News

Please see below, an article from Tatton Investment Management, analysing the key factors currently affecting global investment markets. Received this morning – 10/11/2025

Liquidity, actually  

After stocks sold off 2-3% last week, with big tech particularly vulnerable, Monday morning has seen a decent bounce. S&P 500 futures are now only 1% down from a week ago. The US Senate’s Sunday vote to push on with the bill for 2025’s government funding could mean an end to the current shutdown this week. While this will help the economy, the market’s weakness hasn’t been about a fear of a recession; this is a liquidity and volatility story.

Starting with the UK, the Bank of England’s (BoE) 5-4 vote to keep interest rates steady was closer than expected. Unless anything remarkable happens, the BoE will cut in December – and may even repeat in February. The chancellor’s pre-budget briefing (and leaks on Friday) confirm tax rises ahead, but UK stocks held up better than most and UK bond yields fell more sharply. This was helped by weaker sterling (making our markets more attractive and overseas revenues higher). The Chancellor’s fiscal discipline is attracting bond managers too.

European data was lacklustre (covered below) but Eurozone loan demand is improving, thanks to the ECB allowing greater liquidity than the Fed.

The media put US tech’s wobble down to valuation vertigo – fear that profits won’t live up to the hype. The longest US government shutdown in history, and a surge in layoffs (according to Challenger, Gray and Christmas) didn’t help. However, the overall data is more mixed; ADP reported stronger hiring than expected; the ISM purchasing manager surveys were stronger; growth was resilient enough to keep inflation on the high side of expectations.

But big tech is relatively insensitive to US growth. We agree that the sell-off has been shutdown-related, but for a different reason: reduced federal spending means less liquidity in the financial system. That means fewer asset buyers and greater volatility.

Investors have sold equities (and speculative assets like crypto) to raise cash. The effects spread all over the world, thanks to interconnectedness (Japan’s Nikkei sold off sharply). Amid the jitters, we should remember that the long-term outlook is solid. That suggests that an end to the shutdown could mean an end to the cash squeeze and, perhaps slowly at first, investors may return to the markets. When liquidity loosens, we expect more buyers than sellers again. So, we’re in the same position as we have been for weeks: volatility is a bumpy ride to a good destination.

October Asset Returns Review 

Global stocks gained 4.8% in October in sterling terms, but it was a bumpy ride. The US government shutdown had minimal impact on equities – at least initially. It did prevent economic data releases and eventually weighed on activity, hurting small caps.

Large cap tech stocks rallied 7.3% after solid quarterly earnings, a strong antidote to fears of an ‘AI bubble’. The shutdown also compounded tight liquidity conditions (the US treasury is collecting and not spending money) which increased volatility. We saw this in a $19bn ‘flash crash’ for cryptocurrencies mid-month. Heightened nerves also amplified discussion about private credit lending standards. Recent defaults have tightened credit conditions.

Falling bond yields provide some offset – though they bumped up after the Fed’s hawkish meeting. UK bond yields fell particularly sharply (gilt prices up 2.7%), which helped UK equities gain 4.1% and remain one of 2025’s best performers.

Japanese stocks had their best month (in local currency terms) in 35 years, as investors approved of new Prime Minister Takaichi’s policies. The yen’s fall crimped sterling returns to 5.9%. Emerging markets surged 6.7%, despite the largest EM, China, falling 1.2% amid tighter liquidity. South Korea was by some distance the standout EM, and is going through a corporate revival similar to Japan.

South Korea hosted the APEC summit and a nerve-wracking Trump-Xi meeting. It ended better than expected, with a mini-deal pausing tariffs and export restrictions and assuring investors that geopolitics isn’t as bad as feared. Dissipating risks might be related to gold prices coming off their highs, or that the rally might just have ran out of steam.

Q3 corporate earnings reports were strong, not only for US tech but for global banks too. When fundamentals are solid but volatility is high, investors tend to see opportunity in the dips.

Germany engineers a recovery 

Markets aren’t as enthusiastic about Germany as they were in early 2025, but we see improvement coming next year.

Europe’s largest economy was in recession from late 2022 to Q4 2024 (the longest concession since WWII), thanks to global manufacturing woes and high energy prices. It climbed out of recession just as the CDU-SPD government removed Germany’s constitutional debt brake for defence and infrastructure investment, but is contracting again. Many doubt the government’s fiscal follow-through; reports suggest some of the €500bn infrastructure spend will just be re-allocated from existing plans to make the core budget look better.

