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The United States Secretary of the Treasury, Scott Bessent, was recently quoted as saying, “I think 2026 will be a very good year”. On his way back from Davos, he popped into his son’s and my boy’s school and gave a talk. When I asked my admittedly very bright 17-year-old what he thought, he said he didn’t think he was very convincing, particularly when Trump came up!!!

As we move into 2026, it feels much the same as last year in that the Trump train is creating ever greater volatility in all markets with his now known as the ” Taco Trade” (Trump always chickens out); I suspect I should quit there, whilst I am still ahead!

More seriously, whilst the forecasts have been for a reduction in growth to 1.8% in 2026, the US grew in the third quarter of last year at an annualised 4.3% and is not anticipated to slow down by much in the 4^th quarter despite the record Government shutdown.

The Big Beautiful Bill, enacted last July, incorporates retrospective and future tax cuts for many Americans, which will start to flow through shortly. The funds from the shutdown will also now be spent. The US has also made substantial cuts to its tax service, which is likely to result in more money staying in people’s pockets rather than going to them!

Interest rate cuts over the past 18 months are significant and again now only starting to pass through into the Economy with more likely this year.

This, along with fiscal reform in Germany and consumption boosts to the Chinese economy, along with the Japanese economy making headway and a very low oil price by recent standards, sets the stage for a good year of Economic growth to back up market returns.

Maybe Mr Bessent (albeit with a volatile Journey) will be right. In the meantime, we will continue to focus on growth and income globally in the highest quality investments we can, whilst taking a long-term view as always.

Please may I remind you, nothing in this note represents personal financial advice and should you wish to take any action as a consequence of it, please talk to your authorised GT Wealth Management Financial Adviser first.

As we move towards Autumn and hopefully, for my garden at least, the return of some English rain! I hope you have all enjoyed the summer warmth.

If market returns had been low this year, although we were reasonably optimistic, few would have been surprised. At the outset, it appeared that equities would struggle, as markets were worried by a growing list of threats, including tariffs, concerns about the size of spending on AI, fears of recession, increasing taxation, the slow pace of interest rate cuts, and the resurgence of inflation.

In April, Trump’s early tariff announcements had markets falling heavily; since then, however, they have recovered substantially in many cases to record highs.

The AI spending fears have been calmed by the strength of performance of the companies involved; people are becoming more accustomed to the volatility in tariff announcements and are working to reduce their impact.

There is a realisation that the trade issues between China and the US are not a one-way street. China now dominates some sectors, such as rare earths, which the US needs, and at the same time, US trade with China now represents less than 2% of Chinese GDP.

The US “big beautiful bill” represents significant tax cuts, which should also give a short-term lift to the US economy. The saying never bet against the US despite all these issues, still holds true at this time.

The risks, however, clearly remain of trade wars slowing the global economy, inflation taking off again, and higher valuations in some sectors of the markets not being met by the performance of the underlying business.

Our response, as always, remains to focus on good diversification and high-quality companies/assets bought at sensible prices, which we believe will continue to generate good long-term returns.

 

The Trump train rolls on, creating volatility in markets and uncertainty in Economies. We have been seeing significant changes since his election. Equities have been volatile, the dollar has been weakening, and bond yields have been rising. The opposite of what you would expect.

 

The flip side of this has been a turnaround in investors’ views of Europe and China. What has also changed is that the jury is now out on what the implications for this are for the long term.

 

The changes reflect increasing concern over the US Economy, the uncertainties with on/off tariffs, whether they are a bargaining tool or going to be more permanent, and the effects on employment and incomes due to the attempted reduction in US Government spending.

 

The potential growth that could arise in Europe comes from a major change that we are seeing in Germany’s stance on spending. China is also looking hard at how it reacts in a drive not to let US action damage its economy, with more stimulus and reform being enacted to reduce the risk of a stagnant economy.

 

The American Government is arguing that the changes they are making are part of a volatile ride to a better place with stronger/fairer terms of trade and better use of public money, freeing up resources for the Private sector and allowing for better growth in the private sector. The recently voted through tax cuts are reigniting concern as to the US long-term debt trajectory.

 

This takes us to one of two places: Europe and China actually implementing a growth agenda, the US model working, leading to higher overall global growth; alternatively, Europe and China hesitating, whilst the changes in the US lead to a deceleration of its Economy due to loss of confidence from consumers and businesses.

 

Markets are now reflecting the uncertainty that Trump is creating. In the meantime, we retain our cautionary approach. We have consistently held lower-risk assets over the past two years, and we trust this will continue to help portfolios avoid the worst outcomes.

