News

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

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

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

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

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

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

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

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

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

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

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

Alex Kitteringham

22^nd May 2026

Please see the below article from EPIC Investment Partners, their Daily Update, received this afternoon (21/05/2026):

Nvidia keeps delivering results that make the “this time is different” argument feel less like hype and more like a live market reality check. The company reported fiscal first quarter revenue of $ 81.6 billion, up 85% year-over-year and comfortably ahead of guidance, with next quarter revenue forecast at $91 billion, again well above Wall Street expectations. The message is blunt: there is still no visible slowdown in AI infrastructure spending, and demand for Nvidia’s chips remains aggressively strong as hyperscalers, enterprises, and emerging AI cloud providers keep scaling large language models and agentic AI systems at maximum speed.

The real centre of gravity is the data centre business, which surged 92% year over year to $75.2 billion. Within that, hyperscale customers like Microsoft, Amazon, Google, and Meta generated $37.9 billion, up 115% year-over-year, reflecting an ongoing capital expenditure arms race in AI infrastructure. But the more important signal is breadth. The remaining $37.4 billion from enterprise, industrial, and neocloud customers grew 74% year-over-year, showing this is no longer just a Big Tech story. It is spreading into the broader economy, especially among companies that cannot build their own AI chips and are structurally dependent on Nvidia’s stack.

Networking is another key tell. Revenue nearly tripled year over year to roughly $15 billion, showing Nvidia is evolving from a GPU supplier into a full stack AI infrastructure platform spanning compute, networking, and systems integration. That shift matters because it increases control over the entire buildout, not just a single component.

A particularly important data point is Nvidia disclosing that rental pricing for older H100 GPUs rose nearly 20%. This shows that even legacy compute is tightening. When used capacity becomes more expensive, it is not a supply normalisation story, it is a structural shortage story. Demand is not only hitting new chips but also pulling forward demand across the installed base as well.

This directly supports a more aggressive read of the cycle. Rising secondary market pricing challenges the bear case that oversupply will quickly compress returns. Instead, it suggests the opposite dynamic, persistent scarcity across multiple generations of hardware.

Investors will continue to debate how durable this level of growth really is, especially as expectations get more extreme and comparisons get tougher. That debate is valid, because at this scale even small shifts in demand or spending cycles can matter.

But the reality ahead is harder to dismiss. Whatever the eventual endpoint, this has already been one of the most powerful phases of shareholder value creation in stock market history.

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

Andrew Lloyd

21/05/2026

Please see this week’s Markets in a Minute update below from Brewin Dolphin, received yesterday afternoon – 19/05/2026.

UK markets are under the spotlight

UK markets are under pressure. Guy Foster unpacks the politics, the Strait standoff, and what it means for investors.

Key highlights

• UK political uncertainty: As Sir Keir Starmer holds on to his position as prime minister, the rise of potential challenger Andy Burnham unnerves bond markets.
• Strait standoff: Iran’s oil export halt tightened markets and drove up inflation.
• U.S. inflation: April’s consumer price index (CPI) accelerated, but underlying details suggest less cause for alarm.

UK politics: Leadership uncertainty weighs on gilts

The UK was firmly in the spotlight last week as the prospect of a new prime minister looms. Its most pressing challenges have largely been imported – but domestic political pressure, building quietly for months, is now demanding a response.

Local election results confirmed heavy losses for Labour, with Reform and the Greens the main beneficiaries. By Tuesday, Polymarket odds of Keir Starmer being replaced by the end of June had risen above 60%.

As for his potential challengers, Wes Streeting has resigned from the cabinet, Angela Rayner confirmed she’s been cleared by tax authorities following an investigation, and Andy Burnham has secured a path to a parliamentary seat – via a by-election he’s expected to win. The latter development coincided with a sharp sterling depreciation.

Markets are uneasy about Burnham for identifiable reasons. He’s spoken publicly about moving beyond being “in hock to the bond markets” and has described deregulation, privatisation, austerity and Brexit as “the four horsemen of Britain’s apocalypse.” He’s also signalled ambitions to recapture public control over housing, energy, water, rail and buses.

