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Please see below, today’s Daily Investment Update from Brooks Macdonald which highlights the key factors currently affecting global investment markets.

What has happened?

US equities extended their recent recovery yesterday, with the S&P 500 (+0.58%) posting a third consecutive gain and finishing within 1% of its record high. Technology stocks led the advance, helped by encouraging signals from the previous evening’s SpaceX earnings release, which reassured investors about the durability of AI-related spending. The Philadelphia Semiconductor Index (+1.97%) continued its rebound, while the Nasdaq (+1.05%) delivered another strong performance. The positive mood was also reflected in Europe, where the STOXX 600 (+0.92%) and other major indices moved higher, again led by tech stocks.

A more challenging backdrop for UK consumers

Yesterday’s UK inflation data came in slightly above expectations, with headline CPI rising to 3.5% in September and core inflation remaining elevated at 2.8%. Combined with this week’s strong labour market data, the figures reinforced expectations that the Bank of England will raise interest rates again in November, with markets pricing a near-certain probability of a move by yesterday’s close. At the same time, consumer confidence weakened. The latest British Retail Consortium survey showed households becoming more pessimistic about both the economic outlook and their personal finances. Although spending intentions improved as consumers looked ahead to the holiday season, the survey suggested that some households may increasingly rely on savings to support spending amid ongoing cost-of-living pressures.

The mood soured overnight

The tone became more cautious after the US close. While Meta delivered results that exceeded expectations, Tesla disappointed investors by cutting its 2026 capital expenditure target, raising questions about the pace of its ambitions in AI and robotics. As a result, futures on the Nasdaq 100 were down -1.32% this morning. Meanwhile, France’s fiscal position remained under scrutiny, with the country’s 10-year government bond yield closing above 5% for the first time since 2002. Geopolitical tensions in the Middle East also intensified overnight, adding further uncertainty. Reports of potential future strikes involving Iran, alongside continued attacks on energy infrastructure in Saudi Arabia, reinforced concerns about global energy supplies and lifted Brent crude (+1.73%) to $110.70/bbl, a five-month high.

What does Brooks Macdonald think?

The combination of persistent inflation pressures, higher-for-longer interest rate expectations and rising energy prices could create a more challenging backdrop for markets. From an investment perspective, the recent rise in oil prices warrants close attention. If sustained, higher energy costs could complicate the inflation outlook and reduce central banks’ flexibility to adjust monetary policy. For now, markets can take comfort from resilient economic growth and generally supportive corporate earnings. However, investors are likely to remain sensitive to any signs that higher energy prices begin to feed through into inflation expectations or weigh on economic activity. The key question in the months ahead will be whether the global economy can continue to absorb higher energy costs without a meaningful deterioration in growth.

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Andrew Lloyd

22^nd October 2026

Please see this week’s Markets in a Minute update below from Brewin Dolphin, received yesterday afternoon – 20/10/2026

Earnings season: what’s next for markets

Semiconductors are getting cheaper despite record profits – what does earnings season reveal about the road ahead?

Key highlights

• AI trade: The semiconductor index fell by 10% as Broadcom’s chief executive questioned AI investment returns.
• U.S. inflation: Core CPI overshot for a second month, driven by the owners’ equivalent rent category.
• UK interest rates: Markets are pricing in one rate hike before the end of the year and three more in 2027, which strikes us as aggressive.

No crying in the casino

The biggest controversy in finance at the moment relates to the strength of the AI trade. The latest chapter in that story has centred around the longevity of the so-called ‘picks and shovels’ plays – investment strategies that target the companies providing the tools, equipment, infrastructure or services an industry needs to operate. In this case, that means semiconductors and the associated ecosystem.

AI models could establish monopolies – or they could be highly competitive.

If it’s the former, the benefits of AI will accrue to them. If it’s the latter, prices will fall and the benefits will accrue to their users. Regardless, there’ll be a lot of infrastructure built to serve these masters.

Now, there are constraints to that build-out. Political opposition to data centres has been growing due to their impact on local electricity prices. The funding available for new data centres has also been dwindling. This is due to the available cashflow of hyperscalers (large cloud computing firms) being fully deployed, and technology and consumer services becoming the second and third largest sectors in the investment-grade bond universe (and amidst the highest yielders).

The argument about AI spending was conducted at unusual volume last week and it began with an unlikely critic. Broadcom’s Chief Executive, Hock Tan, likened some AI investment to betting in a casino, questioned whether the developers of frontier models can make money and observed that genuine productivity leaps remain scarce, while most companies are still experimenting. That’s candid talk from a business whose own order book depends on exactly that spending. As a chief executive with a track record of colourful commentary, this probably wasn’t the driver of the semiconductor correction, but the remarks certainly capture the mood.

The Philadelphia Stock Exchange Semiconductor Index, the SOX index, which has become the bellwether for the theme, fell more than 10% in just over a week. Meanwhile, SK Hynix, the Korean memory giant, has fallen 30% in a fortnight.

