News

Please see the below article from Brooks Macdonald detailing their discussions on US policy and Geopolitical risk. Received this afternoon 05/03/2026.

What has happened?

Yesterday, investor sentiment improved on the back of strong US economic data and the absence of any immediate escalation in the Middle East. Equity markets rebounded across regions. The S&P 500 rose +0.78%, moving back to within 2% of its record high, supported by a strong rally in tech stocks, with the Magnificent 7 up +1.52%. In Europe, the STOXX 600 gained +1.37%, alongside solid advances in the DAX (+1.74%) and FTSE 100 (+0.80%). The recovery extended into Asia this morning, where South Korea’s KOSPI surged +11.02% following the previous day’s sharp sell off. That said, the calm remains fragile. Oil prices have moved higher again overnight, with Brent up 3.18% to $83.99/bbl, reflecting the fast-moving geopolitical backdrop.

Energy market volatility amid geopolitical risk

While broader stress eased, there has been little evidence of de escalation in the Middle East. Comments from Iran’s IRGC suggested an intensification of strikes, alongside confirmation from the US that it had sunk an Iranian warship in the Indian Ocean. Markets have remained highly sensitive to headlines, with oil prices swinging sharply intraday on incremental reports. European natural gas prices fell more than 10% yesterday, reversing part of their sharp gains earlier in the week. This pullback helped ease immediate inflation concerns in Europe and pushed back speculation around an ECB rate hike, with 10 year government bond yields edging lower across core and peripheral markets.

Strong US data challenges the rate cut narrative

Away from geopolitics, US economic data provided reassurance on growth and undercut near term stagflation fears. The ISM services index rose to 56.1 in February, its highest level since 2022, driven by a surge in new orders, while the prices paid component fell to its lowest level in almost a year. The ADP private payrolls report also surprised modestly to the upside, reinforcing the picture of still-resilient labour demand ahead of the official jobs report. As such, markets further reduced the probability of a June Fed rate cut, with investors increasingly sceptical that a new Chair would move quickly in the face of firm activity data. US Treasury yields moved higher across the curve, with the 2 year yield rising to 3.55% and the 10 year yield climbing above 4.10%.

What does Brooks Macdonald think?

Trade policy also remains an important area to watch. Bloomberg reported that the EU has received assurances from the US that the current 10% universal tariff rate will be maintained for now, rather than increased to 15%, following the Supreme Court ruling against the previous IEEPA tariffs. At the same time, attention has turned to the potential for tariff refunds, after a US judge ordered Customs and Border Protection to halt the calculation of IEEPA tariffs on import paperwork. With the administration indicating that interest will be paid on any refunds, the timing and scale of repayments could have implications for the fiscal outlook.

Bloomberg as at 05/03/2026. TR denotes Net Total Return.

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

Alex Clare

05/03/2026

Please see this week’s Markets in a Minute update below from Brewin Dolphin, received yesterday afternoon – 03/03/2026.   

Conflict in the Middle East: Understanding the market response

With conflict in the Middle East escalating, Chief Strategist Guy Foster breaks down what’s happening across investment markets – from immediate volatility to long-term positioning.

Key highlights

• Historical perspective: While current oil price fluctuations are notable, they remain significantly lower than the structural shocks of the 1970s and 90s, suggesting a more resilient global energy market.
• Modern diversification: The global economy’s reduced reliance on Middle Eastern oil, coupled with the UK’s shift toward U.S. liquified natural gas (LNG) supplies, can provide a buffer against traditional energy-driven inflation.
• Strategic resilience: Heightened volatility often unearths unique investment opportunities; we continue to manage your portfolio with a focus on long-term stability and proactive adjustments.

With the U.S. and Israel having launched meaningful attacks on Iran and counterattacks underway, it’s a time of significant uncertainty. While there are many important dimensions to these events, we want to share what they mean for investment markets and your portfolio.

The immediate market response

The immediate impact of the strikes has seen most equity prices drop lower on Monday morning. This is quite a normal reaction and reflects a primary concern: that conflict in the Middle East will drive energy prices higher. Any increases would be reflected in higher inflation, which raises costs for businesses and households, reducing economic growth and profits. But how severe might this impact be?

Oil shocks: Then vs. now

Investors with long memories will remember when the oil price rose sharply in response to conflict in the Middle East in the 1970s, and then again in 1990 due to the Gulf War. For context, those price surges were far more severe than what we’ve seen so far. In early trading, oil prices rose 10% – whereas previous shocks have tended to see increases of at least 100%.

Could prices rise much further? That’s the most difficult thing to forecast. Iran’s oil production comprises about 3-4% of global supply. Although it’s heavily sanctioned by Western powers, there are still buyers – of which China is by far the largest – which means that Iranian oil still affects global prices.

