AFH Monday Espresso Podcast

Monday Esspresso Podcast - 23rd February 2026

[00:00:00] Nathan Sweeney: Good morning everybody. It's Nathan Sweeney here, chief Investment Officer for Multi-Asset at Marlborough, and today is Monday the 23rd of February, and I'm really delighted to be joined by James Milward today. James is one of our analysts covering UK and Europe.

[00:00:18] Nathan Sweeney: Good morning, James.

[00:00:19] James Millward: Good morning, Nathan.

[00:00:21] Nathan Sweeney: So James, let's start with markets. So how did markets perform last week?

[00:00:25] James Millward: So it's a broadly positive week for global equities. Asia Pacific led the way gaining around 2.2% while the S&P also bounced back from a previous week's pull off, finishing up over 1%. And here in Europe, the UK market climbs around 2% with the wider European area up roughly 1%.

[00:00:43] Nathan Sweeney: Okay, and I think, really we're getting a lot of questions from clients this week and you know, it's really centering around geopolitics.

[00:00:51] Nathan Sweeney: So obviously we're seeing a lot of media attention about tensions rising between the US and Iran, and so clients are really worried, and I suppose from our perspective, you know, what should they be focusing on?

[00:01:06] James Millward: Yeah, and it's very understandable, but historically, geopolitical tensions in the Middle East tend to have limited direct impact on the stock market unless one thing happens, the price of oil spikes.

[00:01:17] Nathan Sweeney: I think that's a really good point, so if we look at kind of previous examples, so say in 1973, you had the Yom Kippur war, we had the Saudi oil embargo, we've had 1990 Gulf War, 2003 Iraq War. All of these events triggered a sharp increase in the oil price.

[00:01:36] James Millward: Indeed, and when the oil price spikes, it effectively acts as a tax on the global economy. Energy becomes more expensive, transport and production as well.

[00:01:45] James Millward: All costs rise, and consumers end up having less disposable income that pushes inflation higher and as inflation rises, central banks become far more cautious about cutting interest rates.

[00:01:56] Nathan Sweeney: Right and it's that combination of higher inflation and central bank hesitation, it's exactly the thing that really slows down growth.

[00:02:04] Nathan Sweeney: So when we've looked at the data, you know, historically we've noticed that when you get these big oil shocks, especially jumps of 50% or more in the oil price, that often leads to recessions.

[00:02:17] James Millward: Indeed, yes, so the key takeaway for investors is not to panic about geopolitical headlines, but keep a close eye on the real market driver, which is oil prices.

[00:02:27] Nathan Sweeney: Okay, so I think one of the other things which really cropped up has been inflation and if we look at the chart of the week this week, I've actually talked about the fact that it's been raining relentlessly here in the UK.

[00:02:40] Nathan Sweeney: Myself and James share a passion, we both love Cornwall and I was reading that there was a town in Cornwall where it has rained for 50, yes, 50 consecutive days.

[00:02:51] Nathan Sweeney: But the analogy I was drawing there was really that, you know, we've had inflation raining down on markets for the last number of years. And it's kind of a real theme, this kind of embedded inflation.

[00:03:04] Nathan Sweeney: But we have seen some, I suppose, glimmer of hope on the horizon because we've had inflation data out last week and yeah, James, how's the inflation looking?

[00:03:14] James Millward: Indeed and I've spent many a holiday in a wet Cornwall. It's a beautiful place, but it also can rain a lot. But yeah, moving on to inflation, so definitely it was an important print.

[00:03:24] James Millward: Headline inflation for January came in at 3.01%, down from 3.37% in December.

[00:03:31] James Millward: That's exactly in line with expectations, although it was slightly above what the Bank of England had forecast.

[00:03:36] James Millward: A big driver underneath was food inflation, it called more sharp than expected, which helped pull the headline number down. But the stickier part was service inflation, which only eased to 4.38% from 4.53%.

[00:03:51] James Millward: The drop was smaller than hoped and was mainly because of volatile components such as cultural services like live music prices, which rose unexpectedly.

[00:04:00] James Millward: Because of that, core inflation only dipped to 3.09%, still higher than the Bank of England's forecast.

[00:04:07] Nathan Sweeney: Yeah, but I think the really positive thing there is that, you know, there seems to be a bit of a clearing, so let's call it scattered showers for now on the, the inflation front.

[00:04:15] Nathan Sweeney: So yeah, it is really great to see the progress that's been made on inflation as it continues to tick down.

[00:04:20] Nathan Sweeney: So, James, what does that mean for interest rates? I think that's what a lot of our listeners will want to know.

[00:04:25] James Millward: Yeah, sure, so despite the slightly hotter service and core numbers, markets still expect the MPC to cut rates in March.

[00:04:32] James Millward: The labour market has softened considerably and the recent Bank of England communication suggests that the hurdle for near term rate cuts has come down.

[00:04:39] James Millward: Inflation is easing, but unevenly, but the overall trend is still moving in the right direction.

[00:04:45] Nathan Sweeney: Yeah, I suppose that's good news for mortgage holders, you know, getting those rate cuts coming through and it's great to see interest rates now below 4% and continuing to move down.

[00:04:54] Nathan Sweeney: So I think it's a big week next week, we've got NVIDIA's results out and a lot of people will be focused on that, and I think that'll be the key theme, but is there anything else we should be watching out for?

[00:05:07] James Millward: Yeah, definitely so lots of big events happening in markets next week.

[00:05:10] James Millward: So earnings as you mentioned, but on a sort of more macro basis, we've got inflation data for Germany and Japan, and additionally we've got the US Producer price Index, which will be closely watched for any signals for future fed rate cuts.

[00:05:24] Nathan Sweeney: Okay, thank you James, really thank you for joining me on the call this morning.

[00:05:28] Nathan Sweeney: So some good updates there on oil prices and inflation and what investors can expect going forward.

[00:05:35] Nathan Sweeney: So I'd just like to thank all of our listeners for joining us on the pod this morning and taking the time to listen in. If you do have any questions, do send them in, we'd love to bring them up.

[00:05:44] Nathan Sweeney: Until next time, wishing you all a great week ahead.