AFH Monday Espresso Podcast

Monday Espresso Podcat - 17th August 2026

[00:00:00] Rory Dowie: Good morning. Today is Monday the 17th of August. I'm Rory Dowie, Portfolio Manager here at Marlborough. I'm delighted to be joined by Andrew Shaw again. Andrew, good morning.

[00:00:10] Andrew Shaw: Morning Rory.

[00:00:11] Rory Dowie: Three things on the agenda this morning. First, the big one, US inflation. We got the latest reading last week and it was the number markets had been waiting for.

[00:00:20] Rory Dowie: Then we'll bring it close to home with an update on how the UK economy grew over the spring. And finally, something a little different. The extraordinary heat we've been seeing across the northern hemisphere this summer and why extreme weather is increasingly something investors may have to pay attention to.

[00:00:34] Rory Dowie: The first things first Andrew how did markets get on last week.

[00:00:38] Andrew Shaw: Yeah, it was a good week, Rory. Broadly green across the board. Standout was Asia and that was Japan and in particular, South Korea led the way with the big European chip makers up sharply over the weekend on the back of the AI trade, gathering some momentum again. In the US the main indices pushed to fresh record highs and that was helped by that cooler inflation reading and a rebound in the big technology names.

[00:01:01] Andrew Shaw: Europe was firmer too. And the one lagard was the UK with FTSE 100 down about 1.5%.

[00:01:08] Rory Dowie: So risk appetite's still healthy. If I look at the year to date numbers to Friday close, the US is up around 14% this year. Europe behind that at 12% in the UK, up 8%. Again, standouts being Japan and Korea up 37 and 66% respectively.

[00:01:26] Rory Dowie: Andrew, US inflation, we had the print on Wednesday. What did that look like?

[00:01:29] Andrew Shaw: So on Wednesday we got the US Consumer price Index for July, and that's the CPI, the main gauge of how fast prices are rising for everyday goods and services in America. The headline inflation rose just 0.1% on the month, and that pulled the annual rate down to 3.4% from 3.5% in June.

[00:01:50] Andrew Shaw: And if you strip out some of the more volatile elements of that, like food and energy, what economists call the core inflation, that eased to 2.5%, which is the lowest in five months. And so both readings came in bang in line with what economists had expected.

[00:02:05] Rory Dowie: Okay, so a fairly benign number. And it's worth reminding listeners why inflation has been running hot or slightly higher this year.

[00:02:12] Rory Dowie: That's really an energy story, isn't it?

[00:02:15] Andrew Shaw: Exactly. Yeah. The spike we've seen in 2026 has been driven almost entirely by energy, and that traces straight back to the war with the Iran and the disruption to the Strait of Hormuz. That's the shipping channel that a large chunk of the world's oil passes through.

[00:02:30] Andrew Shaw: Petrol at the pump in the US is averaging around $4 a gallon, and that's up from a bit over $3 a gallon a year ago. So energy is still up nearly 15% on the year. The encouraging part of the report is that monthly pace has calmed right down, which suggests that energy driven burst is starting to fade now.

[00:02:51] Rory Dowie: And I guess the reason markets cared so much comes down to what the US Central Bank, the Federal Reserve does next.

[00:02:57] Rory Dowie: Talk us through what that means.

[00:02:59] Andrew Shaw: Yeah, this is the interesting bit, Rory. For most of the year, the debate has actually been whether the Fed might have to raise interest rates to get on top of that energy driven inflation. At the last meeting, three officials voted to do exactly that. The softer inflation number like this one actually takes some of that pressure off.

[00:03:17] Andrew Shaw: Markets now lean towards the fed holding steady at the September meeting rather than hiking. And that's really why shares rallied stable borrowing costs rather than rising ones tend to be good for company valuations.

[00:03:30] Rory Dowie: Thanks, Andrew. Very clear. We'll be keeping an eye on that close to home. We did also have an update on the UK economy last week.

[00:03:37] Rory Dowie: What did that show us?