Iran’s geopolitical isolation also limits its ability to sustain major supply disruptions. Even China, its key ally, needs Iranian energy to keep flowing.

The Strait of Hormuz: A critical passage

Iran’s influence on the global oil and gas market extends beyond its own production. The most sensitive factor is the ability of tankers to navigate the Strait of Hormuz – a narrow maritime passage that serves as the world’s most critical energy chokepoint. Bordered by Iran’s coast, prolonged disruption to shipping here would cause oil prices to spike.

While disturbing the Strait might be Iran’s most potent means of harming its aggressors, it will come at the cost of lost oil revenue and that cost will be borne by all the Gulf states who currently export via the Strait. The other party losing out is China.

While U.S. confidence in keeping the Strait navigable remains unknowable, we can be certain they’ve considered the implications if it remains closed. Polls of U.S. registered voters suggest that military action against Iran was only supported by around a third of respondents and that inflation remains the most important issue¹ during this mid-term election year.

Crucially, the global economy is becoming less dependent on oil in general and Middle Eastern supplies in particular. As oil consumption relative to GDP steadily declines, the market is showing greater resilience; while prices exceeded $120 per barrel in 2022, they remain below $80 even after the latest jump (correct at the time of writing).

Impact on your energy bills

Nobody likes paying a lot to fill their car with fuel, but Europeans tend to be less sensitive to oil price changes because the impact is dulled by fuel duties. They are, however, more sensitive to changes in utility bills and will remember the dramatic changes following Russia’s invasion of Ukraine.

In fact, inflation is expected to decline this year as falling natural gas prices slowly filter through to consumers – the UK’s energy price cap policy delays the passthrough of energy prices into household bills.

As a rule of thumb, if wholesale gas prices rise on a sustained basis by 10%, that could increase headline consumer price inflation by around 0.5%. Recent sustained price declines mean that inflation is likely to fall in April by 0.4%. However, Iranian drone attacks on the Qatari LNG export facility have caused its closure, leading to a sharp rise in LNG prices. If those higher prices were to be sustained, then UK-regulated prices would eventually increase. Although for context, prices after the closure have returned to the level they were at a year ago, and remain a fraction of those seen during 2022. Importantly, the UK has reduced its Middle Eastern LNG dependence in recent years, increasingly relying on U.S. supplies instead.

Bond market implications

Bond markets have reflected the potential increase in inflation to a small extent. They would be most concerned if there was any expectation that it would mean higher interest rates. Before the attacks, two UK rate cuts were expected over the coming year, after those, that second cut hangs in the balance.

Whilst energy prices could generate upward inflationary pressure, it would also dampen consumer spending on other goods and services. So whilst the impact on most bonds is mixed, the prospect of higher inflation has helped the performance of inflation-linked bonds.

Spending on defence will add to pressure on the U.S. public finances. This is one reason why gold – rather than traditional bonds – is currently serving as a more effective hedge against geopolitical risk. We are also seeing the U.S. dollar strengthen as global risks rise, following a familiar historical pattern.

The resilience of your portfolio

The main impact of these events on financial markets is the uncertainty they create. We manage diversified portfolios to help protect against volatility. While uncertainty is elevated, some assets rise in value and, if the moves are sharp, it can be worth taking profit on them.

The history of financial markets shows volatility increasing, and then ebbing again. The best investment opportunities often come at times when uncertainty is at its highest. An example of this was the market falls after the global tariff announcements last year, which marked the start of a strong market rally.

We don’t yet know whether the current violence will last days, weeks or longer. However, as always, we’ll be following events closely to see what opportunities they produce.

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

Charlotte Clarke

04/03/2026

Please see below article received from Brooks Macdonald this morning. 

Recent developments in Iran and the wider Middle East region have led to a rise in geopolitical risk and market unease. Periods like this tend to generate intense news coverage, but for investors it is important to distinguish near term developments from the forces that shape long term investment outcomes.

 

What has happened?

Over the weekend, geopolitical tensions in the Middle East escalated following United States and Israeli air strikes against Iran. Iran subsequently responded with missile strikes targeting US military facilities in the region. Alongside this, concerns have emerged around commercial shipping through the Strait of Hormuz, which is the narrow stretch of water between Iran and Oman that represents the only sea passage from the Persian Gulf to the open ocean and one of the world’s most strategically important energy transit routes. Following attacks on oil tankers, tanker traffic through the strait has slowed, although Iranian officials have indicated they are not seeking a full closure. As is typical in situations of heightened geopolitical tension, developments are evolving quickly and the range of possible outcomes remains wide.

