Things are definitely hotting up whichever way you look at the moment. Local politics, geopolitics, the weather, the football world cup, the US Open golf [Ed – windier there rather than ‘hotting’!!] to say just a few.
I have the feeling as though there will be some politics in this week’s bulletin as already headlines in CityWire are that‘Taxes will go up:’ Advisers concerned by Burnham PM bid.
We don’t know anything for definite, but the 10-year gilt yield rose slightly to 4.82 per cent following the news that Labour’s Andy Burnham had won the Makerfield by-election, setting the stage for a potential leadership contest. Burnham’s decisive win has fuelled speculation over a potential Labour leadership contest and the future of economic policy, although bond markets have so far reacted relatively calmly to the result.
Meanwhile, the UK borrowed £23.3bn in May, according to official figures, up almost a third on the same month last year. May’s borrowing figure — the difference between spending and income from taxes — was £5.6bn higher than forecast by the Office for Budget Responsibility (OBR), the independent fiscal watchdog.
Uncertainty over the impact of high energy prices has led the Bank of England to hold interest rates at 3.75%. It is the fourth meeting in a row that the Monetary Policy Committee (MPC) has decided to leave rates unchanged. Bank governor Andrew Bailey said recent drops in oil prices were “encouraging” but high energy prices during the war had still left “inflationary pressure in the pipeline”.
These helped contribute to a disappointing week in the markets in the UK. However, the initial news coming out of a Memorandum of Understanding between the US and Iran helped all the major US markets have a positive week, even though it was a short trading week due to the Juneteeth federal holiday on Friday.
Market Commentary
The following is from Louis Coke, Director of Private Clients at Charles Stanley:
Since my last email, events have moved on and so I would like to take this opportunity to share our latest thoughts with you. I hope that things are now calming and as such, you should receive fewer emails from me!
The US and Iran have agreed an initial deal aimed at ending the conflict in the Middle East, marking a potentially significant step towards de-escalation. The proposed 14-point plan provides a formal framework for negotiations and offers grounds for cautious optimism in markets. Under the agreement, both sides will enter further talks over the next 60 days (extendable by mutual consent), with key provisions including the reopening of the Strait of Hormuz, lifting of the naval blockade, a complete cessation of military operations, a $300bn reconstruction programme for Iran and the eventual removal of all US sanctions. Importantly, any final settlement would hinge on the US and Iran reaching a lasting nuclear deal, while the unfreezing of assets would be contingent on progress toward that outcome.
The move towards a structured dialogue shows a shared interest in stabilisation and has already contributed to the recent easing in oil prices. If sustained, this should help to moderate inflation expectations, reducing pressure on central banks to raise interest rates.
Historically, the establishment of a credible roadmap to peace or resolution has often been sufficient to calm market sentiment and reinforce confidence that escalation risks can be contained. However, it is important to balance this improved outlook with a degree of realism. Agreements of this nature are only as robust as their implementation, and the path from initial signing to a lasting resolution can be uneven, particularly with Israel promising to act in line with US instructions.
Markets are therefore likely to remain sensitive to short-term developments on this front, particularly around adherence to the terms, the pace of negotiations and any unexpected setbacks. While the direction of travel is encouraging, it would be premature to assume a smooth or rapid resolution. Such is the nature of this conflict that just this morning, the talks between the US and Iran have been called off due to an Israeli strike in Lebanon. Whether this derails any agreement or just postpones it, we will see. At the time of writing, we still believe we are in the middle scenario of the three in the table below.