 

by Tim Wall, Investment Director

 

Market & Investment Review – The Trump Effect

 

As I and many others have said, the most likely outcome from Trump is going to be volatility, and he has so far not disappointed! However, we have also been seeing unexpected changes in markets since his election. US shares have been declining, the dollar has been weakening, and bond yields have been falling (essentially interest rates).

 

The flip side of this has been a turnaround in investors’ views of Europe and China. What has also changed is that the jury is now out on whether all this is good or bad news for the long term.

 

The changes reflect increasing concern over the US Economy, the uncertainties with on/off tariffs, whether they are a bargaining tool or going to be more permanent, and the effects on employment and incomes due to the attempted reduction in government spending.

 

The potential growth that could arise in Europe comes from a major change that we are seeing in Germany’s stance on spending. China is also showing determination not to let US action damage its economy, with more stimulus and reform being discussed to counter falling prices to avoid the risk of a stagnant economy.

 

The American Government is arguing that the changes they are making are part of a volatile ride to a better place with stronger/fairer terms of trade and better use of public money, freeing up resources for the Private sector and allowing for better growth in the private sector.

 

This takes us to one of two places: Europe and China actually implementing a growth agenda, the US model working, leading to higher overall global growth; alternatively, Europe and China hesitating, whilst the changes in the US lead to a deceleration of its Economy due to loss of confidence from consumers and businesses.

 

Markets are now reflecting the uncertainty that Trump is creating. In the meantime, we retain our cautionary approach with a bursting of the recent bubble in higher-risk assets, and we trust this will continue to help portfolios avoid the worst outcomes.

 

Albeit time moves fast, and so I hope the new year has started well for you. My theme for this letter is  “Buckle-up” because I have been saying for some time now that I am not convinced Trump is all bad for markets, however, I believe it will be a truly volatile ride!

He has certainly come out of the blocks at full speed and we are starting to see the effects of this in markets. The biggest impact, thus far, is on the highest-risk assets, which is to be expected, with a coin on the blockchain losing over 25% recently. This plays to our theme of trying to own the highest quality of assets we can.

Staying with America, the other area in which things are fast changing is in Tech and AI.  Recently, China shocked the tech world with the launch of a seemingly competent AI at a tiny fraction of what the American incumbents are spending. This is another area where, whilst we believe in the adage ‘never bet against America’, we still think we are right to have been be cautious of the valuations of some tech businesses.

When thinking about investment, I think that the most telling statistic is that over the past twenty years the US share of Chinese exports has fallen from 50% to 15%. China has developed new trading relationships, particularly with what is now known as the Global South, and our clients with interests in places like India have never been more bullish about its prospects.

Meanwhile, Inflation is broadly stable, so interest rates having been reducing are likewise largely on-hold awaiting to see what happens next.

One area where all portfolios have been challenged is Infrastructure, and so it was encouraging to see a major fund bid for at a nearly 30% premium to its prior share price, which will hopefully help the others in this sector over the near future.

Geopolitics remain a challenge and humanitarian issues look likely to be hit further by Trump’s cost cutting agenda. This aside, we remain broadly positive about markets for the immediate future.

Please may I remind you, nothing in this note represents personal financial advice and should you wish to take any action as a consequence of it, please talk to your authorised GT Wealth Management Financial Adviser first.

 

 

 

Summer is here and encouragingly, whilst the geopolitical risks remain, markets have been in a broadly positive mood across the world with inevitable bumps along the way.

 

Although the super seven tech stocks in the USA have been responsible for the majority of increasing market valuations, in particular, of growth portfolios in recent years, a more levelling out of performance across the board is welcome, particularly for globally diverse portfolios, such as yours.

 

In this regard, on reflection of the above I think relevant for discussion at our next meeting is the old adage that you ‘concentrate portfolios for growth and diversify them for capital protection’ whereas, in reality, we all want both and so I think it is important that we re-affirm with you what your priority is.

 

Across the world, the trajectory of Economic Growth has been variable so far this year with the US, Asia, Africa & India performing strongly, Japan & China well with the UK & Europe moving more slowly.

 

Inflation, in goods and services has likewise, diverged, creating a dilemma for central banks as to when and how much to cut interest rates resulting in variations in the timing. The cut on the 1^st August here in the UK is a welcome sign of progress. Higher inflation has historically been associated with more short-term market volatility, which is something we will have to continue to accept.

 

This year, the many outcomes of the many Elections globally will have an impact which we will no doubt have to adjust for in due course.  In the UK we now have a Labour government and in America, the race (an increasingly close one) is on to see what comes next.

 

In the meantime, the higher interest rate environment continues to allow us to invest for a better income, at lower-risk, for funds we manage with an income objective. It has also created the opportunity in higher-risk portfolios to invest in some quality assets at very attractive prices, which have fallen out of fashion/favour over the last two years, by going against the herd and taking a longer-term view.