 

How markets are reacting and the key implications

1. Energy markets: The Middle East plays a central role in global energy supply and transportation. Heightened tensions often lead to higher oil prices as markets price in additional risk, even in the absence of an immediate disruption to supply. Over the weekend, oil prices have risen by more than 7%, reflecting this increase in risk premia rather than confirmed changes to supply or demand.
2. Inflation considerations: Energy prices feed into inflation, particularly if higher prices persist. However, global central banks generally focus on whether such moves are sustained and broad‑based, rather than responding to short‑term price volatility driven by geopolitical events.
3. Market sentiment: Periods of uncertainty can lead to short-term market volatility as investors reassess risks and exposures. These moves often occur even when underlying economic fundamentals have not materially changed.

 

Market reactions to geopolitical developments are often rapid and uneven and can quickly reverse as new information emerges. Historically, early price movements have often reflected uncertainty and investor risk reduction rather than a settled view on long-term economic impact, with markets ultimately moving back to focusing on fundamentals.

 

What this means for diversified portfolios

Diversified portfolios are constructed with the expectation that periods of uncertainty and volatility will occur. By spreading exposure across different asset classes, regions and sectors, portfolios are better positioned to absorb the impact of individual events, including geopolitical shocks. In practice, this means that while some assets may be more sensitive to rising geopolitical risks, others are designed to provide resilience during periods of stress. Attempting to respond to rapidly changing headlines or to time markets during uncertain periods can increase the risk of poor long-term outcomes. Over time, investment returns have tended to be driven primarily by underlying economic fundamentals rather than short-term geopolitical developments.

 

Our approach

We remain focused on long-term investment objectives, supported by well-designed asset allocation and proactive risk management with proper diversification. We continue to monitor relevant economic and market indicators (including developments in energy markets and inflation) while avoiding kneejerk positioning.

 

Periods of geopolitical tension are not new, and markets have navigated similar episodes many times in the past. While uncertainty is currently elevated, multi-asset portfolios are designed with this in mind. History suggests that maintaining discipline and a long-term perspective is more effective than reacting to periods of heightened uncertainty.

 

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

Chloe 

03/03/2026

 

 

 

Please see the below article from Tatton Investment Management, discussing the market impact of rising geopolitical tensions, shifting energy dynamics, and contrasting narratives around AI’s economic outlook, received this morning – 02/03/2026.

Outright war on Iran’s leaders begins
In response to the US-Israeli military strikes and Iran’s responses, markets have reacted in the way most would have expected.

• Spot Brent crude is trading at $80 per barrel, up from around $70-72 in Friday’s day trading and well above January’s $65 average: Natural gas prices are about 4% higher.
• Gold is above $5,400: Other metals are a little higher.
• The US Dollar is about 0.5% higher against major currencies and 1% higher versus emerging market currencies.
• US and European equity futures are about 1% lower while Japan and China are down more than 2%. The Turkish market is down over 5%.
• US 10-year treasury yields have actually risen slightly but remain below 4% after last week’s global government bond rally. Japan bond markets have seen slight yield falls, Europe and UK yields are also likely to open lower.

Spot oil prices will matter but investors will especially watch the futures contracts beyond six months for signals on whether there could be a wider impact on global growth and inflation.

Engineering a path to a new and stable Iranian political leadership will be neither easy nor quick. Investors will spend this week forming a view on how and when it ends. An important question regards China’s attitude and involvement. Can the US convince China that this conflict is not part of a strategy to further constrain its ambitions?

As we discuss below, risk markets are better positioned for a higher risk environment than a month ago, with cheaper valuations and less optimism. As such, at least we start the week with the sense that while there is obvious downside, many will look for an opportunity to buy if it becomes extended.

AI boom or doom
February was filled with polarising narratives but little price movements. The AI bubble talk has disappeared and, if anything, investor positioning might be negatively biased.

Blue Owl halting fund redemptions sparked fears of a private credit liquidity crisis – amplified by UBS research suggesting defaults could jump up if software companies are displaced by AI. Private credit firms invested big in tech companies. This is a risk scenario rather than a base case, but its probability has increased. Blue Owl halted redemptions out of investor fears, not actual defaults (which have fallen). People are understandably worried about a 2008-style contagion, but junk bonds in public markets haven’t been affected. There’s less leverage in the system than in 2008 (private credit firms can’t create money like banks) and for the firms that survive this could increase transparency for underlying assets.

Citrini research put out a hypothetical piece about a 2028 economy ravaged by AI, with service companies investing in their own obsolescence and collapsing the knowledge economy. The piece rocked markets despite containing no new data – showcasing the power of narratives. The competing narrative says adoption will be slower, allowing productivity growth to feed back into job creation. AI isn’t eating jobs yet (software engineer postings are up) but even if it does, it won’t show up in the data for a while. If the futurists are right about AI development, the backward looking data is immediately obsolete.

