Given the significant turbulence we had during Trump’s Tariff frenzy, global markets have been remarkably resilient. The US has continued to outperform all other stock markets, with the tech sector, notably the magnificent 7 (Alphabet – Google, Amazon, Apple, Nvidia, Meta, Microsoft and Tesla) leading the charge. Their collective value is $22 trillion, so their market capitalisation is greater than the entire stock market value of the UK, Japan and Canada combined!
Concerns have been raised by the elevated valuations of the leading AI companies. However, markets have, to a certain degree (apart from a few recent notable bouts of volatility), shrugged those concerns off. There is no doubt of the dominance of a small number of tech companies which have led stock market values this year, however; they continue to produce sound levels of profit despite their spending on AI infrastructure, with Nvidia delivering a stellar report with increasing sales by 62% year on year.
Turning to inflation, it remains at elevated levels with the UK the highest of the G7 nations at 3.6% (nearly twice the target rate set by the Bank of England). The US inflation rate has been surprisingly low at 3.0% given the tariff effect on imported goods. However, this could well rise in the coming months as the price rises passed on by manufacturers filter through. Eurozone inflation has remained relatively stable, just above target at 2.5%.
So far GDP has been sluggish to say the least, with it growing by just 0.1% in the three months to September 2025. UK unemployment rose to 5%, the highest level since 2021. If the economy weakens more than expected, then this will put pressure on the Bank of England to reduce rates, even with well above inflation figures.
US unemployment has also risen to 4.4%, the third consecutive rise. If the numbers continue to deteriorate, the Federal Reserve will be expected to reduce interest rates in order to maintain consumer confidence and stabilise growth prospects.
The much anticipated UK budget was a rather dull affair, apart from the early leak from the Office of Budget Responsibility! Much of the tax rising will not come into effect until tax year 2028/29, whilst it has reassured the bond markets, which saw the cost of government borrowing falling, it did little to boost confidence with voters, with most calling it a ‘tax and spend’ or ‘spend now, pay later’ budget. Furthermore, business has been disappointed with the lack of a growth agenda to help stimulate the economy.
As the weak economic data coming through, the oil price has continued on a downward path and is currently trading below $60 a barrel, which is roughly 13% down from last year…good for inflation but shows the oil markets’ view on global economic activity and general demand for oil.
In summary, despite below par growth and market shocks, global stock markets have performed well, we continue to monitor events and ensure that the portfolios remain well diversified, with adjustments made to rebalance them when appropriate.