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The Logic Wealth Planning 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 - 17th November 2025
[00:00:00] Nathan Sweeney: Hello and welcome to the podcast. Today I'm really lucky to be joined by Rory Dowie, Global Equity Portfolio Manager here at Marlborough. Good morning, Rory.
[00:00:09] Rory Dowie: Morning, Nathan.
[00:00:10] Nathan Sweeney: Rory, I suppose we start with a quick recap of how markets were performing last week. So how did they perform?
[00:00:17] Rory Dowie: Yeah, so we had similar sentiment in the markets last week with most equity markets being flat to down.
[00:00:22] Rory Dowie: Those losses came mainly on Thursday and Friday after news that the US government was reopening. For November now the US is down about 2%, Japan down 4% with the UK and Europe broadly flat. So the first two weeks have been a bit softer and we also saw other risk assets for Bitcoin, for example, that's down 12% so far this month, and actually had a six month low. Close to home, we actually saw some moves in the UK gilt market, so UK government bonds, they fell as Chancellor Rachel Reeve, scrap plans to raise income taxes in the upcoming budget. Good news for us, hardworking Brits, but the markets didn't like that as that's essentially raised questions about how she'll offset some of the government's revenue shortfall.
[00:01:02] Rory Dowie: So the headline level, again, another slightly softer, weak for markets.
[00:01:06] Nathan Sweeney: Yeah, really good to see actually those tax increases not coming through on income tax, but we'll have to see what, obviously the budget holds. We'll do a whole deep section on that once we get some clarity. We don't like to speculate on what might happen, but we'll give insight on what actually, what has happened once it has, and what that means for markets and clients.
[00:01:26] Nathan Sweeney: But ultimately, I've been doing a lot of client events over the last couple of weeks. And one question keeps cropping up and it's linked to AI and are we in a market bubble? So I thought we'd spend a bit of time just discussing this, and just to give you a bit of context, we had Andrew Bailey commenting on the fact that maybe we're in an AI bubble.
[00:01:45] Nathan Sweeney: This hit the media. And then Jamie Diamond, who is the head of JP Morgan, also said something similar about valuations and markets. So that's increased kind of concern and investor concern, and that seems to be a reoccurring theme from the questions that we're getting. This was Rory. From your perspective, how do you see it?
[00:02:03] Nathan Sweeney: You know, so are these big AI companies, and are we in a bubble? So just to get a sense of what you're seeing.
[00:02:11] Rory Dowie: Yeah, absolutely. It's a brilliant question, Nathan, and I think I'd tackle that across sort of two dimensions, if you like. I think the first thing I'd say sort of more philosophically is that the fact everyone's talking about a bubble makes it less likely that we're in a bubble.
[00:02:24] Rory Dowie: Typically, if you look back over time, bubbles occur when you know people are behaving irrationally in the markets and they're not paying attention to fundamentals and there's not too much talk of it. But the fact that people are talking about it means that, you know, people are scrutinizing these large capital expenditures that these big companies are making.
[00:02:39] Rory Dowie: They are questioning the return on investments of that money spent. So I think that's the first point I'd make. Secondly is the nature of these businesses. You know, if you look back to the tech bubble in 1999, you know, a lot of these companies were getting bid up in the markets, but they weren't earning too much earnings.
[00:02:56] Rory Dowie: i.e. they weren't making profits.
[00:02:57] Rory Dowie: If I compare that with today, you look at these sort of seven companies, the Magnificent seven, that people typically talk about and they typically think about that as the AI trades. These are highly, highly profitable businesses on the whole, and they're actually fairly diversified across different industries.
[00:03:11] Rory Dowie: So Amazon, for example, has a very large retail business as well as its cloud business. Google has, you know, its fingers in lots of pies. You know, it has YouTube, it has Google search, and then Tesla, you know, it makes cars so. Yes, these companies are big and they're spending a lot of money, but their revenue streams are quite diversified, so they're using a lot of the profit across those different revenue drivers to help support this spend.
[00:03:33] Rory Dowie: And for us, really it's about investing for productivity and they really believe that this will generate revenues into the future. So I'd really make that point that this spend is supported by earnings, and ultimately, if those earnings come through, that will support these valuations of these companies.
