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.
Please continue to check our blog content for the latest advice and planning issues from leading investment management firms.
Marcus Blenkinsop
23rd February 2026