AFH Monday Espresso Podcast

Monday Espresso Podcast - 26th January 2026

[00:00:00] Rory Dowie: Good morning. Today is Monday the 26th of January. My name is Rory Dowie, Portfolio Manager here at Marlborough. Today I'm delighted to be joined by Andrew Shaw. Andrew is a Senior Investment Analyst on the team. So Andrew, firstly, good morning.

[00:00:13] Andrew Shaw: Morning, Rory.

[00:00:14] Rory Dowie: Lots going on. Last week we had Trump's tariffs dominating the headlines again, this time with Europe on the receiving end and closer to home we had some economic data here in the UK, including inflation. But before we get onto that, Andrew, what was going on in markets last week and what are the returns looking like so far this year?

[00:00:31] Andrew Shaw: It is more volatile week, last week, predominantly on the back of Trump's comments on Greenland, which we'll get back to shortly, but so far this year, markets are continuing to perform well.

[00:00:41] Andrew Shaw: At the headline level, emerging markets continue to lead the way up 6.5% whilst Japan is up 4%. Marginally behind is Europe and the UK each up around 2.5% and at the bottom of the pack is actually the US is up just 1% this year so far. Interestingly, if you do, if the hood on the US market though, there is what we're gonna call rotation going on at the moment.

[00:01:05] Andrew Shaw: Over the last few years, we've spoken about market concentration and just a few stocks driving the market up those magnificent seven companies in quotation marks. And so far this year, it's the small companies that have been performing well. A gauge for US small companies is at up 9% this year. Whilst those magnificent seven companies are actually down around 2.5%.

[00:01:26] Rory Dowie: Yeah. So to our listeners, essentially those seven large companies which make up high weight in the US markets, they're acting as a drag on the overall market performance. And actually those smaller companies, which have underperformed the last couple of years, are performing much better, but they're not performing by enough to offset the weaker performance in those large companies.

[00:01:43] Rory Dowie: So hopefully that makes sense. And then we're still seeing that theme that we spoke about last week. The US is continuing to underperform kind of most other major markets at the moment. I guess moving on, Andrew. Lots going on last week we had Trump's tariffs, Greenlands-Europe. You know, what's the headline?

[00:02:00] Andrew Shaw: On the 17th of January, president Trump escalated as a long standing interest in Greenland by issuing a specific ultimatum on Truth Social. He threatened to impose an immediate 10% tariff starting on the 1st of February on eight European nations, including the UK and France. And then he further stated that if a deal for the purchase of Greenland was not reached, those tariffs would actually rise to 25% on June the first this year. We think this comes down to national security and minerals. Security as Greenland would act as a defense from any transpo missiles from Russia and or China. And on the mineral front, Greenland has lots of untapped, rare earth minerals. And so that would reduce dependence on Chinese exports.

[00:02:45] Rory Dowie: Yeah, so I mean, I guess we've been used to, listeners might have heard us talk about Trump over the last couple of years and the whole TACO effect that we've termed, well, the industry's termed Trump always chickens out.

[00:02:55] Rory Dowie: So he is actually been using these tariffs as sort of a bargaining tool to get what he wants and then sort of step back on them later. Andrew, is Trump chickening out this time at all?
[00:03:03] Andrew Shaw: I'm not going to say that specifically, but I mean, markets did drop at the start of the week and that was following a blunt reaction from European leaders.

[00:03:12] Andrew Shaw: But yes. I mean, on Wednesday he did soften his tone at the World Economic Forum in Davos, in a rambling keynote speech. H e finally ruled out military action saying, I don't want to use force. I won't use force. All the US is asking for is a place called Greenland. So he had a meeting with the NATO secretary General Mark Rutte, and Trump announced that he was suspending the February the first tariffs, and he claimed to reach a framework of a future deal that would involve total access to the island for defense purposes and mineral exploration.

[00:03:46] Rory Dowie: So less likely we get tariffs, but clearly Greenland as of today, still a serious source of extreme diplomatic friction. Moving on, Andrew from Trump. We had UK inflation data last week and some other economic activity indicators. What can you tell us the latest there in the UK?

[00:04:03] Andrew Shaw: Yeah, the Office for National Statistics reported that UK inflation or CPI actually ticked up to 3.4% in December, and that's rising from 3.2% in November.

[00:04:14] Andrew Shaw: It's the first time in five months that we've seen a rate increase, and it was a bit of a perfect storm of year end factors. Airfares jumped, which is common in December, but then we also saw the impact of higher tobacco duties from the autumn budget, and that was more importantly for the weekly shop food inflation edge up to 4.5%, and that was led by the cost of basics like bread and cereals.

[00:04:37] Andrew Shaw: Having said that, if you strip out more volatile elements of the inflation calculation, including tobacco, food, and energy, the inflation rate for the year to December was actually lower at 3.2%, so more in line with expectations.

[00:04:51] Rory Dowie: Yeah, so I guess a slightly hot reading at the headline level, but kinda more in line if you remove some of those more volatile components of the calculation.

[00:04:58] Rory Dowie: We also had UK PMI data last week. That's basically a survey where purchasing managers indicate their purchasing expectations for the year. A reading above fifties positive indicates an economy is expanding and below fifties the opposite. So, Andrew, what did the data tell us about the UK economy?

[00:05:12] Rory Dowie: Obviously post that labour budget.

[00:05:14] Andrew Shaw: Yeah, UK PMI jumped to 53.9 and that's up from 51.4 and actually hit a 23 month high and the reading is meaningfully ahead of the 51.5 estimate that economists have been expecting, and they put this down to reduced uncertainty from the budget overhanging. The reading indicates the British economy is regaining momentum after a slow down in growth in a worsening labour market over the back half for 2025.

[00:05:40] Rory Dowie: Yeah, so some positive developments there in the UK economy. Finally, it feels like perhaps we're starting to turn a corner. I guess we'll have to see if this continues into something more sustainable in the coming months, but for now, it looks like we are sort of getting on a slightly better tracking. I guess finishing up, Andrew, what is on the deck for this week?

[00:05:57] Andrew Shaw: We're getting to the thick of earning season this week Rory. Companies like Microsoft and Apple reporting. So we will likely to see the key things driving markets.

[00:06:06] Rory Dowie: Brilliant. Thanks Andrew. Yeah, four of those seven companies that we've spoken about in the US are reporting earnings, so we'll be back next week to give you an update there.

[00:06:13] Rory Dowie: Thanks for joining me this morning, Andrew, and to all our listeners, thanks for listening and wishing you all a great week ahead.