Markets in an Uncertain World
23 February 2026
To all Financial Friends
In a world of investment opportunity, chaos, uncertainty and more Trump trouble, investors and students are making healthy returns well above the rising cost of living. Much is happening, so first a quick read of what you need to know right now.
What You Need to Know Right Now
The world around you has changed. Consider with us that the world of money has changed too. The economic background is constantly changing but some things never change. Recent experience shows that uncertainty is creating unusual short-term profits. Uncertainty for the future is a certainty. Whatever happens there is always profit to be made in the markets.
Traditional Advice?
Traditional advice for broad diversification (holding a wide range of funds and assets) to stabilise and protect your funds, depends on the bond market acting as a safety net, rising as equity markets fall. Unusually uncertain market conditions and the indebtedness of the UK and global markets makes the bond market frail and at risk of moving down with (correlating with) the equity market so failing to provide protection.
Looking Forward?
Our recent commentaries have been discussing favouring the potential for certain specific assets benefiting from contractual income. This means assets where the companies whose shares are held are supported by long-term government contracts. Investors often move towards businesses that sell everyday necessities during times when taxes and the rising cost of living reduce disposable income and require households’ expenditure to be focussed on essential goods for living. Gold and silver and the US dollar represent a flight to safety when times are uncertain.
A Choice to Make?
The above leads to a need for you to decide if traditional advice for wide diversification, depending on the maintenance of a secure bond market, is your choice, compared to specific assets which may be seen to reflect current market conditions. Does traditional advice look backwards relying on past performance? Does choosing specific assets look forward into the future? See below for further comment.
For more understanding, if needed, feel free as a subscriber, to use the calendly link www.calendly.com/yourfinancialfriend to talk with Rob. Book a time to build your knowledge.
This commentary needs to cover a number of topics to give you a wider picture upon which to decide for yourself whether your money is in the right place. The above paragraphs give you the outline, what follows gives you the understanding.
More Trump Trouble
Yesterday (20/02/26) Trumps tariffs, affecting the world’s economy, were found by the Supreme Court to be illegal. He slapped a 10% global tariff on imports into the USA then hours later increased this to 15%. The absolute financial and economic chaos caused by this one man is unbelievable and unprecedented. If the existing UK-US tariff deal is honoured then we still have a 10% tariff with sector specific relief. Of course Mr Trump might just change his mind even as I write these words! He is using an historic different legal authority to apply the 15% global tariff which expires in 150 days. During this time Trump hopes to find another legal route to maintain his original tariffs to overcome legal restrictions. Result for investors: Uncertainty, market volatility with potential for specific asset profit?
Specific Assets. The Logic and Reasoning.
When Government promises of guaranteeing repayment of debt weaken, investors replace legal certainty with necessity, scarcity, and contract backed cash flows. It seems very unlikely that the UK Government will ever fail to pay interest and debt in full at maturity. What is more likely is that as UK debt grows, against global uncertainty, lenders to the UK will sense greater risk and demand higher interest to cover the extra risk they perceive.
Higher cost of borrowing and the demand for 5% of GDP for defence and the maintenance and support of current living standards by voters could combine to cause flight from the bond market. The bond market as a 'safety net' a lower risk holding fails? This why my commentaries suggest you consider specific assets.
Necessity, scarcity, and contract backed cash flows.
Gold, Consumer Staples, Infrastructure, and defence do become alternative havens when gilt and bond market trust weakens as they offer: scarcity (gold), necessity (staples), contract certainty (infrastructure), political priority (defence).
Past Performance / Recent Results
Students have been enjoying profitable results over the last 12 months. Those holding a popular Gold and Silver fund +158.9%. Global Technology +21.3%, Natural Resources +23.1%, High Yield Bonds +10%, Global Infrastructure +13.9%, FTSE 100 Tracker Fund +21.3%. Some have ventured into defence funds over the last 6 months returning +25.5%.
These results reflect past opportunities which include some of the specific assets referred to in this document. The future may benefit from the comments made in the balance of what you are reading here. Investing in specific assets, in text book terms, carries more risk than holding a widely diverse portfolio of assets.
As our students know very well, past performance is no guide as to future performance. Investors may not get back the amount they invested.
FTSE 100 and US Major Indices - Why So High?
In such an uncertain world you might ask why are major word indices so high? With the FTSE 100 at +21.3% over the last 12 months the S&P put on +20%, the Dow Jones Total Return +16% and the Nasdaq Total Return +21% we ask why? The American indices have powered ahead mainly because of technology companies known as "The Magnificent Seven" Apple, Microsoft, Alphabet, Amazon, NVIDIA, Meta and Tesla. The balance of companies in the 500 index barely grew over the the last 12 months. If the technology 'bubble' bursts, we can see how strong the negative effect would be.