Global growth is still robust (2.1% in the US, 2% in the UK) and equity valuations are less stretched. The fact Nvidia shares fell, despite stellar earnings, means it is trading at a lower premium. Overly negative investor positioning should mean even mild relief squeezes up prices. Japan looks particularly strong – the only question being whether growth will be inflationary. Investors shouldn’t lose sight of the fact that the global economy keeps churning.

Where Europe now gets its gas
Ofgem’s 7% reduction in the energy price cap was made possible by falling UK and European natural gas prices, to £25/MWh in December, from nearly £50/MWh a year ago. Prices have bumped up more recently, due to colder US weather and concerns about EU gas storage dropping lower than usual for this time of year. A European cold snap drew on supplies at the start of 2026, but milder temperatures since have tapered demand. UBS analysts now expect storage to trough not much lower than current levels ahead of the summer restocking. Summer futures prices are still below current prices: traders are worried about current gas supplies (partly due to Iranian tensions) but calmer about future supplies.

Europe’s energy market has fundamentally changed in the last four years. Its biggest gas supplies are now Norway (31%) and the US (26.4%), though 12.1% still comes from Russia (mainly into Hungary and Slovakia). Most gas imports are LNG, over half of which comes from the US. Gas suppliers have invested heavily in port infrastructure to ship LNG across the Atlantic, which is tying our prices tighter to US gas prices. This is also why the EU is more comfortable running lower ‘just in time’ gas storage levels.

UK and European gas supplies are finally stable, and the EU has expanded its renewables capacity too (renewables overtook fossil fuels for the first time in 2025). There are still security concerns around gas: Norwegian pipelines could become targets in a hypothetical arctic theatre, and reliance on the US isn’t ideal in the age of Trump. Surging energy demand from AI datacentres poses a risk for energy prices (for the world) but the risks don’t detract from a supportive energy outlook.

Is the ‘Donroe Doctrine’ good for LatAm?
You’d think Donald Trump’s “Donroe Doctrine” (interventionist US dominance in the Western hemisphere) would be bad for Latin American companies, but Bloomberg’s LatAm index has surged 77% in sterling terms since January 2025. Morgan Stanley think the LatAm bull market will continue, mirroring the 2003-2007 surge, powered by AI infrastructure spending. This should benefit the ‘old economy’ of raw materials and manufacturing. Chile, a copper and lithium exporter, could particularly benefit. Morgan Stanley also think geopolitical shifts and falling interest rates will benefit LatAm stocks with historically low valuations, as the US shifts its demand to regional partners.

In a multipolar world, LatAm governments could actually move closer to the US, creating investment opportunities – like Mexico renegotiating the USMCA or Brazil enacting fiscal reforms. Commentators talk about US ‘friendshoring’, but that relies on being friends with Washington. Argentina’s $20bn currency swap line loan shows how lucrative friendship can be for Trump’s allies, but US patronage isn’t as personal as it sometimes seems. Washington will likely give tariff relief to Mexico if Mexico agrees to stem trade with China, and it already exempted Brazil from some tariffs when left-wing president Lula refused to budge. In a multipolar world, the US has a strong interest to attract LatAm to its pole.

We shouldn’t discount Trump’s tirades against drug cartels either. These have blighted LatAm governance, especially since the pandemic, and even those against US interventionism want the cartels gone. Stable institutions will benefit LatAm markets. Inflation has fallen across the region, partly thanks to post-pandemic monetary reforms. Lower interest rates could help LatAm markets expand. We wrote about the increasing importance of purchasing power parity (PPP) in the Trump era, and a PPP adjustment would also likely benefit. Yet again, Trump’s policies don’t always have the assumed impact.

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

Marcus Blenkinsop

2^nd March 2026

 

Please see the below article from EPIC Investment Partners discussing the policy-driven factors behind America’s Q4 2025 economic slowdown, received this morning – 27/02/2026.

The most arresting number in America’s fourth-quarter slowdown was not the growth rate. It was the payroll count.

When output expanded at an annualised 1.4 per cent in the final three months of 2025, down from 4.4 per cent in the third quarter, the headline suggested a sharp loss of momentum. In reality, much of the deceleration was mechanical. A 43-day partial federal government shutdown, from 1 October to 12 November, forced roughly 650,000 federal employees into furlough while another 600,000 were required to work without immediate pay.

In the national accounts, public-sector output is largely recorded through the labour services provided by government employees. When those hours disappear, measured output falls automatically. Federal activity contracted at a 16.6 per cent annualised rate in the quarter, subtracting around one percentage point from overall GDP growth. What looked like broad economic weakness was, in large part, an accounting reflection of political paralysis.