| Scenario | Oil Price | Likelihood |
| Ceasefire / De-escalation: A ceasefire (or durable stand‑down) keeps the Strait of Hormuz open with no material disruption to oil or LNG flows. Markets remain sensitive to headlines, military movements, and political statements, but there is no sustained interruption to shipments. Energy prices continue to reflect a degree of geopolitical risk, though not one associated with a physical supply shock. | <$80 | 30% |
| Protracted escalation: The Strait of Hormuz remains open for limited transit, but repeated interference disrupts shipping for several weeks, reducing traffic and raising costs. This results in a modest supply loss that can be largely offset through storage drawdowns and alternative transport channels. | $80-$100 | 50% |
| Strait of Hormuz closure and escalation: Iran effectively halts transit through the Strait for a meaningful period, forcing large-scale rerouting and an acute energy supply shock. The shock is compounded by direct strikes on energy infrastructure. Inventories are depleted, policy responses intensify, and prices re-rate to reflect a true supply shock. | >$100 | 20% |
If we do get a permanent reopening of the Strait, this will be a very welcome development for all. The closure will take some time to recover from and there are many steps towards getting trade and energy flows back to normal. In summary, ships in the Strait need to be cleaned of barnacles, oil and gas facilities need to be brought back online, ships and crews rotated and moved, and, amongst other things, cargo (energy and otherwise) can then be moved on its way.
Strategic reserves have been significantly depleted over the last few months so whilst the oil price has fallen over recent weeks on hopes of a resolution to the conflict, at a global level there is a significant amount of oil that needs to be purchased to put the global system back to its previous state. Natural gas storage is a particularly acute issue for Europe, where the quantity of gas in storage is very low compared to previous years.
Away from the middle east, economic data has generally been positive. The enormous amount of capital expenditure on artificial intelligence continues, and as such markets have been very resilient. We continue to have some concerns around broad equity market valuations and the concentration of market enthusiasm around such a small number of companies, and we are balancing the competing forces of a resilient economic backdrop (helpful for equities) with the risks around monetising artificial intelligence and mixed messages on the health of the global consumer.
In simple supply and demand terms, 2026 is shaping up to be an interesting year. We have a large amount of new initial public offerings to the equity markets (notably SpaceX and possibly followed by OpenAI and Anthropic) and a significant amount of upcoming bond issuance by the US Treasury and other governments. There is some merit to the idea that all this issuance across the two largest markets in the world may keep bond yields attractive and may act as a restraint on equity markets, something which we are watching with interest. Also, retail investor involvement in equity markets is something we have not ever seen to such a significant degree and the involvement of leverage, particularly in US and Asian stock markets, is changing the market dynamic.
In conclusion, I would summarise our view of investment markets as cautiously optimistic. Equities have been the main story for markets for many years now, however we are finding attractive value in other areas of the investment world, such as commodities and fixed income, and we are broadly looking to position portfolios accordingly, where suitable.
The comments from our usual sources:
Tatton Weekly, attached, covers its points under the headings
- From Wars to Warsh – The US-Iran deal is positive for markets and the global economy, so now we return to watching central bankers; US Fed policy and China’s sluggish economy are centre stage.
- Shakeout for oil traders – The Iran ‘deal’ brought down oil prices, an end to the gravy train for short term traders, and almost instant relief for Asian markets, but what about future oil contracts?
- Big Debt for Big Tech – The majority of AI research is funded through borrowing – predicted to hit $4.1tn by 2030 – all that debt increases systemic risk and the pressure to deliver earnings.
The latest Weekly Digest, from Rathbones Head of Market Analysis John Wyn-Evans reflects on why investing often requires “playing the ball as it lies”. Markets rarely offer perfect conditions, and recent geopolitical tensions, shifting interest rate expectations, and volatile energy prices underline that point. While uncertainty around the conflict in the Middle East and US monetary policy continues to influence sentiment, falling inflation expectations and resilient economic data offer balance. As ever, staying disciplined and filtering out the noise is more valuable than waiting for the ideal moment to invest.
Guy Foster, Chief Strategist at RBC Brewin Dolphin discusses the reopening of the Strait of Hormuz and its implications for the economy. Plus, Head of Market Analysis, Janet Mui, cuts through the latest inflation figures in the latest Markets in a Minute.
Key highlights
- Geopolitical volatility: Markets experienced ‘whiplash’ as Middle East tensions escalated before a sudden ceasefire announcement.
- Central bank divergence: The European Central Bank (ECB) raised rates to combat inflation, while the U.S. Federal Reserve (the Fed) and Bank of England (BoE) are expected to hold steady.
- Asset class shifts: Treasury yields are drifting higher amid AI-driven demand, creating headwinds for gold despite its long-term appeal.
