Where Next?
8 January 2026
To all Financial Friends
Sincerely wishing you the most prudently profitable year ahead! Just as we thought risk and uncertainty in the world was at maximum, it increases! Before Trump and Venezuela, investors had to factor in Inflation, Middle East instability, War in Ukraine and nervous tension between the USA and China. Now we ask, who is next for the use of Trump power to take over their country and assets? This means greater unpredictability, risk and uncertainty. A higher risk of takeover or wars, and greater tensions between the major nations.
How Do Investors and Markets Respond?
To remain in equities, investors need to believe they will achieve higher returns to cover the extra risk taken against these increased geopolitical risks. Investors may demand a higher yield (interest rate) when investing in bonds (lending to governments) as the higher risk of a default in payment is feared. This possible outcome increases the frailty of the once perceived safety of the bond markets. In financial terminology all this comes under the heading of the geopolitical risk premium. A phrase you are likely to hear or read in reports.
So What Do Investors Do With Their Money?
Those who are aware of, and want to take the increased risk, will stay in equities for the longer-term benefit. Some hold mixed assets spreading funds over a wide range of investment holdings (typical of most traditional advice from advisers). Mixed asset portfolios rely upon the perceived safety of the bond market to rise when when equities tumble. If bonds rise in value as equities fall then not to much is lost and diversification has protected funds to some extent.
The increased geopolitical risks drive many to sell risky assets and buy what are perceived to be safer assets.
So Which Assets Are Your Monies Invested in Through Your Pensions, ISAs, and Dealing Accounts?
As the depressing rise in the cost of living and the burden of tax rises becomes (for some) the cost of survival, where is your money now? I looked for assets with an acceptable level of ongoing contractual or economic driven income. As the disposable income of most households falls, could such assets, which also reflect the uncertainties we face, provide profit into the future?
My commentary of 10th December recorded this statement I express a degree of confidence in the following assets. Gold and silver. Global Infrastructure funds. Defence (and related) sector holdings. Technology (AI focused) but be aware of the fear of a ‘profit bubble bursting' in this sector. Also, consumer stocks (those providing and selling the things we have to buy just to live!)
The same commentary confirmed that with the exception of Index Linked Gilts, every asset held by most students have made profit. These include Global Technology +21.3%, Natural Resources +23.1%, Gold and Silver +104.8% (yes, just ridiculous but true - £1000 invested turned into £2,048 in just 12 months!), Infrastructure fund a modest +7%, Tracking the FTSE100 Index +21.3% and Defence Stocks fund +76.44%. These gains over just 12 months. Unusual short-term gains. Of course past performance is no indication of future performance.
Seeing such short-term performance you may not be surprised that the increasing uncertainties facing investors, leads me towards the risk of choosing specific assets rather than traditional widely diversified asset holdings dependant on a frail bond market to protect and provide.
We have outlined several possible strategies which some students have adopted over recent times. The most popular has been The Profit Taker Strategy. Uncertainty in the markets has caused some specific assets to rise steeply in the short term. Consider whether you think the increased uncertainty today might cause the same unusual occurrence over the next 12 months?
The Profit Takers
Right now some students investing in funds of defence stocks have seen a rise of 6.3% in the last week. The same fund put on +10.07% in just the last month to date. Other students in gold and silver funds have seen returns of +25.7% in the last 3 months to date. The sceptic will not believe this even if shown in black and white and undeniable - the same gold and silver fund gained +148.8% in the last 12 months to date. So, £1000 invested turned into £2,488! No! Never! Surely not! Oh yes, hard fact! Profits can be taken even in the short term. Tap a few keys and the money withdrawn is in your bank account normally within three working days! If you do not need the money store it safely to invest later, when prices have fallen. Never, never try to time the market. Re-invest after a modest fall and in time you will have leveraged your return and maintained the huge benefit of compound growth.
Oh, But Don’t Lets Get Carried Away!
Just as definitely, assets and markets fall in value as well as rise. You can lose money as well as profit from the risk you take. Perceived wisdom is not to invest if you have less than a five-year time horizon before you need to encash. Investment is for the long-term. As above we have mentioned the possibility of a 'bubble bursting' in the AI Technology markets. Trumps tariffs, invasion of Venezuela and where next? Ukraine and the Middle East and what else, could cause steep falls in investment holdings.
Yes, all the above has been true in the past and may well be in the present and future. But has the world changed around us? Has the world of money and investment opportunities changed too? Should investors look at what is really happening around them and make up their own minds? Perhaps it's best to stick to the old tried and tested - might prove safer? Or, with what is going on around us do you think specific assets are a safer and more logical solution?
So I hope my commentary, discussion, views and opinions entertain and interest you and help you to think things through? Information and guidance to help you make your own informed decision readily available. As a subscriber always feel free to hit the 'Hotline to Harris' calendar button www.calendly.com/yourfinancialfriend to make time to talk things through for more information and guidance.
Before You Go!
Your Financial Friend is building connections with other professionals to take in different views and provide for wider consultancy. We consult with our stockbroker, chartered tax specialist, insurance and protection specialist and now have invited two highly qualified independent financial advisers to express their views. We welcome Victoria's Views and Lisa's Logic. Enjoy a read of their comments on the attachment here.
Should your pension funds and other savings or investments combined reach over £100,000 and you feel you need advice, then ask me for an introduction to our selected Independent Financial Advisers. We are supportive of Lisa and Victoria’s advice based on making clear through education, the risks and rewards their planning offers. We work with independent advisers to support prudent and profitable market aware advice where you feel the need for advice at any stage.
Introducing Victoria and Lisa
Victoria’s views
Markets in early 2026 are being shaped by heightened geopolitical uncertainty. In periods like this, investors often reassess the return they require for taking risk, leading to a higher risk premium for riskier assets and short-term shifts towards perceived safer areas such as cash, high-quality short-dated bonds, and resilient “quality” companies. For long-term investors, the priority is not to respond to every headline, but to ensure portfolios are deliberately structured to withstand a wide range of outcomes - through diversification, appropriate risk levels, and a clear plan for liquidity and income needs.
Victoria is a Chartered Financial Planner at the highest level of qualification for providing advice. In a world where we are more disconnected from our money than ever, and managing our finances has become overly complex, Victoria brings clarity, confidence and control.
Lisa’s Logic
Following the capture of Venezuela's President, perhaps unsurprisingly after the turbulent year of political decisions in 2025, US markets showed little reaction with some major indices like the Dow, S&P 500 and Nasdaq actually rallying, supported by gains in energy and tech sectors. With the hopes of accessibility to oil resources, oil stocks benefited from the move. Amid ongoing geopolitical uncertainty, commodities prices are likely to remain volatile, with defence stocks and gold potentially serving as relative hedges for risk‑averse investors, at least in the near term, though shifts in market sentiment or policy could alter this dynamic.
Lisa is a former solicitor, turned professionally qualified independent financial adviser with a passion and (like Your Financial Friend) for financial education.
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.