The income shock was immediate. By mid-November, an estimated $16bn in wages had been withheld. Although back pay was eventually guaranteed, the interruption in liquidity curtailed discretionary spending in regions with a heavy federal presence. Restaurants near government offices emptied. Contractors delayed hiring. The drag was concentrated but visible.

Yet the shutdown alone does not explain the quarter’s softness. At the same time, America’s external imbalance widened to historic levels. The December monthly trade deficit exceeded $70bn. For the full year, the combined goods and services shortfall approached $900bn. More striking still was the goods deficit alone, which surpassed $1.2tn — the largest on record.

That distinction is crucial. The United States runs a surplus in certain high-value services, including finance and intellectual property. But the merchandise gap continues to widen even under an aggressive tariff regime intended to narrow it. The country is importing more physical goods than ever despite protectionist policy.

In GDP accounting, exports add to growth while imports are subtracted to avoid counting foreign output as domestic. When imports rise faster than exports, the trade balance turns negative and weighs on measured GDP. That dynamic was evident in the fourth quarter. Businesses had spent much of 2025 front-loading orders ahead of tariff increases. By year-end, inventories were being drawn down. Imports remained elevated while exports softened, reflecting weaker global demand and a firm dollar. The widening goods deficit therefore amplified the slowdown.

Tariffs added distortion without resolving the imbalance. Higher effective rates lifted the cost of consumer goods and intermediate inputs, contributing to price pressures in sectors such as autos and apparel. Yet they largely reshuffled trade flows rather than shrinking the aggregate gap.
Strip away government outlays and volatile inventories, and the private sector appears more stable than the headline suggests. Business investment, particularly in equipment and intellectual property linked to artificial intelligence, held up better than expected. The economy absorbed a self-inflicted shock rather than succumbing to recession.

The fourth quarter of 2025 reads less like a conventional downturn than a policy-induced bypass. Output slowed not because private demand collapsed, but because the state temporarily withdrew its own labour and the external sector deteriorated simultaneously. Growth will likely rebound as federal hours are restored and back pay circulates.

The deeper signal lies in the external accounts. A goods deficit exceeding $1.2tn reflects a structural imbalance between domestic consumption and tradable production, reinforced by a strong dollar and persistent fiscal deficits. Political turbulence may support the currency in the short term as global capital seeks safety. Yet that very strength suppresses export competitiveness and perpetuates the merchandise gap.

The United States can sustain large deficits so long as the world is willing to finance them. The fourth quarter suggests that willingness increasingly rests on confidence rather than inevitability. Growth will recover. The more delicate question is how long credibility remains unquestioned.

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

Marcus Blenkinsop

27^th February 2026

Please see today’s Daily Update from EPIC Investment Partners below:

Value in NVIDIA may be hiding in plain sight. The company’s exponential revenue expansion may be causing the market to underestimate the cash flow generation potential of the business over the next few years as it remains the dominant infrastructure provider within the artificial intelligence megatrend.

The company reported record fiscal fourth-quarter revenue of $68.1 billion, representing 73% year-over-year growth and 20% sequential growth, exceeding prior guidance. The results reflect sustained global investment in high-performance AI computing across hyperscale cloud platforms, enterprise workloads, and government infrastructure programs.

Forward guidance signals continued momentum. NVIDIA expects $78 billion in April-quarter revenue, implying 77% year-over-year growth and approximately $11 billion in sequential revenue expansion. Between 2023 and 2025, data centre revenue increased by roughly $4 billion in most quarters. Current guidance suggests deployment velocity is accelerating as supply constraints gradually ease.

The company had highlighted a combined revenue opportunity of approximately $300 billion associated with Blackwell and Rubin architectures in calendar 2026. Management is now indicating this estimate may be conservative based on current order visibility.

Government and sovereign demand are emerging as a structural growth pillar. Revenue from sovereign customers reached $30 billion in fiscal 2026, tripling year over year, as nations accelerate investment in domestic AI computing capacity for strategic security, technological independence, and digital infrastructure development.

Growth is also extending beyond accelerator hardware. Networking revenue reached $11 billion, expanding 263% year over year and 34% sequentially. The company believes it has become the largest Ethernet networking vendor globally, competing indirectly with infrastructure specialists such as Cisco Systems and Arista Networks.

The industry shift toward rack-scale and cluster-scale AI architectures is increasing system-level content per deployment. NVIDIA is increasingly monetising integrated compute, networking, and software-enabled infrastructure rather than selling discrete components, allowing the company to capture a larger share of total AI system spending.

In other words, NVIDIA remains a dominant supplier as customers continue to rely on its technology for large-scale artificial intelligence deployment. While there are market concerns that hyperscale cloud providers are investing in custom silicon to reduce long-term supplier dependence, the overall market for AI compute is expanding at such a rapid pace that competitive substitution is unlikely to offset industry-wide growth.