However one views these positions, reversing them would require substantial spending and carry execution risk – precisely the combination that makes bond investors nervous. Prediction markets give Burnham a 60% chance of success.

Source: Bloomberg

The UK’s first quarter GDP data provided some positive offset, coming in at 0.6% quarter-on-quarter and generally quite strong, with March showing 0.3% growth against expectations of a modest contraction. This suggests UK consumers were able to weather the increase in energy costs during March – probably because UK households raised their savings rates last year to withstand tough economic conditions.

This resilience may reinforce the case for the Bank of England (BoE) to increase rates this year. However, this must be weighed against indications that the housing market is weakening, and survey data suggesting more recent retail sales are likely to be weaker.

The BoE is expected to raise rates at least twice this year, and UK 10-year government gilt yields topped 5.1%, which is higher than 2022 levels. Most of this relates to the prolonged increase in energy costs and impact on inflation, but the political drama is clearly causing some underperformance from UK bonds.

Strait standoff tightens as Trump-Xi talks disappoint

While political drama may be brewing at home, the Iran-U.S. war remained the most important issue across markets last week, with hopes of a diplomatic breakthrough fading as the days progressed. Early last week, the lack of progress in nuclear talks between the U.S. and Iran pushed energy prices higher and weighed on European equities.

By mid-week, satellite imagery confirmed that oil shipments from Khargh Island – Iran’s primary export terminal – had dropped to zero for the longest stretch since the war began, indicating that available floating storage is running out. If Iran exhausts its remaining capacity, it will be forced to cut production outright, which has been a stated aim of the Trump administration’s blockade of the Strait of Hormuz.

Oil prices climbed roughly 8% over three sessions as the physical market tightened. This fed directly into inflation data. The U.S. producer price index (PPI) rose 1.4% month-on-month in April – the largest monthly gain since March 2022 and far above the 0.5% consensus. The annualised figure hit 6%. While the PPI is inherently more volatile than consumer prices, a miss of this magnitude signals that cost pressures are moving through supply chains.

The Japanese PPI told a similar story, marking its fastest year-on-year rise since 2023, driven by oil and naphtha (a liquid hydrocarbon mixture derived from crude oil or other natural sources, which is often used as a fuel, solvent, and petrochemical feedstock) costs – unsurprising for a country that imports 90% of its crude from the Persian Gulf.

The Donald Trump-Xi Jinping summit in Beijing, which had been a source of cautious optimism, delivered little of substance. President Trump asserted the U.S. doesn’t need the Strait of Hormuz open. He did discuss progress on achieving trade deals with China, including vague intentions for China to purchase U.S. oil and agricultural products and a commitment for China to buy U.S. aircrafts.

Where specifics were mentioned, they underwhelmed. The one notable development was the clearing of Chinese tech groups to purchase Nvidia’s H200 chips, which gave a brief lift to NASDAQ futures. Nvidia’s Jensen Huang joining the trip at the last minute now appears to have been the main event.

Against this backdrop, U.S. equities continued their remarkable bifurcation. Tech and AI names drove another strong session on Thursday, with Cisco jumping 20% after hours on an upgraded sales outlook. The broader market, however, struggled with the inflation data – treasuries sold off, with the 10-year yield reaching almost 4.5%, and the 20- and 30-year yields both closing above 5%.

The U.S. Senate’s narrow confirmation of Kevin Warsh as the next Federal Reserve (the Fed) Chair (54-45, almost entirely along party lines) adds another variable. His first meeting in June will be closely watched, though he’s unlikely to have sufficient data clarity to support any rate move in that timeframe. What’s notable is that since the nomination process began, market expectations have shifted from rate cuts to rate increases. If the new chair doesn’t manage to cut interest rates, history suggests he might receive criticism from the president.

Inflation: Punchy but not panic-inducing

The U.S. CPI for April showed headline prices accelerating to 3.8% year-on-year – the highest since the post-COVID-19 spike. Core CPI rose 0.4% month-on-month, the first upside surprise in several months. However, the detail was less alarming than the headline.

The jump in shelter costs was largely a statistical quirk from the government shutdown last autumn, which caused a full year of accumulated rent increases to appear in a single month’s data. Alternative measures of rental inflation, including the Zillow index, continue to decelerate. Core goods inflation showed surprisingly little tariff pass-through, and Bloomberg Economics assessed that the impact from the ‘Liberation Day’ tariffs is now mostly complete.

