MTTM Podcast Episode 518 – The key factors driving investment markets right now

Listen to Episode 518

In this week's podcast, I provide a comprehensive investment market update, explaining the key factors that are driving markets as we head into Autumn. Looking ahead, I explain what investors should be keeping an eye on, including upcoming central bank decisions, potential volatility in the bond market and why the "bad news is good news" mentality is currently driving investor behaviour. Finally, I provide an update on my own £50k portfolio, including where I am invested in order to navigate the current market conditions.

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Episode 518 Podcast Summary

Savings Rate Traps To Be Aware Of

Summary

This year has seen a major shift, with UK and European markets significantly outperforming the US. I explore the reasons why, from Donald Trump's trade-war announcements and the subsequent "TACO" (Trump Always Chickens Out) trade to the crucial role of a weakening US dollar. I also analyse how differing central bank policies have fuelled this divergence and discuss what to watch for as we head into the end of the year, including potential bond market wobbles and the all-important upcoming interest rate decisions.

Key insights

• Market Divergence: 2025 has been a strong year for German (+24%), UK (+15%), and European (+16%) equities, which have all significantly outperformed US markets like the S&P 500 (+2.85%).
• The Weak Dollar's Impact: A key reason for US underperformance for UK investors is the weak dollar. The pound has strengthened by over 7% against the dollar this year, reducing the value of US assets when converted back to sterling.
• Trump's Influence & The 'TACO' Trade: Donald Trump's trade tariff announcements in April caused a major market sell-off. However, markets have since adopted a "buy the dip" mentality, based on the belief that Trump will ultimately delay or reverse his decisions (the "TACO trade").
• Central Banks Are in the Driving Seat: Market performance has been closely linked to central bank policy. Accommodative, rate-cutting central banks in the UK and Europe have boosted their domestic stock markets, while the more hesitant US Fed has had a lesser effect. The Fed's September meeting is now a crucial event for investors.
• Watch Out for a Bond Market Wobble: Rising government bond yields, driven by increased government borrowing in the UK and US, have caused tremors in the market. This could lead to a "bond market tantrum," which could negatively impact equities.
• How Macro Events Affect You: Global market movements have a direct impact on your personal finances. For example, a weak dollar will make your holiday to the US more expensive, while rising UK government bond (gilt) yields can lead to more attractive annuity rates.

Episode quiz 

1. Which major market was the best performing year-to-date?
a) UK (FTSE 100)
b) US (S&P 500)
c) German Market
d) Hong Kong (Hang Seng)

2. The "January Barometer" suggests that if the S&P 500 has a positive January, the rest of the year is likely be:
a) Positive
b) Volatile
c) Negative
d) Flat

3. What does the acronym "TACO" stand for in the context of the "TACO trade"?
a) Trump And China Only
b) Trump Always Chickens Out
c) Trade Action, Consequences Occur
d) Trades Ascending, Cash Out

4. What percentage of companies investing in AI have yet to see any profit from that investment, according to an MIT report?
a) 50%
b) 75%
c) 85%
d) 95%

5. The popular "Sell in May and go away" adage is meant to end on which day?
a) St. Andrew's Day
b) St. George's Day
c) St. Leger's Day
d) St. David's Day

Answers

1. c) German Market
2. a) Positive
3. b) Trump Always Chickens Out
4. d) 95%
5. c) St. Leger's Day

Resources

Links referred to in the podcast:

• Try our AI guidance tool 'DaMoney' - Ask it any money question
• Take out a free trial of 80-20 Investor
• Sign Up To The MTTM Weekly Newsletter

 

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