Still, we always knew stimulus wouldn’t come until 2026, and it will significantly boost activity when it does. Conditions are already improving: businesses are feeling more confident, due to efficiency gains and expanding profit margins (counteracting sluggish revenues). German corporates usually save when growth is weak and spend when it’s strong – but they’ve been investing even through recent struggles. This investment will result in higher revenues, particularly when combined with the public spending boost. Higher revenues and higher margins is a powerful combination, and we expect more investment as profits strengthen.

The profit and margin story isn’t unique to Germany. European companies are improving, industrial orders are on the rise and European loan demand is strong (as noted by the ECB). Germany was previously a passenger in this revival, rather than a growth engine (a historical role reversal) but now it is joining in the fun. Europe’s growth renaissance needs its largest economy firing. We expect that to happen next year. Businesses and households are getting more confident, and will get a shot in the arm from fiscal spending. In 2026, we expect Germany to be at the heart of Europe’s growth story.

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

Marcus Blenkinsop

10^th November 2025

 

Please see below, an article from EPIC Investment Partners which details their predictions for the impact of AI on the labour market. Received today – 07/11/2025

Chris Rea didn’t have artificial intelligence in mind when he wrote his 1989 hit The Road to Hell, but his warning, “This ain’t no technological breakdown. Oh no, this is the road to hell”, has found new resonance in the age of generative AI. The latest employment data seems to vindicate the pessimists: Challenger, Gray & Christmas reported more than 153,000 job cuts in October, the highest for that month since 2003. Companies are restructuring at speed, with AI adoption frequently cited as the cause. The image of automation devouring jobs fits neatly into a familiar narrative of economic collapse, where technology hollows out livelihoods and destabilises society.

Yet that view is dangerously incomplete. The anxiety over shrinking pay packets captures only one side of the ledger, ignoring the countervailing force that will shape the century: the collapsing cost of living driven by demographics and AI-powered deflation.

Across the developed world, fertility rates have fallen below replacement levels, and workforces are shrinking. Without a productivity shock, this demographic implosion would mean chronic shortages, rising costs and a slow-burn inflation trap. The real “road to hell” would be a world short not of jobs, but of workers.

AI’s arrival therefore marks not an existential threat to labour but a reprieve from demographic gravity. Automation has appeared at the moment it was needed, not to replace a surplus of people, but to substitute for their absence. As ageing populations drain the supply of human labour, intelligent systems and robotics are taking up the slack, allowing economies to sustain output and living standards.

The result is a new, structural form of deflation—not the demand-crushing kind of recessions, but cost-deflation born of efficiency. AI drives the marginal cost of producing complex goods and services ever closer to zero. Nominal wages may stagnate as human output becomes replicable, but the price of what those wages buy collapses in tandem.

For most consumers, wealth is better measured by purchasing power than by salary size. When the price of core goods and services plunges, a modest pay cheque can still buy more comfort and convenience than at any point in history. Even those outside the AI capital elite stand to gain from the abundance it unleashes and the erosion of scarcity in many sectors.

The politics of this transition will be turbulent. Redundant job titles make headlines; invisible price declines do not. Yet, in time, AI’s deflationary engine may prove the most benign disruption of all, rescuing ageing economies from inflationary paralysis and transforming scarcity into surplus.

This ain’t no technological breakdown, nor the road to hell, this is the road to salvation.

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

Alex Kitteringham

7th November 2025

Please see below article received from EPIC Investment Partners this morning, which reviews the differing approaches to renewable energy globally.

The United States is the world’s largest producer of oil (although it only ranks 9th in terms of reserves, roughly one quarter of top ranked Venezuela). The US also holds the largest share of global coal reserves (just over 20%). In this sense it is not surprising that the Trump administration considers that fossil fuels should remain the ‘backbone’ of energy generation. Likewise, China – which lacks significant oil reserves – continues to invest in new coal plants given their substantial coal reserves, some 13% of global reserves.

The different approach to renewable energy, however, is startling. China has embraced hydroelectric, solar and wind power generation while close to half of passenger vehicles sold are either outright EVs or hybrid EVs.

The White House declared a national “energy emergency” in January, taking aim at high energy prices and a lack of affordable power. In an earlier daily we covered the enforced closure of the Ørsted’s Revolution Wind LLC in August. The project is a joint venture with Global Infrastructure Partner’s Skyborn Renewables and was approved by the Biden Administration.

The project was 80% complete with 45 of 65 planned wind turbines installed. On 3 November a Federal Judge ruled that Ørsted and its partner could resume construction. We will see how the Trump administration reacts.