Source: LSEG Datastream

The counterevidence came from the companies that sell the equipment and make the chips. ASML is supply-constrained rather than demand-constrained: tool supply for 2027 is unchanged and 2028 offers limited upside, which disappointed some. Yet, its installed-base business, which maintains machines and provides recurring revenue, grew 70% over the year.

TSMC raised its revenue growth guidance from 40% to 44% in dollar terms for 2026. Third-quarter revenue rose 40%, which was driven more by the richer mix of AI wafers than by volume. Capital spending of $60 billion to $64 billion looks likely to land at the upper end, with roughly 20 fabrication plants (fabs) under construction worldwide, as well as a possible new cluster in Texas. Discussions with Elon Musk’s TeraFab venture are also underway.

We’re also interested in what this implies about the shape of the cycle. Semiconductors have historically been violently cyclical, with upswings traditionally driven by a single product category – first the PC and then the smartphone. The demand base is broader now and the fabs being built today take years to arrive, which argues for a longer and smoother cycle.

TSMC has typically been conservative with capital. Its commitment speaks louder than its commentary.

So, industry fundamentals look solid and valuations have fallen, mostly by companies growing into them, but over the past couple of weeks, share price falls improved them even further.

AI’s claim on real resources is also starting to show up where investors feel it most directly: in prices.

Dwindling disinflation

Underlying U.S. price pressure is proving stubborn. Core consumer price index (CPI) data surprised to the upside for a second consecutive month, the first back-to-back overshoot since 2024, and the heavily weighted owners’ equivalent rent category did most of the work. That’s significant because new property lease rates have been rising.

High mortgage rates are keeping would-be first-time buyers in rented accommodation and high new-build costs are restricting supply. Slow net migration should limit demand, but a reliable source of disinflation has gone.

Core goods posted their biggest rise since the start of President Donald Trump’s second term and did so despite a continued large fall in prescription drug prices. This could reflect a delayed impact from tariffs or second-round effects from the rise in energy prices.

Core services excluding shelter is the better gauge of home-grown, persistent inflation, and it has been running near 3% for a year and a half. This is the indicator suggesting that underlying domestic economic strength is a source of inflationary pressure and that interest rates should rise as a result. The reassurance, though, is that wages have decelerated markedly, suggesting there’s limited benefit to weakening the labour market further.

Food prices were quiet in this month’s CPI report, but pressures are building in wholesale markets, which will find their way through to consumer markets in the coming months. A strengthening El Niño is likely to disrupt global food supply through a dispersed pattern of drought, flooding and erratic monsoons – even if it warms the European winter and marginally eases pressure on gas reserves.

The Federal Reserve (the Fed) restarted its hiking cycle last month and last week’s data makes a further increase before the year-end rather likely. Its next meeting falls less than a week before the midterm elections, which sets a high bar for acting then.

One hike, not four

Policymakers here face a gentler version of the same problem. Bank of England (BoE) Governor Andrew Bailey noted that the second-round effects of higher energy prices have been more subdued in the UK than feared, and while he remains cautious about what follows, that’s an encouraging message for now. Gilts (UK government bonds) outperformed on the back of it.

Markets treat a November rise as a near certainty and price in three more over 2027, which strikes us as aggressive. Our expectation, and that of most economists, is a single precautionary increase, one the BoE would be keen to unwind if the energy consequences of the war in the Strait of Hormuz begin to resolve.

A similar situation is true in the U.S., where Federal Reserve Chairman Kevin Warsh refused to offer forward guidance but still managed to downplay the chances of a rate hike in the last meeting before the midterms.

Steady customers, nervous shareholders

The start of earnings season offered another opportunity to check in on the banks. The sector has been weak in recent weeks and the reaction to the volley of results was mixed. Beyond that, the trends were good.

Source: LSEG Datastream

Balance sheets are growing healthily rather than recklessly, credit quality is sound and payment spending across debit and credit cards rose 5%, with no visible increase in delinquencies. The concern doesn’t appear to be deteriorating credit quality but rather net interest margins. As interest rate expectations have risen, the yield curve has flattened, making banks’ ‘borrow short and lend long’ business model less profitable.

Fixed-income trading was weaker and corporate activity merely fine, held back by the absence of the jumbo listings anticipated earlier in the year. Equities and equity financing were strong, which is usually a late-cycle signal and much of that strength sits in the prime broking businesses that fund the multi-manager hedge funds.

In other words, it’s another limb of the same AI trade now seeping into every corner of markets.

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Charlotte Clarke

21/10/2026

Please see the below article from WH Ireland discussing electronic shelf labels, operational efficiencies and a potential shift in pricing power, received this morning – 20/10/2026

Electronic shelf labels (ESLs) have been gaining ground in US supermarkets for several years, with Walmart rolling out the technology across thousands of stores. The trend is now gathering pace in the UK, Waitrose and Morrisons, for example, have introduced ESLs in more than 200 stores and Tesco plans to deploy them across around 3,000 locations. These small digital displays allow prices to be updated centrally within minutes, replacing the labour-intensive process of manually changing paper labels. For supermarkets operating on thin margins, the benefits include lower administrative costs, fewer pricing errors and improved inventory management. Yet beyond these operational efficiencies lies a bigger question: what happens when the cost of changing prices falls and retailers can respond to market conditions almost instantaneously?

