We start this week with some positive economic news from the UK. GDP grew 0.3% month‑on‑month in November, a welcome reversal after the declines seen in September and October, and the strongest monthly increase since June 2025. The government will hope this is evidence of the beginning of a turning point for Britain’s economy, especially following the uncertainty stirred by pre‑budget speculation.
A welcome boost to the economy came from the recovery of Jaguar Land Rover, which was hit by a major cyberattack last August. The hack forced the UK automaker to halt production across all three of its domestic factories, costing the wider economy an estimated £2 billion. With the company now back to full capacity, car manufacturing surged 25.5% — the largest monthly increase since July 2020. The services sector, which remains the cornerstone of UK growth, also outperformed expectations, rising by more than 0.3%.
Continuing the positive momentum, Bank of England policymaker Alan Taylor struck a constructive tone on Wednesday. He indicated that inflation is now expected to moderate by mid‑2026, rather than next year as previously projected. With wage growth continuing to cool, he suggested this creates the conditions for further interest‑rate cuts. Mr Taylor was also among the five Monetary Policy Committee members who voted for the most recent cut at the end of last year. Despite this, markets remain cautious, pricing in only two quarter‑point reductions over the course of 2026.
Over in the US, inflation rose 0.3% month‑on‑month in December while remaining at 2.7% year‑on‑year. The monthly increase was driven largely by a 0.4% rise in shelter costs (rents) and a 0.7% jump in food prices — the biggest monthly gain since October 2022. It is also worth noting that, due to the US government shutdown in the final months of 2025, no data was collected in October. As a result, the Bureau of Labor Statistics relied on a carry‑forward method to calculate figures, hence the reliability of the data is to be questioned. President Trump, keen to impress in his midterm election announced a series of proposals to combat the cost of living, including a cap on credit card interest rates and a ban of institutional investors purchasing single family homes.
Over the weekend, Fed Chair Jerome Powell revealed that the Department of Justice (DoJ) had issued grand jury subpoenas to the central bank, which he described as effectively threatening a criminal indictment on the basis that the Fed had not adjusted interest rates in line with the “preferences of the President.” The announcement has intensified concerns about the future of central‑bank independence, with Powell himself questioning whether monetary policy decisions might, going forward, be shaped by political pressure or intimidation rather than economic fundamentals.
The concerns provided support for precious metals, which were further supported by increasing geopolitical tensions with Iran. Iran is currently amid the largest anti-government protests in years as uprisings spread across the country, initially fuelled in response to soaring inflation and quickly turning against political members with the intention for key government figures to flee the country. President Trump condemned the actions against protestors in Iran and announced a 25% tariff on countries that do business with Iran. This was more of a public threat as there is no official documentation for this. The concerns pushed investors toward safe‑haven assets, with gold jumping to circa $4,610 an ounce and silver crossing $90 an ounce for the first time.
Over in Japan, Prime Minister Takaichi is preparing to dissolve the lower house of parliament, paving the way for a snap election. Appointed in October, Takaichi has laid out ambitious fiscal plans focused on defence spending and reviving economic growth and is looking to capitalise on a recent surge in public support. The news initially sent the yen to an 18‑month low against the US dollar, though it later recovered following comments from Japan’s finance ministry suggesting that intervention in the currency markets was possible.
It has been a strong start to 2026, with portfolios carrying on their positive end to 2025. Exposure to precious and industrial metals has helped drive returns, an area we have been very constructive on. We are beginning to see small cap equities advance, within both the US and UK, and this has further helped portfolios. We continue to see small and mid-cap equities offering compelling value, which should be supported by positive economic growth and falling interest rates.
Nathan Amaning, Investment Analyst
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