WeekWatch

Markets shaken by fast flowing news cycle 

The weekend proved just how fast events can turn, with President Trump’s threats to impose tariffs on all countries that oppose his plans to buy Greenland.

Unsurprisingly, news of a potential trade war sent European markets down on Monday morning, with US futures also looking negative. 

Before this, markets had seemed remarkably sanguine in the face of numerous potential headwinds. 

A skim of the news last week would show arguments about Greenland already ongoing, continued uncertainty in Venezuela, and Iran struggling with a currency collapse and mass protests. On top of this there were ongoing tensions in the Far East over China’s claims around Taiwan.  

At the same time, Federal Reserve chair Jerome Powell is under investigation in the US, reflecting what many see as an attempt to weaken the central bank’s ability to set interest rate policy.  

Despite this, US equities hit record highs early last week before falling slightly, and US Treasury bonds ended close to where they started. Meanwhile the FTSE 100 marched further into record territory as the week progressed. Generally, since the big selloff in April last year, volatility had remained remarkably low across the world. 

Market faith 

The simple explanation for performance up to last Friday was that large, institutional investment houses didn’t believe tensions were going to result in actual geopolitical shocks. 

Ultimately global markets suggest most investors thought events would eventually blow over or at least a compromise could be found, for example, as in the past.  

According to Greg Venizelos, Fixed Income Strategist at SJP: “I think a lot of the market just didn’t believe a lot of what’s being talked about was going to happen. For example, if China were to invade Taiwan, that would obviously be really big. But talking to others around the industry, no one thinks China would be prepared to take such a risk for some time.” 

Looking at the US specifically, however, Greg notes: “There is a general expectation that the November mid term elections will see the Democrats take control of the House. That should moderate the current administration’s actions somewhat. I think that is giving markets comfort.”  

UK GDP surprise 

In the UK there was some relatively good news last week, as the Office for National Statistics (ONS) revealed that UK GDP grew by 0.3% in November. This was above the 0.1% expected. 

According to the ONS, this increase was driven by increased economic output. The monthly figure was helped by Jaguar Land Rover facilities returning to production in the month, after a cyber-attack temporarily took them offline for September and much of October.  

While this helped UK equities, given the FTSE 100 has been on an upward trend for some time now it seems unlikely that it was the only factor. 

UK shares have been helped by investors looking to diversify their portfolio away from US technology companies in recent months. The FTSE 100, dominated by banks and mining companies, is well placed to act as such a diversifier. It’s no surprise that its ten best performing companies last year and year-to-date are all in mining, financials or defence.  

Snap Japan election 

Finally, there are reports that the Japanese prime minister Sanae Takaichi is considering a snap election, possibly as early as February. 

Takaichi currently leads a coalition with a razor thin majority in the Japanese House of Representatives, however she is polling very well. She will be hoping this personal popularity translates to increased seats for her party.  

Martin Hennecke, Head of Asia & Middle East Investment Advisory & Comms at SJP, warns: “Takaichi still appears to have a high approval rating compared to a relatively fragmented opposition. That said, investors might want to pay more attention to economic and businesses’ fundamentals than political developments. The room to manoeuvre for whoever is in charge will be constrained by a combination of significant economic, demographic and sovereign debt challenges to deal with.” 

So far Japanese shares have had a good start to 2026, building on their strong returns in 2025. On the other hand, Japanese government bond yields have continued to rally. They are now nearly double where they stood at the start of 2025, meaning the government will have to be contending with increased interest payments in the future.  

Mansion tax could hit more homes 

Homes currently costing £1.5 million could be hit by the new mansion tax as the government plans to expand the scope of its revaluation efforts. 

The government’s Valuation Office Agency confirmed it was starting a review of homes in England believed to be worth £1.5 million or more to ensure their valuations were accurate and did not exceed the £2 million mansion tax threshold. 

The review will see the largest revaluation of homes in more than three decades, covering up to 200,000 properties previously valued at up to £5 million. Critics have warned that broadening the valuation criteria is likely to drag more homes into the mansion tax. 

The mansion tax was announced in the 2025 Autumn Budget and will come into force in April 2028. The levy will be charged in bands according to the value of homes.  

For example, a house worth between £2 million and £2.5 million will face an annual council tax surcharge of £2,500. This will rise to a maximum of £7,500 for a property worth more than £5 million. 

The mansion tax is expected to raise around £400 million for the government in the tax year 2029/30, according to the Office for Budget Responsibility.1 

The Scottish government last week unveiled a similar plan to apply a mansion tax on homes worth over £1 million, as part of its own Budget. 
 
Financial ambition fading amid economic trouble 

Economic pressures and uncertainty are causing growing numbers of households across the UK to put off long-term financial planning. 

This is according to our Real Life Advice Report 2025 carried out by Opinium to find out how find out attitudes to money, financial advice and the future had changed over time.  Opinium surveyed 8,000 UK adults nationwide between 22nd July and 5th August 2025, and refreshed shorter surveys of a further 2,050 UK adults between 28th November and 6th December 2025.Quantitative data is taken from these surveys. Quotas and post-weighting were applied to the both samples to make the datasets representative of the UK adult population. 

The final chapter of the 2025 Real Life Advice report highlights that the number of adults with no financial ambitions for the next year rose from around one in 10 (13%) to one in five (21%) between July and December 2025. 

A key factor driving this is a bigger focus on day-to-day spending due to the increase in the cost of living, making it less possible for households to plan for the long term.

James Rainbow, chief executive officer at St James’s Place Wealth Management, said: “This widening ‘ambition gap’ speaks to a deeper challenge: when financial pressure becomes the norm, confidence in the future erodes, making long-term planning feel less possible for many households.” 

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

¹ Office for Budget Responsibility - November 2025