 

Debt levels across the Economy, Government, Corporate & Individual remain at very high levels, with higher interest rates and some restraints on the availability of credit. Taking debt into account when drawing up portfolios, in our view, remains very important.

 

Geopolitical risk, meanwhile, remains a concern from an Economic perspective, whilst not taking lightly the humanitarian one.

 

My thoughts remain as always in that whichever direction the world moves, the key to protecting and hopefully growing your wealth is to take a longer-term view, which has always held true, by owning the highest quality assets we can for you, whether it is in Government debt or Equities, and be prepared to change strategy as markets indicate.

 

by Tim Wall, Investment Director

As Summer approaches, encouragingly, whilst the geopolitical risks remain substantial, markets have started to move upwards across the world.

 

Up until now the super seven tech stocks in the USA have been responsible for a large element of the increasing share valuation, in particular, of growth portfolios in recent years. A more evening out of performance across the board is thus welcome, particularly for globally diverse portfolios, such as yours.

 

Across the world, the trajectory of Economic Growth has been variable, so far this year with the US, Japan and China performing strongly, whilst the UK and Europe moving ahead more slowly.

 

Inflation, likewise, has diverged, which is likely to result in variations in the timing of any possible reductions in interest rates.  Higher inflation has historically been associated with more short-term market volatility, which is something we will have to continue to accept.

 

History tells us the timing of rate rises and cuts is often wrong. This year, the many Elections (the need to create a feel-good factor) which are fast approaching in the US, here in the UK, and in many other parts of the world are likely to be significant.

 

In the meantime, the higher interest rate environment (more normal) enables us to invest for a better income, at lower risk, for funds we manage with an income objective.  It has also created the opportunity in higher-risk portfolios to invest in some quality assets at very attractive prices, which have fallen out of fashion/favour over the last two years, by going against the herd, and taking a longer-term view.

 

Debt levels across the Economy, Government, Corporate and Individual remain at very high levels, with higher interest rates and some restraints on the availability of credit. Taking debt into account when drawing up portfolios in our view remains very important.

 

Geopolitical risk, meanwhile, remains a serious and rising concern from an Economic perspective, whilst not taking lightly the humanitarian one.

 

The final conclusion we come to will really be no surprise to those of you who know us well, is that whichever direction the world moves in, the key to protecting and hopefully growing your wealth is to take a longer-term view, which has always held true, by owning the highest quality assets we can for you, whether it is in Government debt or Equities, and be prepared to change strategy as markets indicate.

As 2024 unfolds, I reflect on where we are and based on the presumption history always repeats itself, I ask after recent events, are we looking into a period like the 1920’s, 1970’s, or a repeat of the last few years? As each of these may require a somewhat different approach to  your portfolio going forward.

The PE (the number of years earnings it takes to get your money back) of the now called super seven, the top tech stocks in America, is now over 50! They are responsible for a large element of the increasing share valuation of growth portfolios. Whilst most of their businesses continue to perform strongly. This could represent a repeat of the 1920’s, when it took a very long time after the events of 1929 for investors, who were over exposed to the equivalent assets at that time, to recover.

The possibility that growth may disappear with inflation remaining elevated and ongoing energy issues, commonly known as stagflation, looks like the 1970’s.

The view that interest rates will fall steadily this year alongside falling inflation with growth being sustained  would be the perfect outcome .  At the moment encouragingly America is successfully on this path. The rest of the world less so.

Whichever it is, higher inflation is historically associated with more short-term volatility in markets, which is something we will have to get used to, and relearn to live with.

Unfortunately, history tells us Governments tend to get this wrong, often due to other influences, such as Elections (the need to create a feel-good factor) which are fast approaching in the US, here in the UK, and in many other parts of the world.

In the meantime, the higher interest rate environment (more normal) enables us to invest for a better income, at lower risk, for funds we manage with an income objective.  It has also created the opportunity in higher risk funds, to invest in some quality assets at very attractive prices, which have fallen out of fashion/favour over the last two years, going against the herd, and taking a longer-term view.

Debt levels across the Economy, Government, Corporate and Individual are at very high levels, with interest rates much higher and the availability of credit starting decline, taking this into account in drawing up portfolios is a very important factor.

Geopolitical risk, meanwhile, remains a serious concern from an Economic perspective, whilst not taking lightly the humanitarian one.

Taking all this into account, it is likely more changes to portfolios will be the norm for the immediate future , with a view to capturing the best opportunities that arise from all of this.

The final conclusion we come to will really be no surprise to those of you who know us well is that whichever of those scenarios is the outcome, the key to protecting and hopefully growing your wealth, is that which has always held true, and that is to take a longer-term view. Own the highest quality assets we can for you, whether it is in Government debt or Equities, and be prepared to change strategy as things emerge.

