Making sense of this crazy world
The Budget is now only 12 days away, and I don’t know about you, but I’ll be glad when it’s all over and we know what we are dealing with. It will allow us all to plan with a greater degree of confidence. We are intending to host a short free webinar on Monday 8th December to run through the major changes, the implications, whilst highlighting possible actions. An invite will be coming your way shortly.
Meanwhile, the chances of a UK interest rate cut have risen as data landed this week showing that UK unemployment has risen to 5%. This measure was for the three months to September 2025, and suggestions are that it has got worse since. Interestingly, I’ve spoken to a couple of employees in manufacturing companies who said they have little work to do because everything seems to have ground to a halt ahead of the Budget.
Similarly, a director of a recruitment company that focuses on the manufacturing sector said to me, “I’ve never known it so quiet, other than at the time of lockdown”.
The UK economic backdrop is not encouraging. The hope is that Rachel Reeves et al, place sufficient economic stimulus to create much-needed growth in the economy. Businesses need to start spending capital, committing to orders and employing people. The key is confidence.
This week, Goldman Sachs reinforces the positioning we have been taking around the need to diversify for US stocks, and they suggest it’s going to be a long, slow road over the next 10 years. We take a look later at the regions and arenas which will likely outperform.
Money continues to pour out of equity markets, particularly AI stocks, but investing is not all about AI is it. Just look at what the emerging market and Asian indices have achieved in just one month!
Finally, another awkward moment for Trump, but the good news here is that the US government shutdown is coming to an end. The bad news is that investors are nervous about what the data will now reveal.
This week’s content:
- A weakening UK economy
- Christmas rate cut on the cards
- A long, slow road ahead for US stocks.
- Rotations and re-allocations
- The Opportunities
- Brits taking money out of the market at record rate
- One-month performance of the major indices
- Just awkward!
- In conclusion
A weakening UK economy
Business investment has fallen by 0.3% and consumer spending is subdued. Now, we have unemployment rising to 5%. We also have inflation remaining ‘sticky’ at 3.8%.
Growth remains weak. The UK economy expanded by just 0.3% in the three months to June 2025, following a 0.7% rise in the first quarter. Forecasts suggest full-year growth of around 1.3% for 2025, then slipping further in 2026, closer to 1% or lower.
As reported by LGT Wealth Management, at the same time, long-term borrowing costs have surged. Ten-year gilt yields are hovering around 4.4- 4.7% and 30-year gilt yields are back near 5.5%, levels not seen for decades. These rising yields reflect concerns that the government is struggling to maintain fiscal discipline, and as a result, investors are demanding higher returns for UK debt.
The Office for Budget Responsibility (OBR) is expected to downgrade productivity and fiscal headroom estimates, creating a “fiscal hole” of around £30 billion, and prompting warnings of a potential “doom loop”: the risk of doing so could further choke off already weak growth.
Continues…
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