As a result, NVIDIA appears to be materially underestimated by the market. We see further upside ahead.

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

26/02/2026

Please see this week’s Markets in a Minute update below from Brewin Dolphin, received yesterday afternoon – 24/02/2026.   

Markets respond to political uncertainty

How continued U.S. tariff uncertainty and geopolitical tensions are affecting markets.

Key highlights

• Iranian shadow looms over markets: Oil prices (and associated equities) rose as fears grew over potential supply disruptions.
• U.S. Supreme Court rules against Trump tariffs: America’s highest court ruled that President Donald Trump’s emergency powers don’t include the authority to impose tariffs. Potential refunds could total as much as $170 billion.
• UK economic data shows signs of weakness: Economic data, including unemployment, wage and inflation data, broadly underlined the case for further UK interest rate cuts.

U.S. Supreme Court rules against Trump tariffs

The week ended with a landmark ruling from the U.S. Supreme Court, which upheld the view expressed by lower courts that President Donald Trump’s authority under emergency powers does not extend to levying tariffs.

The decision, which was reached by a margin of six votes to three, was widely expected, but included no detail on whether the importers are entitled to refunds. This will now need to be addressed by a lower court.

If fully permitted, refunds could total as much as $170 billion – representing the biggest portion of President Trump’s tariff revenue – but the agonising wait for a decisive legal decision from America’s highest court has only presaged a further wait for the detail be resolved.

President Trump responded by imposing a 10% global tariff under powers designed to prevent large balance of payment deficits.

The immediate reaction is one of weakness from U.S. bond markets and the dollar, as public finances are further weakened and an accidental tax cut is being delivered to a very distinct sector of the economy – even though the risk is that the refund issue becomes a drawn out legal argument.

Iranian shadow looms over markets

Source: Bloomberg

The risk of U.S. military action against Iran remains materially elevated. This has led to gains in oil prices, and the associated equity sectors, on fears of potential supply disruption. So far, diplomatic negotiations have failed. U.S. military assets, including the world’s largest aircraft carrier, continue being deployed to the Middle East, posing a significant potential threat to Iran.

This constitutes a major test of the TACO (Trump Always Chickens Out) framework. The administration has already launched airstrikes on Iranian facilities, so the question is how willing it is to make a greater commitment, and what objective such a commitment might have.

At the end of the week, President Trump twice referenced a period of 10 to 15 days, during which Iran would need to reach a deal with the U.S. to avoid military action. That was less immediate than the build-up of military assets in the region might suggest.

However, unpredictability is one of President Trump’s hallmarks, and Iranians will remember that a previous 60-day window was cut short by last June’s U.S. air strikes against Iranian nuclear facilities (on that occasion, America’s hand was rather tilted by the earlier Israeli strikes).

The other factor that will be weighing on the Iranian regime’s minds is this year’s extraction of President Maduro from Venezuela, which may indicate that regime change would be the objective of any operation. However, President Trump is a pragmatist, and his stated aim is to end Iran’s nuclear and ballistic missile programs. To what extent that requires a regime change is open to question. There’s a strong desire to avoid the extended deployments that were required in Iraq and Afghanistan in the early 2000s. In the case of Venezuela, for example, elements of the regime were retained and subject to U.S. pressure, avoiding the chaos that comes from a complete removal.

So far, the impact on oil is assumed to be roughly $6 to $7 of risk premium reflected in the current oil price.

Helima Croft of RBC Capital Markets notes: “Regional observers warn that Iran would target energy facilities and economic assets to force Washington to stand down. Using naval bases in Bandar Abbas and Jask, Iran retains the ability to target tankers and mine the Strait of Hormuz, while the Houthis in Yemen and Iraqi militias maintain significant disruptive capabilities.”

The base case of a limited U.S. strike would likely see oil prices spike initially, then unwind as disruption fears fade. However, the rule of thumb is that a 1% loss of supply can cause a 4% increase in price, and with the potential for widespread disruption to transit, significant action could push prices up to $100 per barrel or more.

President Trump’s administration will be very conscious of the domestic political impact of a price spike. It would weigh on growth and compound cost of living pressures, particularly for lower income cohorts. The president’s net disapproval over his handling of inflation has improved in recent weeks, but an oil price spike would change that, and the public support for military intervention in Iran is low.

The U.S. midterm elections take place in November, and Republicans are expected to lose control of the House of Representatives, which will radically alter the balance of power in Washington. With this in mind, a de-escalation would seem to be in the president’s best interests.

UK economic data shows signs of weakness

The UK had a series of economic reports out last week. They broadly underlined the case for further interest rate cuts because the labour market in particular, appears to be quite weak. An important caveat is that the data quality is low, but the unemployment rate has continued to rise to a level not seen for about a decade outside of economic crises.