As we sit indoors with rain and overcast skies whilst watching stories of holiday-makers suffering wildfires and 45-degree heat in Europe! the world seems full of contradictions.

Markets similarly are performing in unexpected ways with tech taking off at a tear this year whilst some safer assets, after a short resurgence, are again lagging.

The key issues we see to pay attention to are demographics and changing climate over the long-term, inflation, interest rates and political fractiousness over the short to medium-term.

The fastest ever rise in interest rates has, so far, had a mixed effect on its target inflation. This is perhaps because savings outnumber borrowings by £4 to £1, and so rising interest rates, some would argue, is mildly inflationary.

The biggest concern seems to be that having left things too long, Governments will now go too far, for one of the challenges is that very few of the decision makers have worked in inflationary times. This week, we had a visit from a major financial institution proudly pointing out that two of their Managers had just passed their twenty-year point managing money for the firm. My thought process was, so they have no experience of management in inflationary periods!

The splintering of the world, economically, is undoubtedly going to change opportunities & threats to both Economies & Countries, and of course, therefore, markets. Whilst it has been very profitable and is common to hear the phrase “never bet against America” and all we hear about China in the Western media is that “led by a faltering property market, it is in the doldrums”, however, the fastest growing world trade is between China, Africa, South America and the Middle & Far East. In the last year, numbers such as an increase in exports from China & some of these places between of 25 & 50% is not uncommon, with up to half of this being goods that can be used by those countries to make things themselves, so we need to be mindful of a changing world.

Meanwhile, the US clearly remains a world leader in Tech & Artificial Intelligence (AI), which everyone is now talking about. History tells us the early pioneers “lose everything”, and after a couple of years, people go what “was that all about” and then ten years later it has changed the world. So, at this time, we should be making our haste slowly, to quote my father!!!

Businesses, who are after twenty years of abundant & ever cheaper money are over levered, will clearly struggle.

Ultimately, quality Companies will always win out and, with interest rates having risen, investing in these and quality Bonds (Loan stock) using Exchange Traded Funds (ETFs) to keep costs low & diversification high, we believe remains the best approach.

In the meantime, let us hope some of that warmth, but not much, comes here for the second part of the Summer and markets give us the same.

As we move into the year markets have got off to a strong start, however, for the next six months at least, I believe they will continue to be volatile. Inflation, Energy issues, the War in Ukraine, Global food challenges, and Covid, are all still very much with us and investment markets always hate uncertainty.

China’s recent decision to abandon its zero Covid policy very abruptly, whilst hopefully rebooting its Economy this year is currently causing some further disruption in supply through absenteeism in factories, due to the virus.

There are mixed views on the extent Economies & Individuals are going to be challenged by the rising interest rates necessary to combat inflation. To date, they appear reasonably robust, demand is steady and, despite the tech industry layoffs, there are still a lot of unfilled job vacancies across Western Economies. However, during the year, the ongoing and largest rises in interest rates in a decade will undoubtedly have an impact.

The switch to renewable energy is primarily challenged by the very long time it takes to gain permission for new projects and the high demand for certain raw materials it creates. The traditional energy industry remains caught in the crossfire between ‘those who see it as critical to increase supply in the short-term, at least’ and ‘those who are adamant that we cannot afford to on climate grounds’. The mild winter and heroic efforts to replace Russian supply in Europe has worked in the short-term. However, it will remain a major challenge for Europe to obtain affordable energy, for its industrial base for the foreseeable future.

We are seeing growing pressure to increase taxation to cover Government deficits, social expenditure and to reduce inequality, particularly in the UK. As I write this, the largest strikes in a generation are taking place. Consequently, reviewing our clients tax positions (income & inheritance) remains high on our agenda, in particular for those for whom minimising taxation is important when passing on assets.

The blockchain & cryptocurrency market continues to be in complete turmoil. It is estimated that 1 in 10 people in the UK put some funds into this arena. It remains an area we have NOT participated in for clients, apart from a very small exposure to blockchain technology in our global portfolio. Our view remains that the technology is interesting and may have real value, (one of Switzerland’s largest financial institutions is now using the blockchain to settle market trades more quickly and at lower cost), but the risk to individuals of engaging in this largely unregulated industry leave it uninvestable for all but those who are looking for an outright gamble.

We now believe that there are grounds for optimism in markets, as the consequences of these issues become clearer.

Our approach to this is to continue to take a long-term view, be clear about what is short-term noise and what really matters in respect of your portfolio. The key as we see it is to continue look for the highest quality investments we can find, seek to control the cost of portfolios using Exchange Traded Funds (ETFs), and avoid trading unnecessarily.