The Market Call

In their usual weekly chat, Jeremy and Gareth cover the macro market news and events with a few thoughts on what it all means.

While the UK reporting season is a bit dull, the US Q2 reports have been more positive. There is a long wait for the Autumn Budget in the UK, and many companies are likely to face a long wait for the inevitable tax increases. Lots of comments out there about gambling taxes, IHT and maybe VAT increases.

Overall, the UK economic news this week has been poor but not calamitous.

Equity markets are moving to all-time highs, with powerful rallies seen from the early April lows, particularly in the US. 

Maybe investors are looking ahead to a period of policy easing. However, in bond markets, the message is more mixed. Will the Fed cut rates next month? A stronger-than-expected US PPI print for July indicates that tariff-induced inflation might be on the way, giving Powell a reason, or excuse, to keep rates on hold. 

There is a setup for a big showdown between the White House and the Fed. If Powell is focused on his legacy, then he might want to go out as the man who stood up to Trump and defended the economy from inflation, as Paul Volcker rather than Arthur Burns.

Gareth covers the updates from Xaar and Zoo Digital. Jeremy highlights the warning from Shoe Zone and suggests the shares might have overreacted to the news. Almost certainly meaning there is worse to come!   

Looking ahead, next week, there is UK inflation data, which might increase to 4%. So, it's not the typical environment in which to cut rates. 

We also have Japan's inflation data, which is expected to remain at a tricky 3.3%.

The main event is likely to be the outcome of the talks in Alaska. Will Trump and Putin move the lines on the map of Europe? 

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Gareth and Jeremy discuss macroeconomic developments and how they might impact financial markets.

Plenty of noise around tariffs still, and still difficult to determine any signal. Meanwhile, the Fed and the BoE have both had contentious rate-setting meetings, highlighting the unprecedented way in which like-minded policymakers have differing views about the future path of monetary policy.

Jeremy questions whether we are seeing the end of the era of central bank global orthodoxy. There will be much chat at Jackson Hole about the existential threats to central bank independence and their ability to operate under the auspices of their increasingly fiscally challenged political masters.

Meanwhile, US company reporting is more positive than the newsflow from the UK, although equity markets are grinding higher on stronger capital flows.

On this point, Gareth mentions the divergent fortunes of Sanderson Design, which updated this week, in the US and the UK.

Looking ahead, we can expect a UK unemployment report, which is not likely to be encouraging for Rachel Reeves; US inflation data that is likely to confirm an ongoing rise in the core measure; and a UK Q2 GDP print, again, which might signal bad news for Rachel.

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This week, Jeremy and Gareth talk Turnberry and trade deals - with a backdrop of some tech titans' Q2 earnings reports with such strong results that "American Exceptionalism" seems as strong as ever.  The anticipated dispersion of capital to other venues will have to wait, as AI spend dominates and American giants are mainly the beneficiaries. 

The US FOMC decision (to leave rates unchanged) allowed Jay Powell to highlight that the credibility of the Fed relies on his ability to not bow to political pressure - highlighting that risks lie in both directions.  Jeremy's comment is that reduced rates could let the genie out of the bottle, with inflation expectations significantly heightened and permanently elevated. If the US is run like an emerging market, it could well end up with emerging market inflation - and interest rates - with major implications for all of us.  Meanwhile, Scott Bessant is looking to stablecoin mechanisms and untapped bank liquidity/leverage to help plug the gap in demand for US treasuries... 

Next month sees the Jackson Hole gathering of central bankers - but next week we have the UK MPC interest rate decision.  Markets are expecting a 25 basis point cut - but Jeremy cautions that the UK doesn't often like to jump the gun on rate moves, so the US "hold" this week might spell trouble for those expectations. 

Gareth talks about Progressive clients STV, IG Design Group, Forterra and SDI Group, and Jeremy highlights the strength of the UK market, buoyed partly by bid activity - with £3bn of incoming capital for IPF and Just Group, both of which saw takeover announcements.

Looking to the next week, US non-farm payroll data will show how the economy is coping with both tariff impacts and the changed migration dynamics in the US job market.  US PMI and UK rate decisions are due next week, but the main event is still likely to be Trump-related, whether and how much he provokes genuine and material trade wars with China, Canada, Mexico, Brazil...or others ! 