Provider Watch
In the hot seat this week were the management team at Rathbones when news broke that it had undertaken a Skilled Person Review and said it would pause taking on high-risk clients and embark on a two-year programme after the review found areas for improvement.
Pressing pause on new enhanced due diligence high-risk clients is voluntary, the business said and will last for a year. Elsewhere in the announcement, Rathbones said it was “reviewing certain aspects of its pricing as part of its ongoing commitment to delivering fair value for clients”.
“In the interim, the group intends to cease charging investment management fees on cash balances held within clients’ discretionary portfolios from 1 July.”
It you are wondering if you should worry, don’t! It does not affect any of our clients other than lower charges to come. And no more proof of how little an issue this is can surely be found in the fact that the day after the announcement Rathbones’ chair and group CEO increased their holdings in the company by more than 15,000 shares each.
Meanwhile, one of the UK wealth management market’s longest-lived brands, Charles Stanley, is set to largely disappear following the unification of Raymond James’ UK wealth management businesses, Citywire can reveal.
Raymond James Wealth Management said the combined business, which oversees £49.4bn in assets and has 230 wealth managers on its books, will from now on be simply known as Raymond James. Charles Stanley Direct, the firm’s execution-only retail investment platform, will continue to operate under its current branding.
Charles Stanley traces its roots back to January 1792 through the formation of a banking partnership in Sheffield called Walkers, Eyre, and Stanley Bank. The firm remained independent for around 230 years and was controlled by direct descendants of the founders, the Howard family, when it was sold to Raymond James.
It is understood Raymond James will continue to honour Charles Stanley’s heritage and make reference to it where applicable to ensure the name is not erased from history.
Quartet Investment Managers Fun Fact
Over 4,400 current and former SpaceX employees became millionaires from their stock holdings – more than 4 times the number created by Google’s IPO. Around 400 employees saw their holdings exceed $100 million.
I assume there is a requirement for them to remain working for at least a while, otherwise there will be a lot of vacancies going there very soon!
Miscellaneous
ASML has told Tom’s Hardware [Ed – please tell me you are not a subscriber!] that claims one of its extreme ultraviolet (EUV) lithography systems has ended up in China despite export restrictions is both inaccurate and damaging to its reputation. It follows a report that Commerce Secretary Howard Lutnick questions senior leadership, concerned that one of the machines had ended up in China in breach of export restrictions. ASML denies any wrongdoing and claims that it knows the location of every EUV tool it has ever built.
According to the Atlantic, in 2007, before the global financial crisis, Britain was at its postimperial zenith. Median household income had just surpassed that of Germany. A pound was worth more than $2, and London was arguably displacing New York as the centre of international banking. But since then, Britain has been left behind with the country’s output per person is now only just above that of Mississippi, America’s poorest state—and that slight lead is only achieved thanks to London. Outside the capital, in places where tourists do not visit, living standards fall well below Mississippi’s.
Pensioners who were in certain pension schemes of failed companies are in line for a share of almost £2 billion in top-up payments. The Pension Protection Fund (PPF) – the industry-funded rescue fund for defined benefit pension schemes – will begin writing to more than 300,000 former staff of collapsed firms from July. Payments will be made from January 2027. These pensioners missed out on inflation protection which they should have been entitled to as part of their payments from their company pension schemes – meaning their pension should have risen in line with prices but didn’t. Some pensioners were denied this valuable benefit before 1997 by their former employers, in firms that later went bust. A recent rule change now means they will get the money they are owed. In April, the Pension Schemes Act became law, allowing the PPF and the Financial Assistance Scheme (FAS) to make the additional inflation-linked payments.
I don’t think its in anticipation of the famous victory that Scotland might well have over Brazil, but the Sottish Government is to issue its first Scottish Government bonds in 2026 and 2027. And what will these ‘gilts’ from the north of the border be called? Yes, we’ll all genuinely be able to own Scottish ‘Kilts’ soon. Brilliant!
And finally, sorry I’m a bit late today. I’ve been helping at the school fete. It’s an old-fashioned affair – tombola, dog show, maypole dancing etc – and a great reminder of all the good things this country does give us. Anyway, I’m off now to sort out my T-shirt and jacket combinations, as that is clearly the sartorial way forward! I hope to catch up with you next time.