The areas to watch are food prices – where fertiliser supply disruption through the Strait poses an upside risk – and semiconductor-driven tech inflation, where Samsung has warned of further market tightening next year.

Household inflation expectations have edged up modestly, but not to levels that would alarm the Fed. We expect the new Warsh-led Fed to remain in wait-and-see mode, with neither a bias to hike nor cut.

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

20/05/2026

Please see the below article from EPIC Investment Partners detailing their discussions on India and the roll out and impact of AI. Received this morning 19/05/2026.

Today’s news that Standard Chartered plans to eliminate thousands of support roles over the next four years, joining the ranks of global lenders using artificial intelligence to trim headcount, will have sent a further shiver down the backs of the leaders of many Indian IT companies. The bank aims to reduce corporate functions roles by more than 15% by 2030 while scaling up the practical use of AI to streamline processes.

The share prices of Tata Consultancy Services and Infosys have fallen 40% and 30% respectively over the past twelve months. This compares to a broader Indian market decline of 7% and the 40% plus rally in the Asia ex Japan and emerging market asset classes.

The roll out of AI is bad news for the Indian economy. Broadly speaking, the Indian current account balance has been steady at between 0% and -1% of GDP over the past decade. Nothing to worry about with the domestic economy growing rapidly with heavy spending on infrastructure a particular feature.

However, a closer look at the merchandise trade account is warranted. The trade account deficit has increased from 0-1% of GDP in 2020 to minus 3-4% today. The rapid growth in the export of services has been the key feature keeping the overall current account deficit more or less in balance. This is now in doubt. We note the persistent weakness of the Indian rupee over the past twelve months.

Indian equities have been perceived as an ‘anti AI’ trade for a while. This perception is unlikely to change any time soon.

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

19/05/2026

Please see the below article from Tatton Investment Management discussing persistent inflation pressures, rising bond yields, and the potential implications of Kevin Warsh’s appointment as Federal Reserve chair, received this morning – 18/05/2026.

Waiting for relief
Global equities edged up 1.5% in sterling terms last week, driven by US stocks and a firmer dollar. Most other markets were weaker and all are starting this week on the back foot. Donald Trump’s visit to China was light on detail but gave some reassurance: President Xi declared Washington and Beijing should be “partners, not rivals”, and China confirmed it will join a new Board of Trade and Board of Investment.

Bond prices were volatile and weak; both short-term and long-term bond prices in major currencies fell. Price falls means higher yields.

UK gilts are suffering because of the global bond markets’ problems and because of UK politics. Earlier in the week, 10-year gilt yields dipped below 5% but climbed back to 5.18% by Friday and are opening around 5,20%. We reiterate that persistently elevated gilt yields, relative to other bond markets, are down to structurally weak demand (including the Bank of England’s net bond sales) rather than purely politics. The potential for Andy Burnham to expand a future deficit has rattled some investors, but even in that case, we struggle to see how the UK’s debt and deficit metrics could become as stretched as the US. The risks have been clear for a while and the bond vigilantes are already getting paid. Long-term investors should at least benefit from almost certainly higher-than-inflation yield returns.

However, the near-term inflation outlook is adding to bond market unease. It’s not just about oil. Supply pressures on metals such as copper and silver — fuelled in part by AI infrastructure spending — are keeping price pressures elevated even as oil worries recede. Jerome Powell’s departure as Federal Reserve chair, with Kevin Warsh set to take over, has prompted debate about whether central banks might soften their 2% inflation targets. But we see that as unlikely in the near term.

Global growth is still resilient. Manufacturing business sentiment remains strong, job postings have been picking up worldwide; the UK economy grew at an annualised 2.4% in the first quarter of 2026. Both Washington and Beijing appear aligned on restoring oil and gas flows quickly as possible. China is showing tentative signs of recovery although the most recent data (issued today, Monday) was disappointing. This should be temporary as Beijing also wants to stimulate its domestic demand. That could mean buying more from the US, exactly as Trump has demanded for the last decade.

