26 Aug 2025
Despite daily headlines of “uncertainty” internationally, stock markets were rather benign in Q2. The stand out was a gain vs Q1 of 11.2% for the FTSE 250 which implies to me that there were value seekers around. All UK indices are up by 7% over the last year.
I hear many punters trying to rationalise the continuing support for equities (AI, of course) but I simply see a great deal of defensive behaviour. Our current government appears to understand less than nothing about private investment and has blunderingly discouraged it at every opportunity. When the question is asked of who would like to buy into the Milliband Green Fund, no hands go up.
There is also understandably little appetite for government debt. There is a price for everything, of course. The yield on 10 year gilts continues to creep up (now 4.67%) as the public finances continue to deteriorate. A year ago the government could borrow at 3.8%. As the debt and the servicing costs both keep rising, we are trapped in a vicious circle. Why lend today when you could probably lend more profitably tomorrow?
Companies are forming defensive circles and protecting themselves and their shareholders. An example is BP (or bp) which I wrote about here.