Historically, the labour involved in replacing paper labels created a small but meaningful “menu cost”, discouraging frequent repricing. ESLs remove much of this friction, allowing retailers to respond more quickly to wholesale costs, inventory levels and competitors. This is not inherently inflationary: faster markdowns can reduce food waste, while better stock management can support profitability. Research suggests the benefits may extend beyond labour savings to improved inventory decisions and gross margins. For investors, the question is how much of these efficiency gains accrue to shareholders rather than being passed on through lower prices.

Concerns remain, however, about how the technology could be used in the future. Walmart has firmly defended its position that ESLs are an operational tool, not a means of charging different customers different prices. It maintains that all shoppers see the same instore price and that its labels do not collect personal data.

The wider concern is how ESLs could eventually interact with consumer data collected through loyalty schemes, mobile apps and online purchases. Shopping histories can reveal brand preferences, price sensitivity and how readily customers switch products or stores. Combined with sophisticated analytics and frictionless price updates, such information could, in principle, enable retailers to tailor prices or promotions to an individual’s predicted willingness to pay. The US Federal Trade Commission has raised concerns about “surveillance pricing”, including the use of personal data to personalise prices or offers. The risk is not that ESLs are necessarily tracking shoppers today, but that they could become part of a broader infrastructure in which consumer behaviour increasingly influences the price each shopper ultimately pays.

This creates an asymmetry between retailer and consumer. Supermarkets can adjust prices in minutes; households cannot switch off their need to eat. Grocery demand is relatively inelastic, and switching stores carries costs in time and convenience. Competition remains an important constraint, but consumers have limited ability to opt out.

ESLs represent both an efficiency opportunity and a potential shift in pricing power. They may improve margins without raising inflation, but they also remove friction from retail pricing while leaving the consumer’s underlying need unchanged. The retailer gains flexibility; the consumer remains bound to the basket.

 

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Alexander James Roberts

20/10/2026

Please see the below article from Tatton Investment Management detailing their discussions on markets over the past week. Received this morning 19/10/2026.

Bonds cracking the AI trade

Bond yields had been climbing but then the remarkable happened last week: demand for bonds jumped, and stocks sold off. Yields at attractive levels, or waning tech optimism – which was the stronger motivation?

Meanwhile, France suffered destruction through social unrest not witnessed since 1911’s “Vie chère” or – just like today – high cost of living riots. The debate about reducing the relentless growth of the government deficit has seen disaffected urbanites being goaded into acts of violence. Over the weekend, Macron’s speech to the nation was met by a lot of political opportunism, with opposition politicians failing to seek restraint clearly. Remarkably, the Euro has remained stable and European equities are opening unchanged. Investors may be viewing the events as signalling a growing political will to deal with the debt issues, as nation heads into the Presidential election on 18th April next year.

The sharp fall in US (and other developed world) yields was, counterintuitively, prompted by surprisingly strong US inflation. The initial yield reaction was up – as you’d expect – but that rapidly reversed once investors realised that the Fed will likely raise rates this month, rather than in December. Long-term inflation expectations stayed level, but growth expectations took a hit – reflected in the fall of the real yields component of total yields.

Corporate bond yields for big tech companies went the other way, and share prices dropped. The UK was one of the few positives, buoyed by a stronger-than-expected GDP number – and the fact that some international investors (perhaps incorrectly) see the UK as a hedge against the AI trade.

The drop in tech stocks made global equities negative in aggregate. This tells us that the stocks-to-bonds shift was more about waning belief in AI’s seemingly never-ending profit growth, rather than yield attraction. Stories about slowing demand for AI ‘compute’ pushed up borrowing costs for datacentre firms – with bonds of CoreWeave – the data centre construction company – reaching distressed territory. It’s unclear how accurate the slowing compute story is, since the metrics for judging AI firms’ success are opaque. But the narrative is more important than reality in the short-term; and investors may well be looking for excuses to crystallise 2026 gains.

The dollar gave up recent gains, almost in lockstep with US real yields, reflecting waning optimism in US asset returns. Currency volatility hurts international investors and it could make foreign investors repatriate capital if it carries on. That could compound stock market volatility.

The antidote, as ever, is earnings. Q3 results already look strong and should renew faith in the AI theme. The only concern is if AI firms reveal even larger debts than investors realised. That would temper, rather than destroy, investor sentiment.

Budget suffers from the government’s own gilts

Chancellor John Healey faces a difficult Autumn budget. UK government debt is higher than it has ever been during peacetime, and the Institute for Fiscal Studies (IFS) thinks fulfilling his previous defence commitments would create a £35bn fiscal hole. Its report this week also highlighted a policy that hurts both the budget and UK bonds: the government’s accounting rules on quantitative tightening (QT).