Source: LSEG Datastream

However, these levels of unemployment were quite commonplace prior to the global financial crisis of 2008. It’s easy to see this as a watershed moment. While we don’t know to what extent the weakness of employment is caused by the adoption of AI (it’s assumed to be modest for now) and how much is explained by the higher cost of employing UK workers, a longer-term trend seems likely.

The use of AI seems set to alter the constraint on increasing production; historically, this has been heavily tilted toward the shortage of workers, but it could be driven to a greater extent by resource and energy shortages in the future.

For now, the timeliest data comes from PAYE. It suggests employment is stable rather than collapsing – and employment surveys seem to suggest the same. The recent trend of public sector wages outstripping private sector pay abated somewhat.

Consumer price inflation slowed significantly from 3.4% to 3%, a considerable improvement but still well above target. Prices always fall in January, as some categories are discounted heavily. However, the change in the annual rate reflected the resilience of prices seen in January 2025, rather than any specific weakness earlier this year.

A way of looking through these seasonal factors is to consider median price increases. These also remain above the Bank of England’s target.

Friday saw strong retail sales, which we hoped would come, as consumers put the concerns of last year’s budget behind them. With that in mind, a measured approach to cutting interest rates remains warranted.

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

25/02/2026

 

Please see the below article from Brooks Macdonald discussing their take on markets generally, fiscal stimulus and geopolitical factors affecting current market performance. Received this morning 24/02/2026.

What has happened?

US equities ended yesterday broadly flat, masking a volatile session that began with a sharp sell-off. The S&P 500 recovered from early losses to finish unchanged. IBM recorded its worst single-day performance since the bursting of the tech bubble in 2000, while the software sub-sector of the S&P 500 fell -3.82%, its lowest level since the ‘Liberation Day’ last year. European markets were mixed. The STOXX 600 declined a more modest -0.45%, though Germany’s DAX underperformed with a -1.06% drop, reflecting its greater sensitivity to global trade. In contrast, gold rallied strongly, rising 2.35% to $5,227 per ounce, its highest level since the record highs seen in late January.

Sentiment-driven pressure on software and AI names

The latest sell-off in AI-related stocks appeared to be driven more by sentiment than by new fundamental information. A widely shared research note from Citrini Research, ‘The 2028 Global Intelligence Crisis’, outlined a hypothetical scenario in which AI adoption leads to double-digit US unemployment by mid-2028. While explicitly speculative, the note gained significant traction on social media and was widely cited as a trigger for the sharp intraday sell off. Stocks perceived to be vulnerable to AI disruption bore the brunt of the move. The software sector fell sharply and is now almost 32% below its October peak. IBM was the worst performer in the S&P 500, dropping more than 13% after commentary suggested AI could modernise COBOL, a legacy language central to IBM systems. The risk-off tone spilled beyond tech, hitting several consumer and financial names referenced in the report, as well as private equity firms amid renewed private credit concerns.

Tariffs add to uncertainty

Section 122 tariffs came into force overnight at 10%, with officials signalling that a move to 15% remains under consideration. Reports late yesterday also pointed to potential new national security investigations into sectors including batteries, telecom equipment, and industrial chemicals. The EU has paused ratification of its trade agreement with the US, citing concerns that new Section 122 tariffs could stack with existing measures and push effective rates above the agreed 15% ceiling. EU officials have called for clarity on whether the US will fully respect the terms of the deal. The UK outlook is similarly unclear. Despite having previously agreed to a 10% tariff rate, there is now a risk it could face a higher global tariff. From the US side, President Trump warned that countries seen to be ‘playing games’ would face tougher outcomes.

What does Brooks Macdonald think?

Looking ahead, markets remain sensitive to both policy signals and shifts in sentiment. President Trump’s State of the Union address tonight will be closely watched for any clarification on tariffs and policies, particularly given the recent escalation. While narrative-driven volatility has dominated recent sessions, it is worth noting that many of the underlying concerns around AI disruption, and global trade are long-term in nature and unlikely to be resolved quickly. Elevated uncertainty can continue to drive sharp rotations across sectors and styles.

Bloomberg as at 24/02/2026. TR denotes Net Total Return.

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Alex Clare

24/02/2026

Please see below, an article from Tatton Investment Management, analysing the key factors currently affecting global investment markets. Received this morning – 23/02/2026

Stable indecision

On Friday, the dollar weakened after the Supreme Court struck down Trump’s “reciprocal tariffs”. Initially, US stocks rose and bond prices fell but both have reversed those moves during Monday’s Asian market sessions. China’s extended new year period ending today (Monday) means it remains to be seen whether there will be an equal and opposite reaction in their markets.