This is not the only strange decision taken by the Trump administration. A coal plant in western Michigan was due to be retired a few months ago. The company that owns and runs it had concluded that consumers would be better served by a mix of other energy sources. The administration barred the plant from closure. The operator has been spending almost $1mn per day to keep it running.

Who bears the cost of running this inefficient plant? Consumers across the Midwest of America. All of this is occurring as the construction and operation of data centres shift overall electricity demand upward.

A 2022 study by the Department of Energy found that more than 300 existing and retired coal plants could be turned into advanced nuclear power plants. The coal plants are already connected to the electricity grid and some of the skills needed to operate nuclear plants are similar, thereby possibly creating job opportunities for existing and former employees.

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

Chloe

06/11/2025

Please see this week’s Markets in a Minute update below from Brewin Dolphin, received yesterday afternoon – 04/11/2025.  

Investor sentiment boosted by earnings season

We examine how earnings results from some of the ‘Magnificent Seven’ have reassured investors worried about an AI bubble.

Key highlights

• Justifying the AI investment surge: Four of the ‘Magnificent Seven’ released earnings reports last week, which revealed an aggressive ramp-up in infrastructure investment due to relentless demand for artificial intelligence (AI) computing capacity.
• A tactical China-U.S. truce: The China-U.S. trade war has seen a temporary respite. China agreed to a one-year suspension of its more restrictive rare-earth export control measures, while the U.S. agreed to reduce existing tariffs by 10% on certain Chinese goods.
• What’s the latest on interest rates? The Federal Reserve cut interest rates by 25 basis points while both the European Central Bank and Bank of Japan held rates steady.

Last week was a busy one for markets, with a combination of factors to absorb.

The market narrative was dominated by three key themes:

• Unprecedented capital expenditure (CapEx) commitments from the largest technology firms.
• Various monetary policy decisions from heavily scrutinised central banks.
• A tactical de-escalation in the protracted China-U.S. trade conflict, which saw a major pivot in advanced chip technology speculation.

‘Hyperscaler’ earnings: Justifying the AI investment surge

‘Hyperscalers’ reported results last week amidst concerns over their investment plans.

Source: LSEG Datastream

The week’s earnings reports from the major “hyperscalers” – Alphabet (which owns Google), Microsoft, Amazon, and Meta – revealed a collective and aggressive ramp-up in infrastructure investment, with 2025 CapEx guidance being raised across the board. The collective spending is now estimated to exceed previous forecasts, driven almost entirely by the relentless demand for AI computing capacity.

The size of the short and longer-term investment commitments is unnerving for investors, as it reminds them of previous investment cycles where long-term demand was slower than expected. This led to longer periods of underused capacity.

Large investments in telecommunications infrastructure during the late 1990s, or mining capacity during the early 2000s, led to correspondingly high depreciation charges, with little offsetting revenue and, often, asset writedowns (when the recorded value of an asset is reduced because the market value has fallen below its book value). This is why people worry about an AI investment bubble.

Instead, companies reported that their spending is based on the concrete evidence of robust, immediate demand – mitigating concerns over a potential AI spending bubble.

Executives were unanimous in reporting that AI demand continues to exceed available capacity. Microsoft’s CFO Amy Hood noted that the company is still operating from a “constrained capacity place,” primarily in power and data centre space, rather than just chip supply. Amazon CEO Andy Jassy echoed this sentiment, stating that despite aggressive building, “as fast as we’re bringing it in, right now, we are monetising it,” indicating a rapid and visible return on deployed assets.

Crucially, Microsoft disclosed that it still has a remaining performance obligation (RPO) backlog of $392 billion, an increase of 51% year-on-year. This represents the revenue that Microsoft expects to earn from services or products it has yet to deliver to clients and customers. This figure, which is expected to take about two years to realise, proves that Microsoft has committed customer contracts and a certainty of near-term revenue, which directly supports its elevated CapEx roadmap for the forthcoming years.

Alphabet raised its 2025 CapEx forecast and signalled a “significant increase” expected for next year, driven by a $155 billion backlog in demand for cloud business.

Central banks: Policy divergence and political scrutiny

The Federal Reserve cut interest rates

Source: LSEG Datastream

Central bank activity underscored a notable divergence in global monetary policy, while the U.S. Federal Reserve and the Bank of Japan continued to face unique political pressures.