 
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Jeremy & Gareth, having skipped a week, cover the macro news of the last fortnight.

Trump's new tariff "magic money tree" has encouraged him to ramp up the rhetoric on tariffs. Critically, the inflationary impact of higher tariffs is now coming into focus, impacting the growing feud between the White House and the Federal Reserve. 

Japan has struck a deal with the US, but the EU and China are awaiting their turn. Both of these larger trading partners present difficulties that the market seems relatively sanguine about. The risk that China plays hardball has been all but discounted.

Macro data shows that inflation remains elevated in both the US and the UK. The UK labour market has softened over the past eight months as the economy faces rising taxes in the Budget and the government deals with higher-than-expected borrowing. 

EY has reported on the highest level of UK profit warnings in 25 years. Several businesses, such as Treatt and Judges, have warned due to exposure to the US market and the weaker dollar. The UK market, meanwhile, continues to move higher, which appears to be more a result of capital flows than fundamentals.

Gareth discusses recent results from Van Elle and Severfield in the construction space.

Looking ahead, it is jobs week in the US, which should indicate a further slowing in the labour market. Additionally, the Fed Chair's press conference should be worth watching, even though no one is expecting any movement in rates.

We also receive the BoJ rate decision, which, as ever, can send shockwaves through the rest of the world's financial markets. Let's see.   

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This week, Gareth and Jeremy discuss how an emboldened Trump has raised the tariff temperature while also considering the potential for a version of the future to be one of US economic growth. But whatever the path forward, Paul Tudor Jones' mantra, that all roads lead to inflation, seems increasingly appropriate.

Risk assets continue their march higher with Nvidia and Bitcoin reaching new all-time highs. Nvidia is the first company to be valued at over $4 trillion. 

In the UK, Gareth talks about housebuilder Springfield and merchanting business Lords Trading as prime examples of UK small-cap companies executing well on sensible capital allocation policies.

Looking ahead, it is mainly about inflation with data releases in the US, the UK and Japan.

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Jeremy and Gareth discuss the week's macro market news and developments, comparing the plight of the Trump and Starmer administrations, which are six months and a year in, respectively. The differing outcomes, at least in part, reflect the degree to which the bond markets constrain the UK government more than the US.

We are halfway through 2025 and have had a turbulent Q2. Equity markets are recovering everywhere, but persistent dollar weakness has made the US seem less exceptional than usual.

In H2, the pressure will be on Scott Bessent to deliver some magic in the treasury markets and refinance well over a $1 trillion of longer-duration paper. The stronger-than-expected labour market, as measured by the non-farm payrolls yesterday, is not helpful. He is still wishing for a 10-year rate below 4.

The UK equity market remains attractive, and there are signs that the IPO market may reopen during H2. Let's see.

We discuss Secure Trust Bank's decision to put its motor finance activity into run-off, which investors appear to have welcomed. However, it is a sign that the regulations are driving this lending activity away from the transparency of the PLC world, which would be a shame. 

Looking ahead, we have some UK GDP data, and Wednesday marks the deadline for Trump's tariffs, which could lead to increased volatility. 

WW3 is over, oil prices are plummeting, inflation is dead, Daddy Trump is putting the world back together, including doing a trade deal with China and getting interest rates down, even if it means sacking the man who is in his way. And the UK smaller company sector has discovered the Bitcoin magic money tree and is bathing in the prospect of free money. What a time to be alive! What could possibly go wrong?

This week, Gareth and Jeremy spend some time discussing the new Bitcoin Treasury Company model being developed among a cohort of UK smaller companies. Is it magic money or a dangerous bubble?

Gareth also covers updates from Sanderson Design, Gear4Music and Vertu Motors.

Next week is jobs week in the US, and we will get inflation data for the Eurozone. Watch for a non-farm payroll number below 100,000, which the market is likely to take positively.

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This week, Jeremy and Gareth discuss the market reaction to Trump's potential intervention in the Israel-Iran conflict, as well as interest-rate "holds" from the US and UK in the face of ongoing inflationary pressure.  Japan continues to confuse - and to present major risk - with high inflation and close-to-zero interest rates, while the US/Japan trade deal is still conspicuous by its absence. 