While most central banks have stopped QT, the BoE has kept selling bonds. That’s one of the reasons gilts have underperformed other bonds. But QT doesn’t just raise the government’s debt costs by pushing up gilt yields; it also costs the treasury directly, through the way they are accounted for. The BoE’s gilts are held on a separate Asset Purchase Facility (APF), which the government indemnifies against value fluctuations. This goes both ways – gains are paid to the treasury, but losses have to be covered too. Other governments apply similar accounting terms, but the UK is unique in that losses on its own debt impact actual cashflow. It looked like a blessing during QE but now it is certainly a curse: the treasury has paid about £30bn a year since 2022.

We shouldn’t overstate the yield impact. Gilts’ main issue is structural imbalance (i.e. too many long-term and inflation-linked bonds), compounded by QT. But at least those don’t impact day-to-day spending.

You could argue the APF payments deter fiscal profligacy, but that’s a fairly weak argument. In the short-term it just makes the fiscal position worse, which increases volatility and makes international investors squeamish. Changing the policy could therefore help more than hinder gilts.

There’s no sign Chancellor Healey will change this in his budget. But with the government wanting extra spending and reluctant to cut, tax or borrow, technical adjustments like aligning gilt accounting with global standards might be all that’s left. Commentators typically scoff at such fiddling, but it can be more important than you think.

The global diesel pressure point

Nowhere is 2026’s global energy shortage more apparent than in diesel prices. Wholesale diesel has more than doubled in price since the start of the US-Iran war, and the Trump administration has made it a geopolitical priority. Why are politicians, and markets, so focussed on diesel?

Diesel didn’t use to be more expensive than regular gasoline; it was often cheaper before 2004. Environmental  requirements made it costlier to produce, while its fuel efficiency and the rapid expansion of global supply chains pushed demand steadily higher. Diesel’s role in transportation and industry made it a truly global market with a consistent premium. That premium widened after Russia invaded Ukraine, and the Strait of Hormuz crisis has destabilised it again. Demand is sticky, which is why the IEA expect prices to rise further.

Diesel’s global economic importance makes the shortage a geopolitical issue. Trump threatened to ban US exports, likely to force the EU to release emergency supplies – which it did, with the G7 agreeing to draw down 100mn barrels of crude and diesel. Trump also announced a sanction relief deal releasing 300,000 tonnes from Russia (less than a single day’s US consumption, ~530,000). The president talks tough on an export ban but it would be politically difficult: the biggest diesel consuming US states are also the biggest oil producers, so any relief a ban provides on prices, also takes away revenue from producers.

We wouldn’t count on reserve releases to fix the market. JP Morgan suggests the 100mn figure includes barrels already promised, and Europe is reluctant to release more. Reserves are designed for acute shortages, not price emergencies. The upshot is that we expect diesel to remain a pressure point for the global economy until the Strait of Hormuz blockades are lifted. Nations can’t keep releasing reserves forever.

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

19/10/2026

Please see below, an article from Brooks Macdonald which highlights the key factors currently affecting global investment markets. Received today – 16/10/2026

What has happened?

After a period of pressure, tech stocks found their footing yesterday as Nvidia CEO Jensen Huang publicly defended the long-term AI investment story. The improved sentiment helped the S&P 500 rise +0.33%, leaving the index within 1% of its record high. Market gains were also broader than recent sessions, with the equal-weighted S&P 500 outperforming the cap-weighted one by around one percentage point. Semiconductor stocks remained under pressure, although the Philadelphia Semiconductor Index recovered from losses of more than -4% early in the day to finish down a more modest -0.88%. The improvement in risk appetite also supported bonds, with the 10-year Treasury yield falling -12.7bps to 5.06%. Earlier in the day, European markets were relatively resilient, having been less exposed to the recent AI-related volatility. The STOXX 600 rose +0.38% for a second consecutive session, reaching its highest level in three weeks.

A resilient US economy keeps inflation concerns alive

The latest US economic data continued to paint a picture of resilient growth and persistent inflationary pressure. September retail sales rose +0.8% m-o-m, comfortably ahead of expectations, while producer prices also surprised to the upside. Headline PPI increased +1.3% m-o-m, boosted by higher energy prices, while core PPI rose +0.7%, more than double consensus forecasts. The release followed Wednesday’s firmer-than-expected core CPI reading and reinforced concerns that inflation may prove more persistent than policymakers had hoped. Although higher energy prices played a role, strength in services prices and consumer spending suggests underlying demand remains healthy.

What does Brooks Macdonald think?

Overnight, Fed Chair Kevin Warsh struck a notably constructive tone at the IMF conference. Despite a string of stronger-than-expected inflation releases this week, Warsh declined to push back against market expectations for the upcoming Federal Reserve meeting, noting that he does not “prejudge meetings” ahead of the Fed’s blackout period. Instead, his comments focused on the strength of the US economy, highlighting a substantial investment cycle and the potential productivity benefits of artificial intelligence. Markets interpreted the absence of a more hawkish message as reassuring, with expectations for an October rate rise falling materially during his remarks. While it remains too early to draw firm conclusions, markets currently appear more willing to focus on the growth opportunity than the inflation risk.

Bloomberg as at 16/10/2026.

