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    Tag: bonds

    Market update: what’s happening and what it means for you

    Posted on by Rebecca Campbell

    As the summer months rolled in, global financial markets seemed to take a breather from the drama of trade tensions and political headlines. Instead, investors shifted their focus back to the basics: how companies are performing, how economies are growing, and the ongoing excitement around artificial intelligence (AI).

    Economic overview: mixed signals across the globe

    While most regions saw little change in economic growth, the United States raised some eyebrows. A major revision to job data revealed fewer new jobs than previously thought, and economic activity slowed during the summer. This led to increased concern about the health of the US economy.

    The US dollar, which had been weakening throughout 2025, found some stability during the quarter. It even regained some ground against the British pound, which is important for UK investors with exposure to US assets.

    Inflation: a growing concern

    Inflation (how fast prices are rising) is becoming a bigger issue, especially in the UK. We’ve been watching this closely, and now it’s clear that inflation could reach double the Bank of England’s target before the end of the year. That means everyday costs could continue to rise, affecting everything from groceries to housing.

    In the US, inflation is also creeping up. However, many companies are choosing to absorb these higher costs themselves rather than pass them on to consumers, likely due to uncertainty about the economy.

    Bond markets react

    Bond markets, which often signal investor expectations about inflation and interest rates, responded to these concerns. Yields on longer-term bonds rose in many countries, reflecting uncertainty about future inflation. In the UK and US, government spending plans added another layer of complexity.

    In the US, the Federal Reserve (America’s central bank) responded to weaker job numbers by cutting interest rates in September, a move aimed at managing risk and supporting the economy. However, not all Fed officials agreed on the path forward, with some suggesting rates should fall below 3% by year-end.

    Back in the UK, the Bank of England faces a tough balancing act. Inflation is proving stubborn, especially in areas like housing and services, making it harder to decide whether to raise or lower interest rates. This uncertainty caused the UK bond market to shift slightly, as investors tried to make sense of the situation.

    Stock markets: AI and emerging markets shine

    Global stock markets saw a shift in leadership this quarter. The US continued to perform well, driven by enthusiasm around AI and related investments. But it wasn’t the only star.

    China stood out, with its tech sector attracting investors thanks to lower valuations compared to the US. Taiwan and South Korea also delivered strong returns, although India’s stock market lagged behind.

    Closer to home, UK and European markets made gains, especially among larger companies. Japan’s market also picked up, helped by a new trade deal with the US and strong company fundamentals, including widespread share buybacks.

    Looking ahead: what should investors expect?

    The more positive mood over the summer has pushed many stock markets into double-digit returns for the year so far. However, UK investors with overseas holdings may have seen some of those gains reduced due to the weaker pound.

    There’s an interesting contrast between stock and bond markets, especially in the US. While bond investors are worried about slowing economic growth, stock investors remain optimistic, focusing on AI innovation and increased merger and acquisition activity.

    Bond markets often spot trouble before stock markets do, but they can also overreact. In the UK, bond investors are more focused on inflation and how it might be controlled without hurting the economy.

    As we head toward the end of the year, expect more headlines about inflation, interest rates, and economic growth. But remember: not all noise is worth reacting to. Staying focused on long-term goals and maintaining a well-diversified portfolio is often the best approach.

    Get in touch

    If you would like to discuss your investments in more detail, or require tailored advice specific to your situation, please get in touch by emailing financialplanning@pmm.co.uk or by calling 01254 679131.

    The value of investments can fall as well as rise. You may not get back what you invest.

    The information contained within this article is for guidance only and does not constitute advice which should be sought before taking any action or inaction.

    Is it a good time to invest during a recession?

    Posted on by Helen Buchan

    With predictions that we could be facing the longest recession since records began, we take a look at whether it can be a good idea to invest during a recession.

    If the moves by the central banks to raise interest rates fail to reduce inflation, it is looking highly likely that higher interest rates could further weaken economic growth.

    However…

    Successful businessperson, Warren Buffett, once said that it is wise for investors to be “fearful when others are greedy, and greedy when others are fearful.” It may be sensible to take a contrarian view on stock markets: when others are greedy, they may continue to pay a large price tag to buy a share or asset. When confidence is high, people continue to invest and don’t think about downsides. When others are fearful, it may present a good value investment opportunity. You buy more for your money when prices are low! This doesn’t mean to say that values may not continue to fall for a period of time, but it does mean that over the longer term you may derive good value from buying low.

    The impact on investments

    Generally, recessions mean lower stock market prices, therefore higher levels of volatility than normal. The price of a stock should represent the current value of a company’s future cash flows and cash flows are created by the earning of a company. If there is lower spending in an economy, then this means lower earnings for businesses. This may also result in lower dividend distribution from the company to shareholders.

    If perceived earnings are lower, then a company’s share price is also going to drop. With the increased chances of a business struggling or worst case, going bust due to the challenges faced in a recession, the markets also consider this as a risk in share prices.

    Not all stocks are the same

    Different stocks will go up or down more than others in certain economic conditions. Stocks which are more sensitive to the overall health of the economy are often referred to as cyclical stocks and are those which will suffer from a reduction in consumer spending or unemployment rates rising e.g. retailers and airlines, with people spending and travelling less.

    On the flip side, are those who provide something which consumers consider essential, such as utilities and food. These are often referred to as defensive companies or defensive shares and would generally fare better and fall less. Albeit, utilities have seen more volatility than usual due to an unusual set of circumstances.

    Diversification

    It is key that investors ensure they have a portfolio capable of withstanding an economic recession rather than trying to time the market. This means including assets which are likely to do well during economic growth, but also some that are likely to do better during a recession – this is known as diversification! Although it is essential to carefully consider the risk profile, it is usually good to include a broad mix of equities, bonds, and some alternatives. It may also be a good idea to consider a variety of sectors and themes too.

    One rule that is often viewed as a simple way of achieving diversification, is the 60/40 rule. This means having 60% invested in shares and 40% in other diversifying assets and is seen as a sensible theory for trying to smooth out any peaks and troughs of investing in the stock market.

    Bonds

    One of the most common assets that usually perform better during a recession, is government bonds. There are a number of reasons why bonds typically do better and are generally seen as safer than stocks. Governments of advanced economies tend not to default and the income produced by a bond is fixed, this means that during a recession, investors often rush into bonds which in turn can bid up their prices.

    However, it has not been a good year for bonds so far with rising inflation and higher interest rates causing bond prices to plunge. This has resulted in bonds and shares falling together and having a negative impact on those portfolios working to the 60/40 strategy.

    The outlook of bonds therefore rests largely on inflation and how inflation is likely to be impacted by a recession.

    How can we help?

    As always, every individual situation is different, and it is vital to get advice based on your exact circumstances when considering any type of investment. PM+M’s Managed Portfolio Service, is a bespoke investment portfolio produced by us, and managed in collaboration with AJ Bell, to make your life easier.

    Working together, we continually monitor the market and conduct ongoing due diligence in relation to the funds held within the Managed Portfolio Service portfolio. We proactively make fund and asset allocation changes when we feel as though this is necessary in order to manage volatility and drive long term growth. Our Managed Portfolio Service aims to provide you with the best combination of investments to maximise your potential returns with a level of risk that suits you.

    If you would like to discuss your investments in more detail, or need some tailored advice specific to your situation, including more information on our Managed Portfolio Service, get in touch by emailing financialplanning@pmm.co.uk, or by calling 01254 679131.

    The value of investments can fall as well as rise. You may not get back what you invest.

    The information contained within this article is for guidance only and does not constitute advice which should be sought before taking any action or inaction.