The Best Investments?
25 August 2025
To all Financial Friends
Knowledge is the best investment you can make. Provided that knowledge is understood and acted upon. Based on my years of market awareness my recent commentaries have focussed on the need to be specific about the types of asset to choose for your pension and investment holdings. Most (not all) professionally advised portfolios are diversified across such a broad range of assets that there is no conviction or cutting edge to achieve above average results. Traditional advice continues to be based on historical patterns, but I have a sense of growing unease arising from intuition and awareness birthed by my years of experience.
The foundation of how a normal market works is 'negative correlation.' This means that normally, so called low risk investments, will rise when higher risk investments fall. So 'low risk' government bonds (investors lending money to a government) will rise in value when shares (equity funds) fall through fear or uncertainty. This supports the belief that diversifying investments between government bonds and equities is a prudent way forward. History shows this pattern to have been reliable on nearly all occasions.
However, history records times when this flight to the 'safety' of government bonds against equities falling failed, leading to loss for investors in both types of asset. Seeing this potentially arising again, perhaps shortly, is the reason why it may prove wise to consider investing in specific assets. Looking two steps ahead of the market, defence, infrastructure, consumer staples, gold and silver and AI focussed technology funds have an appeal. Consider these assets against the economic and political background plus behavioural science (what people will do with their money).
Looking Ahead
Today the 30 year gilt yield which has a direct effect on what it costs our government to borrow money, is at a 27 year high. Borrowing costs are now as high as when Liz Truss shook the global markets with her unfunded tax cuts policy. Since April 2025 we have borrowed £6 billion just to pay our bills as a nation. We borrowed £1.1 billion last month alone, just to make up the difference between income from taxes and total expenditure.
So far, global investors remain trusting in Rachel Reeves maintaining strict fiscal rules. Fiscal rules guide how much a government can spend, borrow, or run deficits. In her upcoming Autumn Budget our Chancellor of the Exchequer has complex issues to face. The question is whether her necessary actions to achieve vital growth of the UK economy can be done without causing a Liz Truss style of market eruption. If she does the future looks brighter. If not, then negative correlation may fail leaving traditional advice given to investors to cause them loss.
PLEASE NOTE: A financial or economic commentary like these, are written to explain, interpret or give an opinion on economic events and markets to help readers understand what’s happening and why it matters. Designed to help you make informed decisions of your own by making you aware of opportunities, risks and potential rewards in the market.