Inflation roundup
Global inflation surged 3.5% year-on-year in April, driven by the ongoing Iran war and persistently strong consumer demand. The US led the way, with its Consumer Price Index rising 3.8%, the highest inflation figure since 2023, while the Producer Price Index jumped 6.4%.

US petrol prices have risen more than 50% year-on-year, with consumers now paying around $4.50 per gallon. But inflation isn’t only about energy. Food prices rose 3.2% in the US, partly linked to global fertiliser shortages. Metals prices rose sharply too — particularly copper and silver — on the back of datacentre construction demand.

The Eurozone also recorded its highest inflation since 2023, at 3%, while UK figures for April are yet to be released. Unlike its peers, the UK saw a smaller jump in energy prices in March — cushioned by high fuel taxes — though faster UK inflation is expected in May. The UK and Europe are also helped by the fact that natural gas prices have fallen back, following a spike after the Iran war began.

Core inflation is sticky, with US core CPI up 2.8% in April. Some of that is down to a data blackout during the US government shutdown, but underlying rate is still uncomfortable. Consumer spending is holding up, offering little sign that higher energy costs are curbing demand. Europe is different: weak German employment — contracting at its fastest pace since the early 2000s — is bearing down on core inflation, which fell to 2.2%.

Central banks are caught in a bind. Norway and Australia have already raised rates; the ECB, Bank of England and Federal Reserve are signalling they may follow. The Fed, however, appears more dovish — a stance likely to deepen once new chair Kevin Warsh takes over. Given the resilience of the US economy and the inflationary impacts of AI spending, dovishness will be difficult to justify.

What the Fed can learn from the BoE
Central bank appointments are rarely as blockbuster as incoming Federal Reserve chair Kevin Warsh. Picked by Trump partly in hopes of lower interest rates, Warsh also has a distinct monetary philosophy: the Fed should wean markets off of the liquidity is has provided since the 2008 global financial crisis.

To understand what that might mean in practice, look to the Bank of England. Since 2022, the BoE has been running down its bond holdings through quantitative tightening (QT) — and it’s gone further than most. Unlike the Fed, the BoE remains a net bond seller. Measured against its own broad money supply gauge, M4, the BoE’s gilt holdings are at their lowest since 2012.

That’s damaged the gilt market. Gilt discussion often gets political but we have long argued the deeper problems are structural: outstanding issuance is skewed toward long-dated and inflation-linked bonds — making them especially sensitive to fiscal shocks. The BoE’s continued balance sheet reduction has compounded that weakness, selling into a market with structurally thin demand. That, more than politics, explains gilts’ persistent underperformance versus other sovereign bond markets.

Warsh’s approach would differ from the BoE’s purist stance. He’s proposed a trade-off: wean markets off central bank liquidity, but cut short-term interest rates in return. Done right, this hands liquidity creation back to private banks, potentially helping small businesses and creating a more vibrant economy.

But there’s no clean path. Trimming long-term bond support while cutting short rates steepens the yield curve, raises term premia, and could dent US equity valuations — the same dynamic that’s hurt UK assets. Add a weakening dollar, and the risks compound.
Warsh knows this, favouring a slow and cautious approach. The Fed’s committee structure makes radical change unlikely anyway. The BoE has been steady too — but the market has still felt it. Caution helps; it doesn’t insulate.

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

Marcus Blenkinsop

18^th May 2026

Please see below, an article from EPIC Investment Partners which discusses the potential impact of AI as a driver of disinflation. Received today – 15/05/2026

Kevin Warsh arrives at the Federal Reserve with a deceptively simple question: if companies can do more tomorrow with the same inputs they used yesterday, why should prices keep rising at all?

This is the deeper point behind his view of artificial intelligence. Warsh is not merely arguing that AI will make companies more efficient or shareholders richer. He is suggesting that it could alter the inflationary structure of the economy. If AI allows firms to automate routine services and lower the cost of starting new businesses, the Fed may need to rethink its interpretation of growth, employment, and productivity.

In theory, productivity is disinflationary. If a company produces more with the same labour and capital, unit costs fall. In a competitive market, those savings are passed to customers, slowing price growth and raising real incomes. Yet inflation persists because these gains are not automatically competed into prices. Firms with market power often retain them, while sticky costs — rents, insurance, and professional fees — remain constrained by politics, scarcity, or regulation that software cannot easily fix.