It was notable over the past week, that individual stock-level volatility has gone from very high to quite low. UK stocks and bonds reacted well to some ‘Goldilocks’ data: lower inflation (from higher unemployment), but strong retail sales and record tax receipts.

Under-pressure Microsoft and Amazon stabilised, but investors didn’t quite buy the dip. Less stretched valuations mean markets driven by earnings fundamentals rather than liquidity. Q1 US corporate earnings forecasts have been downgraded, as AI capex inflation is proving a drag. That could reinforce the rotation out of big US tech – benefitting Asian chip manufacturers. Investor darling Nvidia – still at the centre of AI, should remain a winner.

JPM economists continue to forecast strong US growth (from AI capex and tax rebates) but their own nowcasts bely that bullishness. Even the Fed can’t make its mind up about US growth: the hawks expect stronger consumption, while the doves see productivity savings or job losses. In this context, we need to watch households’ savings rate, but we’re inclined towards the doves, especially once the impact of tax refunds wanes in H2 26. It’s also still unclear whether AI is displacing jobs. Higher UK youth unemployment might be about AI, or it might be about higher employment costs, for example.

Oil prices spiked after Russia trampled ceasefire hopes and Trump ramped up his Iran threats. Washington will probably favour a short sharp bombing campaign. Underneath this, oil supply is still rising faster than demand, so prices have room to fall if tensions calm.

Trump has already reimposed tariffs via a temporary measure and will seek to make them permanent by other means. This could be even more disruptive than the current tariff regime. No wonder, nations are pursuing “strategic under-implementation” of their Trumpian trade pledges, according to expert Sam Lowe, but they will still have to cough up something – like Japan’s $36bn oil and gas investment. Another episode of the Trump show might be coming.

Life in Europe’s fast lane

Despite EU leaders announcing the “One Europe, One Market” slogan, the most interesting comments from the recent summit on European competitiveness were about a supposed two-speed union. This comes after the so-called E6 finance ministers (Germany, France, Italy, the Netherlands, Spain and Poland) launched their coalition, focussed on passing the Savings and Investment Union (SIU – a rebrand of the stalled Capital Markets Union). European Commission president Von der Leyen effectively endorsed these moves as a way to stop nations like Hungary stifling legislation for the rest of the 27 nations.

Faster integration and limiting the blocking power of entrenched national interests will make the EU more responsive to collective economic needs. Passing the SIU could be a game changer, as the lack of a single financial market is seen as one of Europe’s biggest barriers to growth. We suspect nations in the slow lane will be incentivised to join the fast lane too. Just look at the fact once-peripheral Poland is now a major economy in the E6. But a closer inner circle doesn’t mean national interests won’t get in the way; it just means there’s fewer competing interests. If Germany and France disagree – like on Eurobonds – it doesn’t matter how small the circle is.

It’s good that leaders are being pragmatic. We see this in the ‘Made in Europe’ debate too: France is pushing for strict European preference in handing out contracts (potentially in violation of its trade agreements) while Germany wants a lighter ‘Made With Europe’ approach that includes trade allies like the UK. But all parties recognise that, in a regionalised world, something has to change. We said last year that structural changes, particularly around capital markets, could be the best thing to come out of Europe’s defence push. Those changes look closer than ever.

US does a sterling job of de-dollarisation

If you think dollar weakness is a crumbling empire story, sterling’s decline through the 20th century may the best precedent. The British Empire’s naval dominance, extensive trade and industrial production made sterling the lynchpin of global finance. Its reserve status declined rapidly after WWII, but the dollar already overtook sterling as a form of trade credit in the 1920s. Britain borrowed extensively from the US during and after WWI – which helped establish New York as a rival financial hub. Britain’s trade deficit was increasingly offset by its asset wealth. When the UK needed capital for the war effort, the realities of trade forced a reduction in demand.

The US is also a heavily indebted nation that relies on high asset valuations to fund trade and budget deficits, but there’s been no war-equivalent forcing a correction. We wrote last week, though, that Trump’s trade shock makes purchasing power parity (PPP) matter more. If the dollar adjusts to PPP levels, it will mean a long and steep fall. Trump wants to reduce the US trade deficit, but in the first instance he’s drawing attention to the fact the US is no longer the dominant trading nation (China trades more with the world).

Sterling’s decline is a precautionary tale, not an investment prediction. For all the talk of dollar debasement, investors are often dragged back into the US by its corporate earnings growth. And unlike with sterling, there’s no clear alternative (China’s markets aren’t trusted, Europe has structural problems, gold and cryptos are too volatile). But there are worrying signs for the dollar, like the increase in renminbi-denominated energy contracts. Ultra long-term trends don’t go in a straight line, and relief rallies for the dollar don’t prove the long-term decline isn’t happening. Investors need to see both the wood and the trees.

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Marcus Blenkinsop

23^rd February 2026