• Federal Reserve (the Fed): The Federal Open Market Committee (FOMC) cut the federal funds rate by 25 basis points to a range of 3.75% to 4%. The cut was characterised as a pre-emptive easing measure designed to address rising downside risks to the employment mandate (its mandate from Congress to promote maximum employment). Fed Chair Jay Powell affirmed that future policy would remain data-dependent, even as the narrative continues to focus on the administration’s strategy of using political appointments to the Board of Governors to pressure the rate-setting process.
• European Central Bank (ECB): The ECB held its key interest rates steady, keeping the deposit rate at 2% for the third consecutive meeting. With Eurozone inflation stabilising near the ECB’s 2% target, it provided minimal forward guidance, suggesting a prolonged pause. Market expectations are pointing to rates staying unchanged well into 2026. No new economic forecasts were issued at this meeting.
• Bank of Japan (BoJ): The BoJ also held its main interest rate unchanged at 0.5%. At the subsequent press conference, Governor Kazuo Ueda was inevitably asked about the stance of the newly installed prime minister, Sanae Takaichi, who’s known to favour accommodative monetary policy.

Ueda made it clear that while the bank would “stay in close contact with the government and maintain necessary communication,” the BoJ’s decision to maintain its current stance was based solely on the need to evaluate more data, particularly concerning domestic wage trends and the impact of U.S. tariffs. He pledged to “adjust the degree of monetary accommodation when we are convinced, irrespective of the political situation”, an explicit verbal defence of the central bank’s independence against both domestic and external (U.S. Treasury) pressure to quicken its tightening pace.

Trade spats: A tactical China-U.S. truce and chip policy volatility

The last few weeks have seen an intensification of trade stresses between the U.S. and China, with tech restrictions and tariffs from the U.S. prompting rare-earth metal export restrictions and other countermeasures from China.

But more recently, relationships seemed be thawing, resulting in a temporary de-escalation. However, volatility in the semiconductor sector underscored the fragility of the tech relationship.

The rare-earths and tariffs deal

Beijing secured short-term relief for key industries by agreeing to a one-year suspension of its latest, more restrictive rare-earth export control measures, and committing to resuming large purchases of American agricultural products (notably soybeans).

In return, the U.S. offered tangible concessions, agreeing to reduce existing tariffs by 10% on certain categories of Chinese goods. This marks a tactical retreat by both sides to stabilise markets, though the underlying structural controls remain in place.

The Blackwell chip drama

Market attention was intensely focused on the potential relaxation of export controls on Nvidia’s advanced Blackwell AI chips (B-series).

Speculation began when U.S. President Donald Trump publicly signalled he might discuss the sale of a downgraded variant (e.g., the B30A) with Chinese President Xi Jinping. This talk ignited a massive rally in semiconductor stocks, driving Nvidia’s market capitalisation briefly toward the $5 trillion mark on Wednesday, as investors anticipated access to the vast Chinese market.

However, the market impact proved short-lived. On Thursday, President Trump clarified that while semiconductors were discussed broadly, the advanced Blackwell chips were not specifically on the table, instantly cooling market optimism. Analysts and U.S. lawmakers had vehemently opposed any relaxation, arguing that exporting even a scaled-down Blackwell chip would functionally end the existing export control regime and severely erode America’s critical advantage in AI computing power.

Technology remains the dominant force behind the economy and the market, with technological supremacy becoming the prevalent geopolitical issue.

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

05/11/2025

Please see the below article from Brooks Macdonald detailing their discussions on the AI Arms Race. Received this morning 04/11/2025.

What has happened?

Markets kicked off November with familiar patterns: the S&P 500 edged up +0.17%, but the Magnificent 7 gained +1.18% while the rest of the index (S&P 500 ex-Mag-7) slipped -0.30%. Small caps and equal-weighted shares echoed the caution, with the Russell 2000 and equal-weighted S&P 500 down -0.33% and -0.30% respectively. Investors wrestled with hawkish Fed signals, and a government shutdown now tied for the longest in history and set to claim the record at midnight tonight. Amongst mega-caps, Amazon stole the spotlight, jumping +4.00% after striking a seven-year deal with OpenAI. The ChatGPT creator will pay Amazon Web Services for Nvidia chips and data-centre access in a deal valued at up to $38 billion.

Fed speakers turn up the hawkishness

Treasury yields climbed as several Fed officials sounded cautious. Chicago Fed President Goolsbee (a 2025 voter) said he’s ‘not decided’ on December and is ‘nervous’ about inflation trending the wrong way after four-and-a-half years above target. San Francisco’s Daly urged an ‘open mind’ for the next meeting. Governor Cook noted rising employment risks but stopped short of backing December easing. The hawkish chorus, building on Chair Powell’s comments last week, pushed the 2-year yield +3.1 bps to 3.61% and the 10-year +3.3 bps to 4.11%.