This is where AI may be different. Earlier technology cycles improved what firms could do. AI may change who can compete. For decades, organisational scale was itself a barrier to entry. Challenging an incumbent required teams of coders, lawyers, accountants, marketers, and support staff. Competition was expensive.

AI compresses that structure. A small team can now write code, generate research, answer customers, and review contracts with far fewer people. It does not eliminate expertise, but it reduces the minimum efficient scale of the firm.

That creates a potentially powerful disinflationary force. If incumbents use AI to lift margins without cutting prices, they may face leaner competitors able to undercut them. The threat is not just that existing companies become more efficient. It is that competition itself becomes cheaper.

There is a caveat. AI may create high barriers in chips, models, and data centres. These sectors are capital-intensive and may remain concentrated. But most companies will rent that infrastructure rather than own it, and the cost of using it is likely to keep falling. A small firm does not need to build a frontier model to use one, just as it did not need to build a power station to benefit from electricity.

That is the crucial distinction. The infrastructure layer may be expensive to build, but cheap to access. The disinflationary pressure comes from the industries built on top of it. If a small legal, software or financial firm can do with five people what once required 30, the incumbent’s pricing power weakens. AI does not need to make every sector perfectly competitive. It only needs to make competition cheaper.

This shift challenges the Fed’s traditional reaction function. The central bank’s inherited model assumes a familiar sequence: strong demand tightens labour markets, pushing up wages, which then feed into prices. Policy therefore leans against growth before inflation becomes embedded. A strong economy is treated as a risk to be restrained.

AI complicates that instinct. If supply is expanding through productivity, growth is not necessarily inflationary. If routine knowledge work becomes cheaper, services inflation may no longer behave as it did in a labour-heavy economy. The Fed’s question changes from “is growth too strong?” to “what kind of growth is this?”

The argument has limits. AI will not bypass planning rules for housing or solve oil supply shocks. But it may change how productivity gains pass through the economy. That is the core of the Warsh doctrine: the economy’s supply side may be changing in ways the old labour-market framework cannot see. The Fed’s task is not to assume inflation has disappeared. It is to decide whether the old signals still mean what they used to.

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

Alex Kitteringham

15^th May 2026

Please see todays Daily Update from EPIC Investment Partners received this afternoon (14/05/2026):

Momentum has outperformed quality so decisively that, at times, it appears to be the only game in town. Extreme concentration in index leadership, persistent passive inflows, and continuous earnings upgrades within a narrow group of semiconductor and AI infrastructure names have created a self-reinforcing structure that mechanically rewards trend persistence.

Momentum strategies thrive when market leadership narrows and earnings dispersion widens. That is precisely what has unfolded across semiconductor and AI infrastructure equities. Companies within this cohort have combined genuine fundamental strength with relentless incremental capital inflows. Importantly, this is not purely speculative momentum. It is momentum anchored in businesses generating structurally high returns on capital, dominant competitive positioning, and multiyear visibility into AI driven demand expansion.

However, these dynamics are self-reinforcing, not necessarily self-sustaining. As positioning becomes increasingly one sided and valuation assumptions begin to embed near perfection, market sensitivity to incremental disappointment rises materially. Momentum regimes often appear most stable precisely at the point where underlying fragility is accelerating beneath the surface.

Quality investing operates across a different spectrum. Earnings trajectories tend to be smoother, valuation rerating is typically more gradual, and relative underperformance is common during periods when investors prioritise narrative concentration and thematic exposure over balance sheet strength, pricing durability, and long duration free cash flow generation.

We continue to maintain exposure to businesses such as NVIDIA, TSMC, and Broadcom, where we see substantial long term value creation potential. The AI infrastructure buildout remains firmly in an expansion phase, supported by strong hyperscale capital expenditure visibility and broad based enterprise adoption trends. These businesses remain exceptional quality compounders embedded within one of the most powerful investment cycles seen in modern capital markets.

At the same time, periods of extreme concentration inevitably create valuation distortions and narrative blind spots elsewhere in the market. One of the clearest examples today is high quality luxury compounders, particularly Ferrari.

