Subscribe
Share
Share
Embed
The Mearns & Company Monday Espresso is your essential five-minute investment briefing, equipping you with everything you need to know for the week ahead. Marlborough's Multi-Asset Solutions Investment Team summarise market events over the past seven days and preview the key events in the week ahead, while also sharing their expert insights.
Monday Espresso Podcast - 22nd December 2025
Rory Dowie: Good morning. It's the last podcast of 2025. Today's Monday, the 22nd of December. My name is Rory Dowey, Portfolio Manager here at Marlborough. Today I'm delighted to be joined by James Athey. James is a Bond Fund Manager here at Marlborough. What better way to open the Christmas week than by having you on the pod, James.
Rory Dowie: So good morning.
James Athey: Thanks Rory. I would like to bring some Christmas cheer, but you know, we bond guys are not necessarily known for that.
Rory Dowie: Well, we had a lot of macro data last week, so we need you. Inflation, retail sales, and we also had central bank meetings, one here in the uk and then another one in Europe.
Rory Dowie: But I guess before we get into the meat of that markets last week on the equity side of things, the US and Europe were broadly flat. The UK was actually up 2% and then further afield, Japan was lagging down about 2.5% in emerging markets were, were down around a similar amount. So far over the month of December, fairly muted.
Rory Dowie: Headline return numbers. So after last week, the UK and Europe up about 1.5 so far this month with the US and Japan flat with Emerging Markets down around 70 basis points but I guess let's hope for a Santa rally this week. Those that don't know the Santa rallies a phenomenon in markets where they typically perform well over the last five trading days of December, and the first two in January, so around that Christmas period.
Rory Dowie: And so I guess, let's see what this week brings. Right performance out the way. James, where do you wanna start? And perhaps in the UK we had inflation Bank of England meeting. What's going on?
James Athey: Yeah, exactly. Thankfully, for those of us who've got mortgage deals to fix, or even on floating rate mortgages, the Bank of England did cut rates.
James Athey: That was very much widely expected heading into the meeting. The market had, I guess, been expecting or maybe hoping that the vote share would be a bit more convincing. Unfortunately, there's only Andrew Bailey, the governor, that switched from voting against a cut to voting for a cut this time, so it is still a five four vote.
James Athey: So as has been the case for a while for the bank, not exactly convincing view as to you know exactly what the direction, or at least the distance of travel and timing for monetary policy is. But following on the back of the data we'd seen earlier in the week, it definitely was the right decision in our opinion.
James Athey: So we saw an employment report, which again showed unemployment ticking up. Wage growth was a little stronger than expected. But the losses of jobs and the rise in unemployment suggests that those wage negotiations and numbers should come down in the future. And then we had CPI, which of course is what the bank targets, and that was a pretty huge miss.
James Athey: Versus expectations we're down to 3.2%. Now in terms of year over year, CPI and the sort of core services number, which the Bank of England is very focused on, was also down. And in a month on month sense, there was a considerable and pretty broad-based weakness. So I think that's a pretty positive number going into next year for the idea that disinflation will continue and hopefully we can see more rate cuts.
Rory Dowie: Yeah. Brilliant. Thanks James. So, yeah, CPI, that's basically UK inflation, so that was came in below expectations. So again, hopefully we get more rate cuts next year. We just had the rate cut this week, so that's good news for us, you know, UK mortgage owners, I guess that was good news in the UK then. Further afield, we had some central bank meetings as well, perhaps in Europe, firstly.
James Athey: Yeah, ECB, not really much to see here. As has been the case for the last few meetings, the European Central Bank was on hold. Their interest rates are down at 2% and inflation is closer to 2% in Europe, certainly than it is in the UK. So, as always, within Europe as a whole, you know, array of considerations given the countries are in quite different circumstance but for now the ECB thinks they're done with rate cuts.
James Athey: Actually the more interesting central bank this last week has been Japan, where their policy there is heading in completely the opposite direction of course. They have been very, very, very slowly increasing interest rates. You know, for the first time in, in many, many, many years, they did as expected high interest rates by 25 basis points.
James Athey: That's 0.25%. That takes their interest rate to 0.75%, so three quarters of 1%, so still very low interest rates. The interesting thing is that the market reaction was kind of the opposite to that, which you might expect a weaker currency and higher bond yields, which is partly because the messaging continues to be caution and uncertainty around future rate hikes in spite of the fact that you know, inflation is way above target.
Rory Dowie: And that's on the back of obviously the new Prime Minister we've had in Japan. Sanae Takaichi was elected I think last month. You know, she's very pro-growth herself as well. So I think Japan for us would be one to watch quite closely next year after decades almost of, you know, next to no sort of rates sought or no yields in Japan, they are starting, to kind of move upwards and it really is that outlier.
Rory Dowie: James, as you said, you know, across most regions around the world, I suppose there, was there any other macro data to kind of highlight over the last week.
James Athey: Yeah, we so far managed to go through the podcast without talking about the US, which is always sort of unusual and, and difficult to do in a normal week.
James Athey: Big challenge in the US is that we're still dealing with the, the sort of effects of this government shutdown, as unfortunately has been the case a lot in recent years. Democrats and Republicans struggling to agree on budgets, struggling to fund government, or struggling topprove the sort of issuance of debt in order to fund their deficit.
James Athey: We therefore had the longest, shutdown on record, and that meant that government agencies, like the Bureau of Labor Statistics and the Bureau of Economic Analysis weren't there to collect data. And so it's really been distorting economic data now for a while, and that has absolutely been true this last week where unusually for the well followed non-farm payrolls report, which normally comes in the first Friday of every month.
James Athey: We had a payrolls on Tuesday, so this was October [00:06:00] data, and essentially it was a bit of a mess. You had a pretty negative looking headline. You had revisions that were negative as well.
James Athey: You had a rise in the unemployment rate through October, but then that was followed by the November data, which showed a sort of reversal in the opposite direction. So two months in one go. The data not looking clean, lots of reason to be skeptical about exactly what it was telling us, and for that reason, markets to, to a significant degree, I think just put it aside and said, you know what, we'll wait until something more certain comes out next year.
James Athey: The same was true later in the week when we had CPI. Much like the Bank of England, the Consumer Prices Index, the measure of inflation is a big focus for central banks. They're mandated to care about inflation. On the face of it, a great number, 2.7% when the market had expected 3.1%, so a big drop in inflation.
James Athey: But again, the lack of government workers, the lack of data collection meant that there were a lot of imputed prices. That's basically where they can't directly observe a price, and so they make a statistical guess and therefore it looks like those numbers have been heavily distorted. So big data, important data in the US but probably ones to just sort of put aside and, and wait for next months to try and get a better picture.
Rory Dowie: Yeah. Brilliant. Very insightful, James. Thank you for that. So, you know, headline numbers look good, but again, investors are not, you know, taking that data with the degree of confidence they usually would have. So, so one to keep an eye on going into 2026. James, thanks for joining. Very, very insightful. Hope our listeners found that useful.
Rory Dowie: Just to finish, we'd like to thank all of you for listening and supporting us over 2025. We hope you have a brilliant festive period and we look forward to being back on the pod in the new year. We are taking a week off next week, so the next show will be on Monday, the 5th of January. Merry Christmas.