WeekWatch - 08.06.2026

Strong US jobs data could drive rate hikes

The US economy added 172,000 jobs in May, almost twice what was expected. Together with the effects of higher energy costs, some analysts now expect the US central bank, the Federal Reserve (Fed), to raise interest rates this year. Hetal Mehta, SJP’s chief economist noted that “there has been quite a decent recovery in the (US) labour market over the last two or three months. It’s probably not sustainable as the economy is slowing. It is likely this reflects a partial reversal of the cooling in the economy at the end of 2025, which includes the effects of the federal government shutdown.” Apart from making borrowing more expensive for many technology companies, higher interest rates make the current value of such high growth companies less attractive.

Both shares and bonds sold off in response, with the tech-heavy US Nasdaq index closing -4.2% on Friday, while the broader S&P 500 ended -2.6%, only three days after reaching a record high. Bond yields rose (and prices fell), as higher interest rates make existing bonds with lower coupons (interest rates on bonds) less attractive. Markets are now signalling the possibility of two US rate hikes by early 2027. Elsewhere, oil, gold and bitcoin also retreated.

While tech companies bore the brunt of the price corrections, some of this was profit-taking. Many tech companies which ended the week in the red have performed strongly over the past two months. The Nasdaq index has risen 23% over this period, while the S&P 500 has delivered returns of 15%. Even after Friday's sell-off, both indices remain in positive territory so far this year. A broad gauge of global stock market performance, the MSCI ACWI, is almost 13% higher since the start of the year.

Longer term, many analysts believe the latest earnings season supports a positive outlook for stocks. Earnings for companies in the S&P 500 grew by 27% during the first quarter, with more than 80% of companies exceeding expectations. 81% of companies also reported higher-than-expected sales, the largest proportion since 2021.

Investor concerns – market concentration, cash calls

Friday’s sell-down is a reminder that investors should not assume that stock prices can only go higher, even if fuelled by AI. Analysts point to the low proportion of stocks which are responsible for the overall strength in the market. Excluding the contribution from AI-related companies, returns from the S&P 500 have been more modest this year – just over 2% to the end of May, compared to the 11% which includes their contribution.

Investors were also reminded of the high pace of investments demanded in AI by news that Alphabet (the parent company of Google) will raise up to $85 billion from stock market investors. This will be needed to fund its AI data centres and computing capacity to support its AI ambitions. The largest equity fund raising ever, it is set to exceed the amount that Elon Musk’s SpaceX is planning to raise. This could increase the market’s reliance on just a few companies.  

No fast-track for SpaceX into S&P 500

Index provider S&P Dow Jones Indices confirmed that it will not bend its listing rules for SpaceX. This means that the company will not automatically gain entry to the world’s most valuable stock index, the S&P 500. The decision makes the S&P Dow Jones an outlier, as SpaceX will be fast-tracked into indices from rival index providers FTSE Russell and Nasdaq.

The S&P Dow Jones listing rules are unambiguous. A new company must be publicly traded for at least a year before consideration for entry. It must also be profitable, both during the most recent quarter and at the end of its past four quarters. SpaceX’s aggressive expenditure plans (a key reason for its listing) suggest it will not be profitable for a few more years.

The S&P Dow Jones decision has been praised as not bowing to commercial considerations. However, with SpaceX expected to be one of the largest public companies in the US, it is exceptional that it will not be represented in the premier US stock market index. It also raises the possibility of sharp divergences between the tech-heavy Nasdaq, where SpaceX will be a constituent member and will automatically be purchased by passive investors, and the S&P 500, where there will be no such requirement. If SpaceX performs strongly, S&P 500 funds may underperform the Nasdaq ones (although the opposite will be true if SpaceX underperforms).

Gold overtakes US Treasuries as central banks’ top asset

Over the past few years, many critics have been keen to call time on the US dollar as the premier currency for global trade. This theme of “de-dollarisation” sees countries look to settle trades in competing currencies such as the Chinese renminbi or the euro. It has taken on greater urgency since the Ukraine war and the subsequent sanctioning of Russian assets held overseas, much of which are in US dollars.

Are central bankers feeling the same? A report by the European Central Bank during the week stated that gold has overtaken US government bonds as the world’s top reserve asset. Gold accounted for 27% of all central bank reserve assets at the end of 2025, compared with 20% the year before. Over the same period, US Treasuries fell to 22% of assets compared with 25%.

Rather than a strategic adjustment, this change in ranking reflects what has been happening to the value of both these assets. The price of gold rose by over 60% during 2025, while the price of US Treasuries slumped as bond yields rose. Fears about inflation benefited gold while hurting the prospects for fixed income. Greg Venizelos, head of fixed income strategy at SJP commented that the strong recent performance of gold may partially be explained by “concerns about the credibility of fiat (government-issued) currencies against the backdrop of ever worsening government finances and fears that the US government is using the dollar as a weapon in terms of sanctions.”  

UK not saving enough for retirement 

Millions of workers are not saving enough for retirement, risking a cliff-edge drop in income when they stop working, a new report shows.¹ 

The amount needed for people to achieve even a modest standard of living has risen sharply in recent years. This is based on the latest Retirement Living Standards report from Pensions UK. 

The trade body said that fewer than one in four (23%) are on track to reach a ‘moderate’ standard of living in retirement. To do this, a single person needs around £32,700 a year after tax. This rises to £45,000 per year for a two-person household.

In the Pensions UK report, a moderate standard of living is described as providing more financial security and flexibility. It includes an overseas holiday every year, plus one long weekend break in the UK, regular meals out and the ability to run a small car. 

There are also ‘minimum’ and ‘comfortable’ standards of living in retirement. These come with different spending levels. They can be explored in more detail here. 

Renters’ Rights Act discouraging buy-to-let investors 

Law changes affecting landlords in the private rental market, introduced on 1 May under the Renters’ Rights Act, have caused a significant cooling in the buy-to-let (BTL) market, according to mortgage brokers.

Pressure on landlords has grown since the introduction of the new law, with failure to comply leading to big fines. The reforms banned no-fault evictions, tightened the rules for rent increases and gave tenants new rights.

The BTL sector was already becoming less attractive for property investors due to a range of tax changes. Stamp duty land tax has increased, tax relief on mortgage interest is limited, and capital gains tax (CGT) allowances have also been cut, pushing up the tax bill on the sale of BTL properties for some landlords. This may produce different outcomes for B2L investors, as the levels and bases of taxation depend on individual circumstances and reliefs can change at any time. 

Source

¹ Pensions UK partnered with Loughborough University’s Centre for Research in Social Policy to develop the Retirement Living Standards (RLS). The ‘minimum’ standard is based on the ‘minimum income standard’ funded by the Joseph Rowntree Foundation. The ‘moderate’ and ‘comfortable’ standards were developed through research with groups of people across the UK. Report dated 3 June 2026