Over the past year Ferrari shares have materially underperformed as broader automotive sentiment deteriorated under the weight of tariff concerns, cyclical fears, and global growth uncertainty. Yet Ferrari is fundamentally misclassified when viewed through a traditional automotive framework. Its economics are structurally inconsistent with the broader OEM universe. Production volumes are intentionally constrained, not demand constrained. Pricing power is structural rather than cyclical. Order books are supported by multiyear waiting lists rather than promotional activity or financing incentives.

The critical distinction lies in earnings quality through the cycle. Unlike traditional manufacturers, Ferrari’s earnings power is not primarily exposed to volume volatility or macroeconomic sensitivity. It is driven by brand equity, engineered scarcity, and sustained pricing authority. Historically, this combination has translated into materially higher and more stable returns on invested capital than the broader automotive sector, alongside significantly lower earnings cyclicality than is implied by its sector classification.

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

Andrew Lloyd

14/05/2026

Please see this week’s Markets in a Minute update below from Brewin Dolphin, received yesterday afternoon – 12/05/2026.

What’s driving market optimism?

We explore what’s driving market sentiment as U.S. stocks soar to record highs despite continued Middle East tensions.

Key highlights

• Potential U.S.-Iran deal rallies equities: Equities saw a boost as the U.S. initiated discussions towards a potential deal to reopen the Strait of Hormuz.
• UK political changes are afoot: UK elections saw a substantial swing from the Labour Party to Reform – could this lead to the departure of the prime minister and chancellor?
• The U.S. jobs market holds up: Job openings have plateaued and a significant number of people are still quitting their jobs – despite this, job cuts increased in April.

Potential U.S.-Iran deal rallies equities

The Iran-U.S. war dominated proceedings once again last week. It began with the fallout from a U.S. operation to force the Strait of Hormuz open by facilitating the transport of tankers with naval escorts. The convoys came under fire and investors were concerned that this would trigger a collapse of the ceasefire, providing a downbeat start to the week.

The operation was halted after a day. By mid-week, President Donald Trump used it as the basis for a reattempt at negotiation. Secretary of State Marco Rubio stated in exceptionally direct terms that “the combat phase is over” – language that was unusually conciliatory.

The Trump administration confirmed it had sent a proposal for the reopening of the Strait of Hormuz to Iran. This triggered a substantial rally even though Iran was initially cool towards the proposed terms, particularly any moratorium on uranium enrichment.

The possibility of a deal saw equities – particularly European equities – rally, with government bond yields falling sharply. But at the beginning of this week, negotiations have only highlighted how far apart each party is.

The broader picture remains one of an energy shock, with compounding implications for Europe, such as:

• Elevated gas prices (materially above U.S. levels)
• Fiscal constraints, with debt-to-GDP ratios converging on, or exceeding, 100% in several countries
• The additional burden of increased defence spending

These challenges are connected rather than isolated.

So, when the U.S. and Iran re-engaged in ballistic operations following assaults on U.S. ships, and even as the U.S. awaits a response on its offer, equities have retreated, cyclical sectors have underperformed, and the more defensive corners of the market – including technology – have held up relatively better.

We believe both sides would like to see the Strait reopened, so while there have been several false dawns, eventually one of these potential agreements is likely to take hold

UK political changes are afoot

Last week also saw the UK hold local elections.

The results showed a remarkable swing from the Labour Party towards Reform. To a substantially smaller extent, the Conservatives and independent councillors lost out to the Liberal Democrats and Green candidates.

Source: Associated Press

The results were not hugely surprising and there was little reaction in the bond market. However, there is now a concern that these poor results could bring about a leadership challenge resulting in the fall of Prime Minister Sir Keir Starmer and, more specifically, Chancellor Rachel Reeves.

Potential candidates could be more inclined to increase spending, leading to more bond issuance and possibly higher inflation.

Prediction markets place approximately a 45% probability on the prime minister departing by the end of June, and a 60% to 70% probability of him departing by year-end – a number that fell when he vowed not to resign, but rose once more as signs of rebellion from the party, and even within the cabinet, started to grow.