What does Brooks Macdonald think?

The AI arms race is accelerating. OpenAI’s Amazon deal pushes its recent pledges toward $1.5 trillion when combined with prior Nvidia and AMD deals. At the same time, Alphabet joined the funding frenzy by announcing ~$22 billion in new to fuel AI buildout, mirroring Meta’s more aggressive borrowing strategy. The AI investment boom continues to split the market: mega-caps with direct AI exposure race ahead, while the broader economy faces cross-currents from sticky inflation, Fed restraint, and fiscal gridlock. We remain vigilant as tides can turn quickly.

Bloomberg as at 04/11/2025. TR denotes Net Total Return.

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

04/11/2025

Please see below, an article from Tatton Investment Management, analysing the key factors currently affecting global investment markets. Received this morning – 03/11/2025

Faster change, stronger growth, bigger risks

Stocks climbed last week, yet again hitting various new highs although, again ending with a sense of anticlimax. The narratives didn’t change. UK markets did well across the board, reflecting an improving economy.

The US Federal Reserve cut interest rates but warned that a December cut is not a “forgone conclusion”. The rate-setting committee is split between hawks and doves, partly thanks to Trump’s recent appointees. The US government shutdown also means there’s little data to go on (and the available data is mixed) so policymakers rely more on judgement. Job postings are falling, and now layoffs are increasing too (with some high profile tech layoffs). A weaker labour market ahead of the year’s most important retail period could hurt sentiment, so it’s the Fed’s hawkish turn is strange timing. That’s why small caps stocks were poor.

While the ECB kept rates unchanged, its lower inflation forecast means December’s meeting should be interesting. There’s a small chance of a Bank of England cut this week, but a higher chance of a December cut, after the budget.

Trump and Xi’s mini-deal to suspend tariffs and restrictions for a year helped the mood, even if it’s only a pause. Tariff de-escalation allows investors to focus on strong corporate earnings – including for European banks. Tech stocks reported strength, but not enough to boost share prices. Investors are worried about how much they’re spending on AI infrastructure.

More AI spending means less money for shareholders – as discussed below. But even if the AI capex race doesn’t help tech stocks, it should boost global growth. Big companies are investing heavily and shifting resources. There will be losers, but it’s a positive for growth and profits.

That does mean proportionally less money for risk assets, though, which adds to the tightening of global liquidity. Indeed, there was increased attention on the rise in US interbank rates amid comments of (mild) concern from the Fed. That’s why recent volatility could continue, even if the outlook is getting better. The risks could feel riskier ahead.
Renminbi is a power tool

China’s renminbi (RMB) has strengthened against global currencies. The government fixes its currency value against a basket of currencies, but changes its fix depending on the market exchange rates – so the fix is sometimes more about guiding markets. From 2023, currency markets pushed RMB weaker but the fix remained stable. Beijing wanted a stable RMB, but markets didn’t agree, due to weak growth. At points since, RMB devaluation has looked likely, but never came. In 2025, however, Beijing has guided RMB stronger and markets have gone along with it – thanks to signs that China’s economic stimulus is working.

At the same time, China is ramping up RMB’s internationalisation. It’s now world’s second-largest trade finance currency, and third largest payment currency. By guiding RMB higher against the dollar, Beijing is also counteracting the gap in interest rates between the US and China (higher US rates pushes capital to the US). RMB gains are gradual, consistent and it has been the least volatile of any major economy recently, which encourages companies to use RMB for trade and reserves. China is also presenting itself to major trading partners as open and reliable – in contrast to volatile US leadership.

A strong RMB isn’t good for China’s short-term growth. Exports are a huge part of the economy, and have been hit by US tariffs. A stronger currency makes them even less competitive. But it isn’t about growth; it’s about proving RMB’s worth as a global reserve. Beijing sees an opportunity to capitalise on the world falling out of love with the dollar this year. Something similar happened in 2023, when everyone thought RMB devaluation was on the cards but the opposite happened. China gambled that internationalisation was more important than export growth, and it paid off. It would be a brave trader to bet against RMB again now.

Why does tech want private debt?

Meta’s $25bn bond issuance comes just after it was part of a $27bn private debt deal – a joint venture with Blue Owl to build an AI datacentre. It’s part of a splurge of debt-raising from tech firms in 2025, with $175bn raised so far.

Meta’s private deal would have got more attention if it was a public bond. It got an A+ credit rating, but yielded 6.58% at issue – more like a junk bond yield. Trading in secondary markets drove prices up 10% after issue. If this was a public bond, whoever arranged the deal would be embarrassed. The price jump means Meta never had to pay that high interest in the first place. Shareholders don’t like unnecessary payments.

