It never ceases to amaze some people that I always find something to write about in these updates. The challenge for me is more about what news to leave out rather than struggling for material. The same applies this week.
I aim to try and make sense of what’s going on and give perspective. There are unfolding matters which may not seem important but will materially impact the type and style of future investment strategies. As a counter to this, on many occasions, there is often news flow which sounds dramatic and sensational, which seems to demand attention and a reaction. Often, however, in the scheme of things, they can be relatively inconsequential.
I can provide two examples: the US government shutdown and the news of yet another Prime Minister resigning in France. Important events if you are caught up in the crisis, but on a wider perspective, they are of no real consequence to broader sentiment and markets.
Of significance this week was the ruling party in Japan electing a woman who is likely to become Japan’s first female Prime Minister later this month. Japanese stocks surged on Monday to record highs, and the yen weakened against the dollar as investors expect more fiscal stimulus.
There appears to be no let-up in the attractiveness of equities for some, but as I alluded to last week, investors in some quarters are becoming more cautious and diversified. The Bank of England also chipped in this week, warning of a possible AI bubble. Investors pulled a record amount of money from equity funds in the third quarter of 2025, making it the worst three-month outflow on record. Yet, markets still march on, and they have missed out on gains!
Jamie Dimon, the CEO of JPMorgan, visited the Bournemouth campus this week and left with a sting in the tail as he warned of a possible equity market correction in the US in 6-24 months’ time due to rising asset prices. I’ve previously commented on how we at Blue Sky have positioned our portfolios, and so these comments are no surprise but, of course, Dimon’s comments have grabbed the headlines.
I asked the question last week whether emerging markets are the new safe bet. This statement comes as interest in stocks across the developing world has seen one of the biggest rallies in the last 15 years, on the back of a sliding dollar and attractive valuations. Frontier markets are also looking attractive to those willing to embrace the risk.
Finally, and it is only the last item in this communication because of time and date order, Israel and Hamas have agreed a hostage exchange and a ceasefire is now a reality as the relevant parties thrash out the final details of a treaty. Good news on many levels. Oh, and Donald Trump hasn’t been awarded this year’s Nobel Peace prize but fair play to him in progressing matters in the Middle East.
This week’s content:
- Is the debacle in France likely to impact broader markets?
- Japan stocks surge
- A significant rally in emerging and frontier markets
- Equity outflows in the 3rd quarter, but still the market marches on
- Jamie Dimon comes to town
- Dimon warns of market exuberance
- Keep investing or keep the powder dry?
- Summary
Is the debacle in France likely to impact broader markets?
It used to be southern Europe which caused concern across markets, but in recent times, it has been northern Europe, with the likes of Germany and France facing challenging times.
France is seeking yet another Prime Minister, and the unfolding debacle makes the UK look pretty stable. The debt issues are well known. According to EPIC Investment Partners, the French have the longest retirements in the world, averaging in excess of 25 years, and France is the only place in the world where the average pensioner earns more than the average worker. The annual cost exceeds 350 billion Euros.
Continues…
Want to get this in your inbox?
Our CEO, Gary Neild, writes engaging Market Commentaries every week. If you would like to receive the full version straight to your inbox every Friday, please join our communications list.
Risk warning
Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.