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Alex Kitteringham

16^th October 2026

Please see the below article from Brooks Macdonald detailing their discussions on the US inflation report. Received this morning 15/10/2026.

What has happened?

A stronger-than-expected US inflation report initially pushed Treasury yields sharply higher and reignited fears of further Federal Reserve tightening. The 10-year Treasury yield briefly reached 5.33% before reversing to close at 5.19%, and has fallen a further 8bps overnight to around 5.10%. Despite lower yields by the end of the session, risk appetite weakened, with the S&P 500 falling -1.11%, its worst day since July. European markets was more resilient, with the STOXX 600 rising +0.43% and the FTSE 100 +0.70%.

US inflation above expectations

Headline CPI rose +0.65% m-o-m, lifting the annual rate to +3.7%, while core CPI increased +0.34%, pushing the y-o-y measure to +2.6%. Importantly, the upside surprise extended beyond energy prices, suggesting inflationary pressures were broad-based across the economy. Markets initially responded by sharply increasing the perceived likelihood of another Federal Reserve rate hike, with October hike expectations briefly rising above 50%. However, those moves largely reversed as investors shifted their attention to growing concerns around economic growth and tighter financial conditions. High-yield credit spreads widened to their highest level since March, highlighting a more cautious backdrop beneath the surface.

The AI trade faces a reality check

The sell-off in AI-related assets accelerated yesterday as investors scrutinised the sector’s heavy capital spending requirements and reliance on financing. The Philadelphia Semiconductor Index declined -4.30%, marking its sixth consecutive daily loss and leaving it down more than -11% over that period. The sell-off has continued into Asian trading this morning, with the KOSPI (-7.04%) and Nikkei (-5.08%) among the hardest-hit markets, while semiconductor leaders such as SK Hynix and Samsung also recorded sharp declines.

What does Brooks Macdonald think?

Yesterday’s market moves highlight the competing forces currently driving investor sentiment. On one hand, the inflation data suggests central banks may have less scope to ease policy than markets had hoped. On the other, growing concerns around the AI sector and broader financial conditions are raising questions about the strength of future economic growth. The sharp fall in Treasury yields after their initial post-CPI surge suggests investors are becoming increasingly focused on the economic consequences of tighter conditions, rather than inflation alone. Looking ahead, today’s US PPI inflation release and UK GDP data will provide further insight into the balance between inflationary pressures and economic momentum.

Bloomberg as at 15/10/2026.

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Alex Clare

15/10/2026

Please see this week’s Markets in a Minute update below from Brewin Dolphin, received yesterday afternoon – 13/10/2026

What could U.S. midterms mean for investors?

The Democrats are expected to win seats in the upcoming elections, which could affect economic priorities.

Key highlights

• Oil and geopolitics: Brent crude pushed back above $103 per barrel as energy prices remain the dominant cross-asset driver, keeping inflation pressure alive in bond markets.
• U.S. midterm elections: Prediction markets give Democrats near-certainty of taking the House of Representatives and a 65% chance of the Senate, signalling legislative gridlock ahead.
• Labour market: Employers are holding onto staff while employees aren’t moving – a signal of job insecurity rather than weakness, which is helpful for the inflation outlook.

Oil still calls the shots

Energy and geopolitics continue to set the tone across every asset class and last week offered a textbook illustration.

Brent crude pushed back above $103 a barrel after reports that the White House asked the Pentagon to draw up strike options against Iran that could be implemented before the midterms. With energy prices anchored at these levels, inflation remains the dominant cross-asset driver and the pressure has been felt in bond markets, where yields have reached multi-decade highs.

The conflict has also widened. Houthi attacks have reached Saudi airports, including strikes on Riyadh’s main international airport, which killed three people and injured dozens more. Iranian attacks on shipping have stepped up, even as flows through the Strait of Hormuz have shown some signs of improvement.

None of this is accidental. With the midterms less than a month away, the political pressure on the Trump administration from that quarter is at or around its peak, so it’s entirely rational for Iran to be as antagonistic as it can be while its leverage lasts.

That calculation cuts both ways, and by the close of the week it had produced something closer to a thaw. By the end of the week President Trump confirmed he won’t conduct further military action ahead of the midterms and that productive discussions are ongoing.

It’s fair to say that the administration’s commentary on the state of negotiations should be met with a degree of scepticism, but they’re signalling to Iran that they do not consider that they will accept heavier losses in the midterms rather than softening their negotiating stance. Once the votes are counted, Iran’s perceived leverage diminishes, which could prompt either side to re-evaluate their position. Oil prices are modestly lower as a result, which is where last week left us – a little relief, no resolution.

Midterms

Looking in more detail at the U.S. midterms, there are a few things to observe. It’s normal for a sitting president’s party to lose seats. The president is not on the ballot, but his popularity affects the 435 races in the House and the 35 in the Senate.

Prediction markets now give the Democrats a virtual certainty of taking the House and a 65% chance of winning the Senate as well. The bottom line is that once the new Congress is sworn in on 3 January, there will be major constraints on the president’s ability to guide domestic policy.