[00:03:39] Andrew Shaw: We did on Wednesday, the Office for National Statistics or the ONS, the official body that measures how the UK economy is doing. Told us the economy grew by 0.4% in the second quarter, so that's April through to June. That's a slowing from 0.6% in the first three years of the year.

[00:03:57] Andrew Shaw: But it was in line with expectations and all things being considered. It's still a reasonably solid showing. Growth was almost entirely driven by the services sector, thinking of everything from shops and restaurants to law firms and, and IT.

[00:04:12] Rory Dowie: And there was a rather fun detail behind the June numbers.

[00:04:15] Rory Dowie: Football didn't come home, but what was the impact on the UK economy?

[00:04:19] Andrew Shaw: Yeah, there was a fun detail Rory. June was a standout month up 0.3%. And the ONS actually points to the football World Cup as the driver there. It gave a lift to pubs, food and drink, TV production and advertising. So a summer of football showed up in the economic data.

[00:04:36] Rory Dowie: Yeah. Okay. So a decent quarter, but the outlook hinges heavily on that Middle East situation and you know where that oil price sort of goes to. And that brings us neatly to our third topic because there's another force acting on economies this year that's hard to ignore the sheer heat of this summer.

[00:04:51] Rory Dowie: Not going to complain about it. Andrew, give us a sense of some of the numbers behind how hot this summer's been.

[00:04:56] Andrew Shaw: Yeah, they really are striking. July, according to the European Climate Service, Copernicus was the joint second hottest month ever recorded anywhere on the planet. And that's tied with July, 2024.

[00:05:09] Andrew Shaw: And that's only just behind July, 2023. Globally temperatures were around 1.5 degrees above pre-industrial levels. That's a yardstick that scientists use. Essentially how much the world has warmed since we started burning fossil fuels at scale. And 2026 as a whole is currently running as the third warmist year on the books.

[00:05:30] Rory Dowie: And this isn't just a weather story. It feeds straight into the economy and actually then into markets. Extreme heat hits farming, food prices, disrupts tourism drives up demand for energy to run air conditioning, for example, and land insurers may even have larger bills the other side of a summer like this is fire.

[00:05:47] Rory Dowie: And that's been remarkable this year too, hasn't it?

[00:05:50] Andrew Shaw: It has. Europe is on course for its worst wildfire season on record. By the end of July, more than 250,000 hectares had burned across the continent. That's an area roughly with the size of Luxembourg. To put the pollution into perspective, Copernicus estimates the European fires had release more than 8 million tonnes of carbon dioxide by late July, and that's roughly the annual carbon footprint of well over a million people.

[00:06:17] Rory Dowie: Yeah, quite a sobering figure, but there's a slightly counterintuitive twist in the global picture, isn't there? Can you give our listeners an update on that?

[00:06:25] Andrew Shaw: Yeah, there is and it's worth flagging. Globally wildfire emissions in the first half of the year were actually the lowest on record, and that's mainly because there were far fewer agricultural fires in Africa, which is normally the biggest source.

[00:06:39] Andrew Shaw: So this is very much a concentrated European summer story rather than a worldwide surge. But for Europe specifically, it's about as bad as it gets.

[00:06:48] Rory Dowie: Yeah, so genuinely extraordinary summer and a reminder that climate is steadily becoming a mainstream investment consideration from the insurers footing the bill to food and energy prices to the economies like our own that these shocks pass through.

[00:07:01] Rory Dowie: So Andrew, as ever, you've made it very clear for all our listeners finishing up what's on the decks this week.

[00:07:07] Andrew Shaw: Yeah, it's quite a week on the data front. This week, Rory, in the US we get the minutes from the West Federal Reserve meeting, which should give us a bit more colour on that rate debate, plus a few more second quarter earnings reports. Close to home it's fairly light though we'll keep half an eye on heat and wildfire situation across Europe.

[00:07:27] Rory Dowie: Great, thanks Andrew. Thanks listeners for joining and wishing you all a great week ahead.