell’s term doesn’t end until May next year). Adding to the rumour mill, Trump said yesterday that he had 3 or 4 people in mind as potential replacements.

What does Brooks Macdonald think

US President Trump has made no secret of his desire to see US interest rates lower, characterising Fed Chair Powell as “Too Late Powell”. The risk of an early announcement, however, is that it could effectively create a shadow Fed chair with the power to influence market sentiment and undermine Powell’s authority. Further, just because US interest rates could be cut more easily under a new Trump-friendly Fed chair, it doesn’t necessarily follow that bond markets would play ball, especially in terms of longer-term bond yield interest rates which the Fed has much less control over.  

Please check in again with us soon for further relevant content and market news.

Chloe

26/06/2025

Please see below article received from Brooks Macdonald this morning, which provides  a market update for your perusal.

What has happened

A degree of relative calm returned to markets yesterday, as fears of a worst-case Middle East conflagration eased. While Iran and Israel continue to trade attacks, there is a growing view that the latest conflict might yet be contained. Avoiding further escalation, Israel has not targeted Iranian oil production while Iran has not targeted US people or assets in the region – and crucially for the oil price, Iran has as yet shown no interest in blockading the Strait of Hormuz through which close to 30% of the world’s seaborne oil trade goes through.

Signs of Middle East de-escalation?

Rather than ratcheting up, it seems the conflict might even be de-escalating behind the public rhetoric. The Wall Street Journal said yesterday that Iran was signalling it wanted to end hostilities and restart nuclear talks, citing unnamed Middle Eastern and European sources, while a similar report by Reuters said that Iran conveyed that message through Qatar, Saudi Arabia and Oman. Separately, Iranian foreign minister Abbas Araghchi yesterday said that “the Islamic Republic of Iran has never left the negotiating table”. According to US news website Axios, there may be meeting this week between US Middle East envoy Steve Witkoff and the Iranian foreign minister to discuss a nuclear deal and an end to the Israel-Iran conflict.

Markets shift back to risk-on

Global equity markets rose, while US government bond, gold and oil prices all fell back yesterday. The US S&P500 equity index finished yesterday up +0.94%, recouping most of Friday’s -1.13% decline, while the pan-European STOXX600 equity index was up +0.36%, having dropped by -0.89% on Friday. Overnight in Asian equity markets, the Japanese Nikkei225 equity index has closed up +0.59% (all equity indices in local currency price return terms).

What does Brooks Macdonald think

Overnight the Bank of Japan has left interest rates unchanged and announced it is looking the slow the rate at which it reduces its bond purchases next year, both decisions widely expected. On the latter, the Bank is presumably hoping to take some of the heat off Japanese government bond yields which have risen this year. This is all market positive as it reduces the risk of ‘something breaking’, avoiding a redux of the market hiatus last August when the Bank hiked rates unexpectedly.

Please check in again with us soon for further relevant content and market news.

Chloe

17/06/2025