The prediction market implied chances of each party winning each chamber of Congress

Source: Kalshi

Three consequences follow. Legislative gridlock is the first: given how far apart the two parties have become ideologically, little of consequence will pass beyond what is strictly necessary.

The second is fiscal. Brinkmanship becomes a feature of divided power in the U.S. Last year’s reconciliation bill lifted the debt ceiling from $36tn to $41tn, and over half that additional capacity has already been used. The limit is expected to be reached in the spring of 2027, after which accounting measures could extend it for roughly six to nine months.

Shutdowns and debt ceiling negotiations have tended not to have a big impact on markets but chip away at the global investors’ ebbing willingness to finance the U.S. More immediately the Trump administration will need a budget and will want more military spending, but the Democrats will have a voice in those negotiations and are likely to demand more healthcare funding. That should eventually be good for the healthcare sector, which already benefits from longevity and from AI’s ability to reduce costs. It is unlikely to address the issue of America’s rising debt-to-GDP.

In 2011, a standoff was resolved two days before the deadline and contributed to a downgrade of the U.S. credit rating; in 2023, Republicans extracted substantial spending concessions while controlling only one chamber.

The third consequence is investigations: committee control, subpoena power and the ability to sue in court would all shift to the Democrats. Two areas are largely untouched. Foreign policy remains the president’s to direct, including command of the military and trade negotiations.

Appointments are the live question.

Jerome Powell has not vacated his seat on the Federal Reserve’s (Fed) board, having said he would stay until the investigation into the renovation cost overruns was well and truly over. The Fed’s internal watchdog found mismanagement but no criminal violations, and the Justice Department won’t reopen a criminal case, though the attorney general hasn’t closed the door entirely. That falls short of Powell’s test, so he will most likely stay for now. If the Democrats took the Senate, they would be able to block his eventual replacement, which most observers would regard as good news for Fed independence.

Equity returns in the year after a midterm has historically been the strongest of the presidential cycle, however the same logic would suggest we’re currently in one of the weaker years of the cycle, so it seems like the normal pattern hasn’t been in place this year. Furthermore, we’re always conscious that a six-foot man can still drown in a river that’s five feet deep on average.

Low hire, low fire

Unemployment rose during September because more people looked for work despite

fewer people quitting or being laid off

Source: LSEG Datastream

The American labour market is sending a consistent and rather particular signal: employers are content to hold onto staff and employees are not looking to move. The payroll report showed job growth below the pace needed to keep unemployment stable and the rate duly ticked up to 4.2%. But the rise came mostly from people entering or re-entering the workforce, not from layoffs – which barely show up in the data. Voluntary departures, meanwhile, fell sharply.

Jobless claims last week were similarly benign. What that describes is a prevailing sense of job insecurity, not outright weakness.

For inflation, this is helpful. Wage growth has continued to slow, which has taken the heat out of inflation expectations – a process that has been running since the end of April, interrupted only recently by higher energy costs.

Growth is cooling gently rather than stalling: the Atlanta Fed’s running estimate of consumption growth has slipped from 2.8% to 2.2%, and the September services surveys showed the global sector still expanding, with Europe accelerating and the UK expanding more slowly. The U.S. picture is muddier, with the ISM manufacturing index reading more sedate than the S&P version. On this occasion we’d lean towards the ISM, since a sharp jump in American activity last month looks implausible.

Three hikes priced, one forecast

The minutes of the latest Fed meeting showed a committee that agreed on the destination, but not the route. Members voted unanimously to raise rates, yet gave clearly different reasons for doing so, which does nothing to clarify where policy goes next. The Fed chair’s reluctance to offer forward guidance leaves markets to work it out for themselves, and they’ve taken a hawkish view.

From a base rate of 4%, markets now discount up to three further increases. Professional forecasters, weighted towards the most recent estimates, expect just one, unwound towards the end of next year. That’s a wide gap and one of the more consequential disagreements in markets today.

The cost of money is also being allocated with more discrimination. Sovereign bond markets have been weak but bifurcated, with strong credits holding up and weaker ones punished. France stands out as the weakest of them all, with French government bonds underperforming the broader market and the euro soft.

Emmanuel Moulin, France’s representative on the European Central Bank’s (ECB) governing council, described the situation as complicated and serious while making clear it doesn’t warrant intervention from Frankfurt. History suggests the ECB has found reasons to step in before and has shown some ingenuity in explaining why such action isn’t a fiscal measure. More stress would usually be needed to trigger such a move, but Christine Lagarde confirmed late last week that the ECB has the tools ready if needed.

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

14/10/2026

Please see the below article from WH Ireland discussing weak US consumer confidence despite resilient growth and the potential midterm impact, received today – 13/10/2026.

With the US midterms only three weeks away, the economy is becoming a defining political issue. The University of Michigan’s preliminary October survey puts consumer sentiment at 46.3, down 3.7%mom and 13.6%yoy. More strikingly, its Current Economic Conditions Index plunged 12.2% to 44.7, a record low. The headline reading is also approaching May’s all-time low of 44.8. The figures capture a widening disconnect between economic activity and how households experience it.