The whole point of public bonds is that lenders compete to give you the best rate, so why keep the deal private? The standard reason is to keep details under wraps but, as a publicly listed companies, Meta has to publish its financial details anyway. We suspect companies will see the deal as an incentive to avoid private credit – which might end the dearth of high-yield corporate issuance this year. We can’t forget private credit’s current PR headache, of course. A high-profile mispriced deal won’t help that mood.

On the flipside, why are AI-related companies issuing so much debt when so many think there is a bubble? We think bubble talk is overstated, and it’s not unreasonable for these cash-rich companies to borrow if they expect AI-fuelled expansion. But the timing is a little strange.

Capital spent building AI capacity is capital not returned to shareholders. Big tech has been using its cash on share buybacks for years, benefitting equity valuations, but that has tailed off as AI investment eats into cash. It’s an interesting trade-off, showing AI growth is no longer the gift that keeps giving.

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

Marcus Blenkinsop

3^rd November 2025

Please see the below article from EPIC Investment Partners detailing their discussions on the emerging-market bond landscape. Received this morning 31/10/2025.

The emerging-market bond landscape harbours a distortion so large it hides in plain sight. Nearly two-thirds of the USD-denominated universe now trades with spreads below 150 basis points (bps), with one in six below 50 bps. Some of this reflects genuine progress—Qatar, for instance, has earned its place among near-developed credits—but much of it is mechanical, not merit-based.

JPMorgan’s EMBI Global Diversified (EMBIGD), the benchmark dominating EM debt investing, was built on a sound premise: limit each issuer to twice the index country average to avoid concentration risk. Yet this safeguard has become a machine for mispricing, channelling passive capital not to the best credits, but to the smallest. In this world, allocation is determined not by fiscal strength or market depth, but by a spreadsheet formula.

The absurdity is clearest when comparing Mexico and the Dominican Republic. Mexico’s economy, at roughly US$1.8 trillion, is fourteen times larger than the Dominican Republic’s US$126 billion, and its bond market vastly deeper. Yet both sit almost side by side in the benchmark: about 3.8% for Mexico and 3.5% for the Dominican Republic. A Latin American heavyweight and a lower-rated Caribbean island command near-equal access to global passive capital. This is distortion masquerading as diversification.

The consequences are tangible. Capped giants like Mexico face a structural overhang—index capital cannot fully absorb their issuance—while smaller, uncapped names see their spreads crushed to unsustainable levels. This week, the BB-rated Dominican Republic sold a new 10-year bond at 177 bps over Treasuries, while Mexico’s state-owned utility CFE (rated BBB) trades wider at 204 bps. Why purchase the weaker credit at a tighter spread? The correlation to the index is 85%, so even the diversification argument fails.

Stress only magnifies the irony. When risk aversion hits, passive funds are forced to dump the same small credits simultaneously. Liquidity evaporates precisely where it is most needed, punishing investors who mistook benchmark exposure for safety. Larger, capped issuers such as Mexico remain tradable, preserving price discovery and resilience. In downturns, the illusion of diversification turns into a liquidity trap.

What starts as an index rule ends as an investment philosophy. When scarcity, not solvency, drives allocation, markets cease to price risk and begin to simply replicate it. Benchmarks no longer measure reality—they manufacture it.

Our models are explicitly designed to avoid this trap, bypassing the fiction of benchmark parity to seek genuine value. Ultimately, the choice for investors is stark: trust an index that rewards scarcity over solvency, or trust the simple arithmetic of value. Because when a BB borrower yields 5.875% and a BBB borrower offers 6.1%, the maths, not the marketing, reveals where prudence and opportunity truly lie.

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

31/10/2025

Please see below, an article from EPIC Investment Partners highlighting recent developments for energy storage. Received today – 30/10/2025

Last week we highlighted the emergence of Long Duration Energy Storage, also referred to as energy storage systems (ESS). The advent of AI, and the consequent rapid development of new larger data centres, has ‘shifted the curve’ of power consumption forecasts across the globe. Simultaneously the roll out of green generation (particularly solar and wind) has left most countries struggling to upgrade their power transmission infrastructure to cope with the variable nature of green power generation. Some are coping better than others but it appears a widespread issue.

The ESS industry is in its infancy. In 2024 ESS installations reached 74.9 gigawatts (gw). China (39gw) dominates while the US (12.3gw) is also a significant player. Bloomberg NEF forecasts that installations will double by 2027 (to 137.7gw) and, in round numbers, double again to 243.4gw by 2035.