The gilt market has been concerned about the impact of a new prime minister as they may feel compelled to jeopardise fiscal sustainability to meet their political objectives. It seems likely that any future leader will be aware of how important it is to respect the bond market – however, they’ll also need to cope with external factors (such as the U.S.-Iran war), which put additional pressure on the government finances.

In recent weeks it’s been made clear that the Persian Gulf war has been the most significant bond market concern.

Source: Bloomberg

The U.S. jobs market holds up

In the U.S., frustration continues to grow with the economy.

Polling suggests that attitudes towards the war are fairly static, but attitudes towards the inflation it has created are becoming increasingly uniform.

Earnings reports cited the increasing pressure on the lower income cohorts, but so far, the jobs market is holding up. Job openings have plateaued, and there are still a significant number of people quitting their roles (implying they’ve found better employment elsewhere).

The latest jobless claims data remains subdued. Last month, 100,000+ new jobs were created in the U.S. Jobs growth has been slowing in recent years, but recent months have seen it stronger than anticipated.

Source: LSEG Datastream

The only concern is the increase in the number of job cuts in April, which the monthly Challenger Jobs Report attributed to AI. Jobs growth can slow due to cyclical factors, such as interest rate or gasoline price increases. But it can also slow due to structural factors, such as the roll-out of labour-replacing technology-driven investment.

So far, this is the second consecutive month we’ve seen AI mentioned as the reason for U.S. jobs cuts. It has been cited as the reason for 49,135 job cuts – about 16% of all job cuts this year. The numbers are very modest, but the trend is one that will be scrutinised.

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

13/05/2026

Please see the below article from EPIC Investment Partners detailing their discussions on the current geopolitical landscape. Received this morning 12/05/2026.

The closure of the Strait of Hormuz remains an ongoing issue for the global economy. China’s factory prices grew at the fastest pace since the COVID pandemic with April producer prices rising 2.8% y-o-y in April, much higher than market expectations.

Supply chains are changing rapidly and are unlikely to return to normal. Gulftainer, based in the United Arab Emirates, is the manager of a number of container terminals in the Middle East. This includes the Khor Fakkan port that sits just outside the Strait of Hormuz, facing the Gulf of Oman. Shipments through Khor Fakkan has climbed from roughly 2,000 containers a week prior to the conflict to 50,000 a week today. About 7,000 trucks enter and exit the port each day compared to just a few hundred prior to the conflict. CEO Farid Belbouab makes the important point that the shippers, shipowners, and importers are focussed on reliable delivery dates regardless of the higher cost or longer transit times.

Another example is Iran ramping up trade with China via railway shipments in a bid to blunt the impact of a US blockade of its ports and adapt to pressure designed to strangle its economy. The number of cargo trains going from Xi’an in central China to the Iranian capital Tehran has risen from around one per week before the conflict to one every three or four days since the start of blockade on April 13.

Certainty is invaluable even if it means higher prices.

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

12/05/2026

Please see the below article from Tatton Investment Management discussing improving market sentiment driven by easing geopolitical tensions, resilient global growth and strong US (AI-led) corporate earnings, received this morning – 11/05/2026.

Reasons to believe

Operation Epic Fury is over and markets are betting that the Strait of Hormuz will be open soon. Both stocks and bonds bumped up; equities helped by strong corporate earnings especially in the US; bonds benefitting from lower inflation expectations for the next twelve months.

Oil prices dropped through last week with the nearest Brent crude futures contract (July) falling below $100 pb. However, Iran’s refusal to engage in discussions on the nuclear issue has seen it rise back to $105 pb. Nevertheless, most traders believe that US-Iran peace talks will probably wrap up around Trump’s visit to China at the end of this week – given Beijing’s pressure on its Iranian all to reopen the Strait. The risks look less risky than a week ago. Oil prices won’t fall rapidly (reserves need to be rebuilt) but the long-term energy outlook has tipped back to oversupply.

The next Trump show episode could be another tariff tirade against Europe, though that could be coupled with warming of US-China relations and hence lower tariffs on China.