The deterioration is not simply about slower growth. It reflects the cumulative burden of higher prices, expensive borrowing and renewed energy costs. Inflation may rise or fall from month to month, but lower inflation does not mean prices return to previous levels. Households are still paying more for everyday essentials, while elevated mortgage rates and housing costs make financial progress harder. Recent US data suggest real wage growth has weakened, compounding the squeeze on purchasing power.

There is also a growing divide between those benefiting from rising asset prices and those relying primarily on earned income. Strong equity markets and technology investment have supported aggregate wealth and consumer spending, but those gains are unevenly distributed. Households with substantial investments may feel more secure; those with limited savings have less protection against higher fuel bills, food prices and borrowing costs. This helps explain how spending can remain resilient even as consumer confidence approaches historic lows.

Inflation expectations add another complication. One-year expectations rose from 4.6% to 4.7%, while five-year expectations increased from 3.4% to 3.5%. Both are above their respective ranges in 2024. These are survey expectations, not forecasts of actual inflation, but persistently elevated readings matter because they can influence spending decisions and complicate the Fed’s task. With energy costs rising amid the Iran conflict, policymakers face the risk of renewed inflation pressure just as households are expressing deep dissatisfaction with current conditions.

The political implications are significant, particularly as independent voters become an increasingly important force in US politics. Gallup found that a record 45% of US adults identified as political independents in 2025, making them the largest group by political affiliation. Their influence is especially pronounced in closely contested races, where relatively small shifts in support or turnout can prove decisive. The latest University of Michigan survey adds to the challenge for incumbents: sentiment among independents deteriorated further in October, even as it improved among Republicans and Democrats. While this does not necessarily translate into a change in voting intentions, it suggests that economic dissatisfaction is extending beyond traditional party loyalties.

More concerning is the possibility that weak sentiment reflects a deeper and more persistent erosion of confidence, rather than a temporary reaction to one month’s data. If household purchasing power remains under pressure while asset price gains disproportionately benefit wealthier Americans, robust headline growth may do little to improve how the economy feels for many voters. As the midterms approach, the question is no longer simply whether the US economy is growing, but who is benefiting from that growth, and whether the gains are reaching the households whose votes could prove decisive.

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

Marcus Blenkinsop

13^th October 2026

Please see the below article from Tatton Investment Management discussing how high bond yields are pressuring AI markets, non-AI businesses and French fiscal policy, received this morning – 12/10/2026.

Bond yields put the AI trade on notice
US tech stocks still dominate and lead higher as we start this week, having ended last week’s choppiness positively. Developments involving conflicts in Ukraine and the Middle East are much in the news but the net effects may have offset each other. Oil prices and bond yields are unchanged from the Friday closing level.

Chip manufacturers were rattled by an apparent misreading of OpenAI’s revenue but quickly recovered once the story’s source intervened. The recovery was encouraging, but it’s a reminder that much of investors’ AI optimism rests on poorly understood, industry-specific ‘compute’ metrics.

The fragile mood is partly because equity investors are looking nervously at high bond yields. Investors aren’t yet tempted to swap stocks for bonds, but we might be approaching the ‘hurdle rate’ that changes the equation: 10-year US inflation-linked bonds now yield a government-guaranteed 3.2% above inflation. Anecdotally, we hear that short-term credit instruments are struggling to compete with that offering.

That’s not hitting share prices yet and it might never – considering that the AI growth story promises to deliver much greater returns. But high yields hurt companies in other ways too, most notably now in credit spreads. They’ve risen sharply amid the AI borrowing spree, exacerbated by SpaceX’s $40bn bond issuance. Investors don’t like that AI firms keep borrowing even as costs rise, and there’s a risk that those fears spiral.

Still, underlying credit metrics are healthy: default rates are rising but only mildly. Credit spreads also spiked after 2025’s “Liberation Day” tariffs and the US-Iran war, but quickly recovered. Higher credit spreads put pressure on equity valuations, but we shouldn’t overstate it.

Liquidity conditions are key, and those are influenced by investor sentiment. Geopolitical risks make that sentiment fragile, but the mood should be bolstered by strong expected Q3 earnings. The billions AI firms have borrowed but not yet spent should support liquidity too.

Earnings have outpaced share prices this year, meaning lower valuations. Arguably, markets have already priced in some slowdown. If they’re right, yields should fall. But the tug-of-war over growth and yields means equities need to deliver strong earnings – or stall.

AI crowds out investment
AI stocks keep climbing even as bonds and non-AI equities struggle. Tech firms’ insatiable capital appetite is powering markets and the economy, but it’s also pushing up borrowing costs for everyone else. Some commentators call this ‘crowding out’. Crowding out is typically a charge levelled at governments – the theory that higher government borrowing and spending raises interest rates and prevents private sector firms from investing in their own growth.

Goldman Sachs and Absolute Strategy Research (ASR) downplay the AI crowding-out story. ASR point out that yield rises have been uniform – rather than concentrated on areas with high tech issuance. Instead, ASR blame resilient growth in the face of high energy prices.