[00:03:48] Nathan Sweeney: Yeah, and I suppose that would lead on to then earnings. So company earnings. So should investors be concerned, are we seeing earnings falling? And is that a sign that this AI trade is not working, or we should be concerned about these big companies?
[00:04:02] Rory Dowie: Yeah, so you know, with the bulk of the way through earnings season in the US now, so companies report updates about four times a year, so once every quarter.
[00:04:09] Rory Dowie: So the earnings period we're going through now is them reporting third quarter earnings of this year. So June through to the end of September. And actually companies are been doing very, very well. If you look at earnings growth, the S&P 500, those top 500 companies in the US. Earnings growth has come in at 13.1%, and that's relative to the 4% that markets had expected coming into the earnings season at the start.
[00:04:33] Rory Dowie: And actually, if you look over the last four quarters, that's the fourth consecutive quarter now of double digit earnings growth in the US. So companies have been doing very, very well. They've been growing well, and actually they've been beating earnings expectations. So 82% of companies posted earnings surprises.
[00:04:49] Rory Dowie: So 82% of companies reported higher earnings than the market had expected at the start of earnings season, and that's typically a very strong signal to how companies are performing.
[00:04:58] Nathan Sweeney: So we've got this narrative that we're in this AI bubble. And so for the first thing, my observation on just what you're saying there is that firstly, these are not AI companies.
[00:05:08] Nathan Sweeney: These are companies doing lots of different things from making cars to selling goods, to selling software. And the earnings that these companies are generating today are pretty good.
[00:05:19] Rory Dowie: Yeah, absolutely. So I'd say, you know, the earnings are good today and are ultimately, if they can continue to earn, that essentially supports the kind of capital expenditures that these bigger companies are putting into AI, building out these data centers.
[00:05:32] Rory Dowie: So from our perspective, this really supports those valuations.
[00:05:35] Nathan Sweeney: Yeah. So what they're using is they're using profits that they're making today from various different business streams to invest in something they believe will drive future growth. So a new business stream essentially. OK, that makes a lot of sense. I suppose is there anything else that really stands out for the week? 'cause obviously a bit of a deep dive there just to go through that, but is there anything else that would really caught your attention?
[00:05:57] Rory Dowie: Yeah, so one extra thing I'd note from last week was the end of the US government shutdown. That was the longest ever US government shutdown and actually we should now start to get some economic data out of the US finally. We have been flying blind somewhat on the data front because obviously the government's been shut down, so they've not been releasing the data. And actually, somewhat counterintuitively, the government shutdown ending for us was one of the main reasons markets were down in the last two days, last week, where investors were actually getting nervous about what that data may say.
[00:06:26] Rory Dowie: Over recent weeks and months, we've been talking about the Federal Reserve. The US Central Bank, remaining data dependent in their decisions on interest rate cuts. So they've been watching inflation on one side and the economy on the other, so jobs, unemployment, et cetera. Investors have become increasingly nervous about the job market and the economy is doing better than perhaps expected.
[00:06:44] Rory Dowie: And actually, maybe we still have inflation there. Which will give the Federal Reserve less of a reason to cut rates in December. And actually you saw that fear play out in markets last week. If you look at the probability of a US rate cut in December, that probability of a rate cut is now less than 50%.
[00:06:58] Rory Dowie: So it's less likely to happen than not. And actually just a few weeks ago, the probability of a rate cut in December was up at 90%. So investors getting a bit nervous and I think that's just caused, you know, a bit of softness there in the US.
[00:07:09] Nathan Sweeney: Okay. And then, for a week ahead, what should we be focused on?
[00:07:13] Rory Dowie: Yeah, really for me the headline is Nvidia. They report earnings after the bell on Wednesday, the largest company in the US and they're obviously the darling of the AI space. We'll be watching that very closely. And aside from that, we have obviously data out of the US, things like retail sales, import and export data.
[00:07:26] Rory Dowie: So we'll give you an update next week.
[00:07:29] Nathan Sweeney: Okay. Thank you Rory. Really, really insightful. Really appreciate those comments there. And to our listeners, any questions, please do fire them in. We'd love to bring them up on the pod. And if we don't speak to you, have a great week.