Progressive client news focussed on one stock, Oxford Metrics, whose H1 results statement highlights H2 weighting along with a skew towards US academia - a market segment clearly under pressure from Trump's defunding of large chunks of US educational budgets.  Smart Manufacturing growth will, over time, diversify the group away from these risks, but investors are worrying about the near-term. 

Following a recent IPO, the UK now has its own version of the US-based Strategy (fka Microstrategy) - a "bitcoin treasury" business known as The Smarter Web Company. The stock has rocketed post its recent float, and Jeremy and Gareth discuss the fact that, from almost all bubbles and collapses, there are persistent changes, and some survivors...

Speaking of survivors, Thomas Moore's fund at Aberdeen has now moved to trading at a PREMIUM to its NAV - after a decade of discounts...and the fund is raising new capital. 

Evidence of green shoots then, both in terms of micro-cap investor risk appetite, and investor perceptions of value at a steady and high-quality long term investment trust. 

Next week looks quiet - US GDP and inflation data will allow Trump to blame "Too Late Jay" Jerome Powell (and maybe Joe Biden) although clearly events in the Middle East will be key. 

This week, Jeremy and Gareth talk about the dramatic overnight events in Iran, as Israel's actions have led to spikes in the prices of oil and gold, but not driven the usual "flight to the dollar" in any meaningful way - the USD is trading at three-year lows. Does this signal a loss of status as a safe haven, or is it simply that investors expect the conflict to be contained and localised? 

More broadly, we have seen the US / China trade deal being pieced together, although President Trump couldn't help himself launching some other tariff threats even as the China situation appears to be stabilising.  Look for an interesting discussion next week about Jay Powell's competence if the FOMC dares to not lower rates...

On the UK front, Jeremy makes the point that the ongoing M&A departures are nowhere near to being replaced by IPOs - by a factor of 30:1, based on some work by Peel Hunt.  UK stocks are disappearing at a steady (and worrying) rate - those who remain are clearly "resilient" as we discussed previously, and they're becoming more and more scarce....hopefully this scarcity makes them attractive - a positive sign for valuations among those not (yet) acquired by mainly American bidders. 

We had Progressive client news from Gear4Music, who acquired some cut-price assets from a failed competitor, Idox, who saw 9% y/y growth in their order book in the H1 they reported, and Intuitive Investments Group who raised just under £10m to propel activity in Hui10, a business involved in modernising and streamlining the antiquated Chinese state lottery.  

Next week we have UK inflation and a rate decision (likely no change), and the US Fed rate decision (likely no change but watch for Trump's response).  Also, keep an eye on Japan -  they have a rate decision on Monday and inflation data on Friday; hopefully no surprises, although as Jeremy reminds us, at some point Japan could make headlines again.  In the meantime, we hope that the Middle East sees a degree of calm returning.

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This week, Jeremy and Gareth and describe what felt like a more-normal few days, with signs of a slowing US economy and falling bond yields.  This was suddenly upended by the public and bitter (and very rapid) falling apart of the Trump-Musk relationship.  Musk's backing of Trump was at least partly predicated on promises of a smaller state, but Musk (and DOGE) have failed to deliver the meaningful cuts promised.  Now we have Musk shouting from the sidelines about the unsustainability of the budget deficit, which could lead to downward pressure on the dollar, upward pressure on yields and increased expectations of inflation - hence buying of Gold. 

The UK has had growth forecasts downgraded by the OECD, to levels well below the OBR (and presumably Rachel Reeves's) expectations - so the likelihood appears to be further tax increases and spending cuts.  The Mansion House Accord and the Pensions Investment Review give some (but potentially morally questionable) impetus and cause for optimism - but Wise Technologies plans to move to a main US listing, and a pulled cobalt-related IPO bring us back to earth. 

Progressive stocks mentioned include IG Design Group, tinyBuild, SDI, all with news, but most broadly relevant is Van Elle whose early-stage involvement in housebuilding projects is being delayed by building regulator logjams....alongside earlier news from MJ Gleeson this points to a more-cautious view on the recently-rosy prospects for housebuilders. 

Next week is all about US data - non-farm payrolls, inflation data and sentiment from the University of Michigan...

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