Global growth has been much more resilient than expected – particularly in the US. The US added 115,000 jobs in April and there is little sign of AI impacts. That’s feeding through into phenomenal corporate earnings. Large cap indices are heavily concentrated on a few AI winners, but small and midcap indices show strong earnings too. It’s a little surprising the dollar has fallen back after this strength, but that could be about the long-term fragmentation of global trade (as we’ve covered before). Dollar weakness might now be the default trend.

Equity valuations have cheapened since the start of 2026, global growth has improved and, this week, bond yields have come back from their highs (especially in the UK, due to gilts’ inflation sensitivity). Tighter monetary policy detracts from the outlook, but central banks might loosen if energy prices fall. The Fed will probably cut rates under new chair Kevin Warsh – but that will require a balance sheet reduction, to avoid overstimulating a strong US economy. Many are sympathetic to Warsh’s low-rates, lighter-balance-sheet approach, but the reduction in liquidity could knock markets in the short-term. The need to convince committee colleagues (including Powell) will keep the reduction slow, at least.

 

April asset returns review

Global equities rallied 6.9% in April in sterling terms, recovering from the March sell-off despite the fallout from the US-Iran war. US stocks gained 7.2%, climbing above their level from before the war. They were helped by the resilience of US growth and strong corporate earnings – particularly for big tech companies. The capital rotation away from e saw at the start of 2026 is now reversing, with the AI theme dominating again.

UK and European stocks didn’t reach their pre-Iran war levels and both stalled into the end of the month (+2.3% and +4.5% respectively), reflecting energy vulnerability.

Global bond prices gained 0.3% but saw significant volatility, and UK bonds (gilts) dropped 0.5%. Higher inflation and interest rate expectations shifted demand to shorter-term bonds, pushing up long-term yields. The fact the UK was worse hit is down to an imbalanced gilt market (more long-term and inflation-linked bonds than elsewhere), rather than politics.

Central banks held rates steady, but the BoE and ECB suggested rate hikes might be needed in June, to stop the energy shock becoming a price spiral. The BoJ is also likely to hike next month, but Japanese stocks still gained 5.9% last month. The Fed paused its rate cuts but maintained a dovish bias – despite some objections and the continued strength of the US economy.

Emerging markets gained 11.3%, powered mainly by three chip manufacturers involved in the AI theme: Taiwan’s TSMC and South Korea’s Samsung and SK Hynix. That doesn’t mean other EM stocks were bad; in fact, we saw a broad outperformance in EM earnings.

Oil prices unsurprisingly bounced around but finished April only 3% higher in sterling terms. Futures pricing suggests a swift end to the conflict and resumption of the long-term global oversupply. Risks grew in April, but investors climbed the wall of worry.

How open is too open for AI?

Chinese start-up DeepSeek promised to disrupt US tech companies with its low-cost AI model last year, but its valuation is still dwarfed by big US tech.

Investors have swung back towards big tech stocks in recent weeks, after a brief rotation into small-cap and non-US stocks in early 2025. Goldman Sachs’ measure of S&P 500 market breadth narrowed to a historic low last week, with returns heavily focussed on the AI winners. Investors are nervous about excessive AI spending (exemplified by Meta’s recent fall) but are favouring companies already monetising the technology. That’s generally the so-called “hyperscalers” with large moats around their models and businesses.

The standout winner is Alphabet, with all its data and proprietary AI models. The AI race in the US is a winner-takes-all brand of techno-capitalism, where being the first to make the latest model is what matters. That’s led to increasingly closed-off tech companies, unlike the open-source approach of Chinese AI start-ups. DeepSeek plans to make its latest V4 models open-source. After the proliferation of open-source AI in China, Chinese models now account for a large share of global AI usage. Beijing sees the open-source competition as essential to keep up in the AI race, but it requires significant public investment and compresses start-up profits.

Europe is basically absent from the AI race, hampered by data restrictions. There may be good reasons for those restrictions (India’s Modi similarly argued for “data sovereignty” at a recent AI summit) but they still hinder AI development. Meanwhile, security risks are mounting: Anthropic’s powerful cybersecurity AI Mythos was allegedly subject to unauthorised access from state actors. That underscores the fact AI is increasingly a frontline geopolitical issue. Whether to make AI open or closed source could be a key dividing line in 21st century geopolitical rivalries.

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

Marcus Blenkinsop

11^th May 2026