We think that misses the point; growth is resilient because of the AI investment boom. The benefits of that growth have been mainly concentrated on tech firms, but the drawbacks (higher rates) are felt everywhere. Outside the US, where AI investment is lower, growth has been much weaker. Even within the US, non-AI businesses are feeling the strain: McDonald’s shares are down more than 30% from February’s peak. The fast-food giant’s consumers are struggling just as its financing costs for new equipment are rising.

This is really just last year’s ‘K-shaped economy’ story wearing a new name: tech does fine, everything else has a harder time. Crowding out is only a problem for those being crowded out, so AI firms and their investors won’t complain yet. But the risk is that this comes back to bite the winners themselves.

AI firms’ borrowing costs jumped last week, suggesting they’re not as rate-proof as assumed. They may therefore have to slow their issuance. That’s normal, but markets’ heavy concentration in a handful of AI names makes any slowdown more dangerous than it should be.

High French bond yields force fiscal discipline
Protestors in France are angry about state underfunding. At the same time, the government wants tighter fiscal policy. That’s about the harsh conditions that high bond yields impose.

France’s fiscal position remains fragile: debt-to-GDP is close to 120%, and the deficit-to-GDP was 5.4% last year. Yields on French government bonds (OATs) have risen sharply, and our measure of fiscal risk (yields compared to bank swaps) is higher for France than other G7 nations. The French public is clearly unhappy with the current tax-and-spend mix, but OAT investors think it’s already too generous. As the FT put it, France is caught “between the bond markets and the barricades” ahead of next April’s presidential election.

We argued before that it’s difficult for French leaders to push for fiscal discipline, so it was interesting to see Marine Le Pen argue for exactly that. She wants a 3% deficit by 2030 and a “golden rule” capping debt at 60% of GDP. Those savings are unrealistic: she’s opposed pension reforms before (the single biggest spend) and her plan for cutting EU payments would likely hurt French farmers. But the pitch itself is significant, signalling a break from the high-spending brand of right-wing populism she’s campaigned on in the past.

We think there’s a shift to fiscal discipline happening across the political spectrum, and not just in France. This doesn’t have to mean spending cuts; tax rises could also close the funding gap. The shift isn’t because Le Pen or others suddenly had a change of heart, but because bond yields are so high. As we see in the UK, the primary impact of fiscal expansion now is to simply raise debt costs, wiping out the benefit of extra borrowing.

Bond investors haven’t had much good news lately, but the effectiveness of bond vigilantes themselves lowers the fiscal risk.

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

Marcus Blenkinsop

12^th October 2026

 

Please see below, Brooks Macdonald’s Daily Investment Bulletin which provides a brief analysis of the key factors currenting affecting global investment markets. Received today – 09/10/2026

What has happened?

Markets remained under pressure as higher oil prices renewed concerns about inflation and interest rates. Brent crude briefly approached $106/bbl amid ongoing disruption to shipping through the Strait of Hormuz and escalating Middle East tensions, before easing back after President Trump stated that the US would not attack Iran before November’s midterm elections and described discussions with Tehran as productive. Nevertheless, investors continued to price in the possibility of a more prolonged period of elevated energy costs. European assets bore the brunt of the move. The STOXX 600 fell to its lowest level since June, while bond markets remained sensitive to inflation concerns and fiscal risks, particularly in France. UK gilt yields reached fresh post-2007 highs, reflecting a global repricing of inflation and policy expectations. In the US, Treasury markets stabilised following strong auction demand and softer oil prices late in the session, with the 10-year Treasury yield ending lower despite earlier testing multi-decade highs. Economic data continued to point to labour-market resilience, with US jobless claims falling to 197,000, reinforcing expectations that central banks still have room to prioritise inflation.

Oil Shock Meets Tight Monetary Policy

The latest market volatility highlights a familiar but important tension; financial conditions are tightening while energy-driven inflation risks are re-emerging. While bond markets have periodically rallied on concerns that higher yields or market stress could slow growth, policymakers continue to stress that inflation remains the primary challenge. Recent comments from Federal Reserve officials, alongside ECB and Bank of England communications, suggest that further tightening remains possible even as markets digest higher borrowing costs. The interaction between energy prices, inflation expectations and policy rates remains one of the key drivers of cross-asset market performance. 

What does Brooks Macdonald think?

The market reaction reflects a growing recognition that inflation risks have not disappeared. While oil prices have retreated from recent highs and diplomacy may limit near-term escalation with Iran, disruptions to global energy flows continue to warrant close monitoring. Importantly, resilient economic data reduces the urgency for central banks to pivot towards easier policy. For investors, the key question is whether higher energy prices prove temporary or become embedded in inflation expectations. While elevated yields are creating a more attractive opportunity set within fixed income, they also raise the hurdle rate for equity valuations. We continue to see broadly resilient economic growth and healthy labour markets as supportive for risk assets, but the combination of geopolitical uncertainty, elevated oil prices and restrictive monetary policy is likely to keep market volatility elevated in the near term.

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

Alex Kitteringham

9^th October 2026