The FTSE 100 Index benefits as the major companies in the index hold assets abroad in the currency of each country across the globe. Performance is therefore not dependent on the slow growth of the UK economy. Profits are increased from sterling as a currency at low values, so holding assets in US dollars when converted back to sterling achieves a currency translation gain.
During global uncertainty commodities/energy held in the FTSE Index perform well adding to the welcome performance. So the Index is not reflecting the underlying state of the UK economy. The FTSE 250 index is a more accurate measurement of the economy. The Vanguard 250 tracker fund gained 12.85 compared to the FTSE100 Index at 21.3%.
Wars and Rumours of Wider Wars
Yes we know. Ukraine. Israel/Gaza and now USA/Iran. The last of these perhaps the most threatening. Wars and rumours of wars, Taiwan/China? Many other points of friction or prolonged civil war. Yesterday I attended a village meeting with fellow villagers and our MP Blake Stephenson. Talk and questions were all about local issues. Potholes, narrow pavements, planning permission for more houses, infrastructure and so on. All important matters of concern of course.
Right at the meeting end I raised my hand to ask a question. "Blake, thank you for your integrity and common sense that flows from you." Now, with a twinkle in my eye, if I were Winston Churchill in the House of Commons today what would I be talking about? Are we not at a 1936 moment? Surely 5% of GDP for defence, now not later? If we do not defend ourselves all these needs and good local objectives we talk about will just go AWOL!"
As a Financial Friend student, may I encourage you to look up from the everyday things that matter, to ensure your penisons, ISAs and investments are well placed for what you see coming in the future.
Rolls Royce recently signed up with the UK Ministry of Defence to provide strategic defence infrastructure. The contract will last for 8 years with a price tag of £9 billion. So whatever happens to our economy Rolls Royce have £9 billion of financial security. Could it be that sectors like defence and infrastructure where business wins funded contracts will be seen as one of the opportunities to lessen risk and profit?
Inflation, Tax, the Rising Cost of Living and Rachel’s Gamble
Inflation
Down to 3.2% p.a. they tell us. Any return you achieve above 3.2% p.a. means you are getting richer in real terms. There are a number of threats facing the Bank of England who see inflation to their 2% target achievable in due course. Interest rates are forecast to fall gently. All of this is good news although the cost of living now has reduced disposable income for many.
The forecasts can be achieved provided war, rising energy costs and sterling falling against other currencies do not arise. Increased borrowing affecting fiscal stability could block these improvements. Fiscal stability means the country is living within its means rather like a household living within the income earned by the family. We live in hope!
Tax
For the average basic tax payer the personal tax allowance remains at £12,750 until April 2031. This frozen allowance means that any increase in income will be taxed. There are a mix of other tax increases such as an increase in dividend tax of 2% if your investments are outside an ISA or Pension plan. Buy to Let owners are hit by a 2% tax increase received from rent. Those with a house valued at £2 million or more will pay a high value surcharge even if they live in the property. This pattern shows the desperate need the government have for more income to achieve much needed fiscal stability.
Cost of Living
Households are losing disposable income, the money they have left after all the bills and basics are paid. Inflation falling means that prices will go on rising but at a slower rate. This is why we mention consumer staple stocks as an opportunity for investors in due course. Although finances for some are stretched consider it essential to prioritise saving/investing and ensuring current funds are well placed for growth. Financial conditions are unlikely to become easier in the short to medium-term. Making money make more money for you can take little of your time yet provide future and near-term security which may be much needed to support your security and current lifestyle.
Rachel's Gamble
Imagine you are running a business and you cannot survive without having to borrow to pay your bills every month. You have to grow your business or you go bust. To grow your business needs more money to achieve the growth, without more money you cannot invest to achieve the growth you need. You come up with an idea! That's it. I will borrow more money to invest in the business. So now you have piles of 'bad debt' and now what you decide to call 'good debt' because it is for growth not just to pay your bills.
That is great if you get the growth, all your problems are solved. Fingers crossed! If you do not get the growth then you end up a double dose of debt and more than likely go bust. That's an exaggerated picture of the risk and hope which Chancellor of the Exchequer Rachel Reeves is taking with the UK economy and all of our futures. We hope very much for the best but plan for the worst - the bond market failing to be a safer place for our money.
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.