Recent regulatory oversight has been confusing in both China and the United States. The removal of storage mandates in China for renewables earlier this year was a big concern, but new energy storage targets were set in September and underline China’s commitment to ESS. In the US, some federal policy shifts introduced uncertainty due to frequent changes in import tariffs while new restrictions on the use of Chinese equipment were equally unhelpful.

US market players are adapting to this new environment supported principally by US based battery manufacturing initiatives by leading Korean firms. Battery technology is moving at a rapid pace. Sodium-ion batteries are the latest development. While lithium batteries are lighter (thus widely used for EVs) sodium-ion batteries are cheaper, safer and perform better in extreme cold. They are, therefore, ideal batteries for ESS. There is no shortage of sodium. CATL, the world’s largest battery producer by some margin, expects to start production of sodium-ion batteries in the first quarter of 2026. There is no doubt that the other players, Chinese and Korean, will follow suit. Rapid growth is set to continue.

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

Alex Kitteringham

30^th October 2025

Please see this week’s Markets in a Minute update below from Brewin Dolphin, received yesterday afternoon – 28/10/2025.  

U.S. inflation exceeds expectations

We examine the latest U.S. inflation figures, which beat market predictions despite a modest rise in September.

Key highlights

• U.S. inflation rose to 3%: the modest pickup was lower than expected and reinforced the view that inflation is still under control despite U.S. trade tariffs.
• President Trump to meet President Xi Jinping: the first in-person meeting between U.S. President Donald Trump and Chinese President Xi Jinping since 2019 fuels hopes of trade tension de-escalation.
• Oil price rally: Brent crude oil prices jumped after new U.S. sanctions on Russia’s largest oil producers, including Rosneft and Lukoil.

Markets are leaning on optimism

Global markets ended the week on a firmer note, with sentiment noticeably more constructive than a couple of weeks ago.

A catalyst was the latest U.S. inflation data for September, which came in slightly below expectations, rising from 2.9% to 3% year-on-year. The modest pickup was lower than expected and reinforced the view that inflation is still under control despite U.S. trade tariffs. This paves the way for an interest rate cut next week, a move already fully priced in by markets.

Optimism also rose after the White House confirmed that President Donald Trump and Chinese President Xi Jinping will meet on Thursday in South Korea, on the sidelines of the Asia-Pacific Economic Cooperation summit. It will be their first face-to-face meeting since President Trump’s return to office, coming just days before the current trade truce is set to expire on 10 November.

Markets are leaning on a more optimistic outcome from the upcoming talks, even if a major breakthrough remains uncertain. Discussions are expected to cover a broad range of issues, from technology exports and agricultural purchases to restrictions on rare-earth minerals. The tone from Washington has softened recently, which investors are viewing as an indication that both sides want to extend the tariff pause while leaving room for longer-term negotiations.

Meanwhile, the U.S. signed a rare-earth partnership with Australia, agreeing to co-invest in mining and processing capacities to secure access to critical minerals used in clean energy and semiconductor production.

The deal improves America’s leverage ahead of the summit, though China remains overwhelmingly dominant in this strategic area. For instance, the International Energy Agency (IEA) estimates that China accounts for about 61% of rare-earth production and 92% of rare-earth processing. That concentration highlights Beijing’s enduring influence over global supply chains and its leverage in any trade discussions.

Ahead of the talks, China held its fifth plenum last week, which sets its long-term strategic plans and policy goals. Its 15^th five-year plan focuses on artificial intelligence (AI), energy transition and stronger domestic consumption. This underscores China’s long-term ambition for innovation-led and self-reliant growth. The five-year plan ensures that the strategic rivalry between the U.S. and China won’t go away, but both countries will need to learn to co-exist and not decouple for the stabilisation of the global economy.

Gold cools after a blistering rally, while oil prices jump

After months of relentless gains, gold prices finally took a breather from record highs of above US$4,300 per ounce. The pullback was largely technical, with investors taking profits after an extended rally, and the momentum indicator that measures the magnitude of recent price changes suggested that gold was overbought.

Nevertheless, the case for gold remains intact, supported by central bank purchases, widening fiscal deficits and lingering geopolitical uncertainty.

Meanwhile, Brent crude oil prices jumped about 8% last week after new U.S. sanctions on Russia’s largest oil producers, including Rosneft and Lukoil. This move is intended to increase pressure on Russia to end the war in Ukraine.

Oil prices jumped while gold prices slumped

Source: Bloomberg

The measures caused short-term oil supply disruption mainly for Asian buyers, with some Indian refiners scaling back Russian imports and Chinese buyers cancelling spot cargoes.

Even so, the IEA expects global supply to exceed demand by nearly four million barrels per day next year, suggesting the market remains comfortably balanced overall.

Japan’s ‘Sanaenomics’ energises markets

In Japan, Sanae Takaichi made history by being confirmed as the country’s first female prime minister, a milestone that injected optimism into markets and sparked enthusiasm for what commentators are calling ‘Sanaenomics’. She has pledged to boost public investment, expand defence capabilities, and deepen ties with the U.S. to help renegotiate a better trade deal.

So far, markets are receptive to her agenda. Her leadership has drawn comparisons to former Prime Minister Shinzo Abe’s reform-driven era, with hopes that ‘Sanaenomics’ can reignite domestic demand and attract renewed global interest in Japanese assets.

Japanese equities rallied, the yen weakened, and government bond yields climbed as investors anticipated higher borrowing to finance fiscal expansion.

UK data highlight resilience ahead of Autumn Budget

In the UK, economic data painted a picture of resilient consumers ahead of the Autumn Budget. Retail sales rose 0.5% month-on-month in September, beating forecasts, while the GfK Consumer Confidence Index improved modestly in October (although it was still in deeply negative territory).

U.S. vs UK headline CPI (Consumer Price Index)

Source: Bloomberg

The UK composite Purchasing Manager’s Index also strengthened in October, signalling resilient private sector services activity.

Meanwhile, UK inflation held steady at 3.8%. Although this was lower than expected, it’s still far from comfortable. The good news is this could mark the high point of inflation, with slowing energy and utility prices likely to bring inflation lower in the coming months. For the Bank of England (BoE), it’s still a high hurdle to justify cutting interest rates this year. Services inflation remains stuck at 4.7%, a big reason to stay cautious.

The BoE’s Monetary Policy Committee remains split. Hawks are focused on sticky inflation, while doves worry about economic weakness. The BoE is walking a tightrope between stubborn inflation and slowing growth.

Markets are now pricing in a higher chance of a December rate cut. While BoE Governor Andrew Bailey is leaning on rate cuts from his recent speech, these may not come as soon as markets hope and will probably be more of a 2026 story. It’s hard to justify a rate cut in the near term unless there are more signs that inflation is truly under control or the economic data deteriorates significantly.

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

29/10/2025

Please see the below article from Brooks Macdonald detailing their discussions on US-China relations, Fed chair contenders and markets. Received this morning 28/10/2025.

What has happened?

Yesterday’s wave of optimism propelled the S&P 500 (+1.23%) and Nasdaq Composite (+1.86%) to fresh record highs, marking the S&P’s strongest three-day streak since May. Tech stocks led the charge: Qualcomm surged +11.09% on a new chip challenging Nvidia’s dominance, while Reuters highlighted a $1bn AI partnership between the US Department of Energy and AMD (+2.67%). This boosted the Philadelphia Semiconductor Index and gave the Magnificent Seven (+2.60%) their best day since May. In bonds, the yield curve steepened as short-term Treasuries sold off in the risk-on environment. Gold tumbled -3.18%, slipping below $4,000/oz, now down -8.59% from last week’s peak.

Fed chair contenders emerge

US Treasury Secretary Bessent revealed the final five candidates for Fed Chair: Kevin Hassett, Kevin Warsh, Christopher Waller, Michelle Bowman, and Rick Rieder, with plans to submit the list to President Trump post-Thanksgiving. Trump, however, floated Bessent himself for the role, alongside Marco Rubio for Secretary of State and Jamieson Greer for US Trade Representative, raising questions about the shortlist’s influence. While Trump’s comments might not be serious, investors should approach them cautiously.

Corporate layoffs signal broader labour market softening

Amazon is set to slash up to 30,000 corporate jobs starting Tuesday, aiming to curb costs from pandemic overhiring and affecting nearly 10% of its 350,000 corporate staff. This follows a flurry of layoff announcements last week, including Target (1,800 roles), Applied Materials (~4% of workforce), Rivian (~4%), Charter (~1%), Molson Coors (~9% of North American staff), and Meta (600 AI positions). While these feel company-specific, they align with ongoing signs of a cooling labour market.

What does Brooks Macdonald think?

Optimism is building around President Trump’s upcoming Thursday meeting with President Xi, bolstered by Trump’s comments: ‘I have a lot of respect for Xi. I think we’re going to come away with a deal.’ He also suggested a potential TikTok resolution during talks. That said, trade and macroeconomic outlook remains fluid.

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

28/10/2025