This month saw the Bank of Japan (BoJ) raise its main interest rate from 0.75% to 1% – the highest rate since 1995, in response to surging global energy prices due to the Iran war.

While Japan’s inflation rate has sat below its 2% target all year – it was 1.5% in May – a BoJ policy statement suggested a risk of it accelerating above that target, forcing businesses to pass on higher costs. This could lead to “an increase in consumer prices across a wide range of items”.

Widely expected by the market, the rate hike – decided by a vote of seven to one board members – was seen as a landmark step on Japan’s continued path towards ‘normal’ monetary policy, breaking out of a three-decade-long deflationary period.

Just one dissenter, dovish new recruit Toichiro Asada, voted to hold rates.

Economists and policymakers are described as ‘hawks’ or ‘doves’ depending on their approach to achieving economic stability. Hawks favour price stability and curbing inflation through tighter policy (rate hikes), while doves prefer economic growth and maximising employment through looser policy (rate cuts).

A summary of opinions from the bank’s two-day Monetary Policy Meeting (MPM) on 15-16 June was published by the BoJ last Wednesday (24 June). It doesn’t attribute quotes but cited one member as saying: “Raising the policy interest rate could suppress aggregate demand by curbing firms' business fixed investment, potentially inducing simultaneous declines in inflation and in production and employment. The Bank should therefore hold the rate steady at this point.”

Most of the opinions warned of mounting price pressures as businesses passed on the rising costs resulting from the weak yen and Middle East conflict.

What does the BoJ’s rate hike mean for Japan’s economy?

As Japan is an importer of natural resources, a weak yen pushes up the cost of imports for its domestic consumers and businesses, in turn fuelling higher inflation.

The yen is currently its weakest against the US dollar since 1986. Macrotrends data shows it was trading around 161.70 on 27 June, with traders braced for the possibility of further government intervention to prop up the currency.

Normally, if the BoJ hikes rates, the yen should get stronger. But according to Alex Hart, investment specialist at fund manager Sumitomo Mitsui DS Asset Management, that’s not happening right now because of the influence of the US.

He explains how people expected the US economy and job market to slow down, which would have led the Federal Reserve to cut rates. But economic revisions have held up – employment data was positive and inflation remains sticky – so a US rate hike may be expected instead.

Hart says this is weighing on the yen in terms of the attractiveness of the ‘carry trade’ (when investors borrow yen cheaply to invest in higher-yielding assets elsewhere).

“At the moment it’s probably more the US and global economy that are the determinants of the yen [as well as] real money demand,” he adds. Higher inflation is also encouraging Japanese consumers to buy more equities – selling yen and buying global assets. That creates additional downward price pressure on the yen.

That said, he doesn’t expect further yen depreciation because the government will likely intervene, which even if it doesn’t work it sends a message to hedge funds that might be looking to short the yen, for example.

Currency intervention is when a country’s authorities – in this case, the BoJ and Ministry of Finance – tap their huge reserves to sell US dollars and buy their domestic currency (yen), strengthening the local currency to help stabilise rising prices.

Many investors are waiting to see how all this affects liquidity, says Scott Gardner, investment strategist at investment platform J.P. Morgan Personal Investing.

A more ‘liquid’ market means consumers and businesses can spend, borrow and invest more easily, fuelling economic activity.

Where are the bright spots for investors in Japan?

Although the BoJ is slowly reducing its quantitative easing (QE) and bond-buying programme, Japanese banks are increasing lending and, in turn, their balance sheets.

“The commercial banks have been producing loads of liquidity, even more yen that has got to find its way into the market,” Gardner adds.

His team at the platform has been overweight Japan since the start of the year in its Fully Managed range, which is constructed using exchange-traded funds (ETFs).

“We like the Japanese economy and see overall economic activity improving, you’ve got the [aforementioned] liquidity picture and also a very pro-growth agenda coming from the Takaichi government,” he says.

Elsewhere, Hart says energy infrastructure-related stocks have performed well, while banks, consumer names and defence look promising.

“Some defence-related names have sold off quite considerably amid global expectations the war is ending. Also heavy aerospace, ships and tanks are being replaced by cheaper drones,” he says.

“But defence spending in Japan has increased to 2% of GDP – potentially moving higher than that. We’re seeing increased spending in other countries as well, also some of those names are now moving into drone technology, so that’s an area I think remains quite a bright spot in terms of its potential.”

Two of Japan’s biggest listed defence contractors are Mitsubishi Heavy Industries (TSE:7011) and Kawasaki Heavy Industries (TSE:7012). Both are listed on the TSE and investing in drone and unmanned aerial vehicle (UAV) technology.

Why invest in Japan?

The other exciting shift in Japan’s investment case, is its move away from a “sleepy giant of mainly industrials and financials” to a technology leader that’s holding its own alongside the rest of Asia.

“Semiconductors are the big thing at the moment, which plays into the index concentration dynamic you also see in the US. Around 21% of the Nikkei 225’s top 10 holdings are in semiconductors,” Gardner adds.

“The AI trade is in full swing across Asia; be it Taiwan, Japan, Korea… that's one of the reasons why the Nikkei has held up quite well relative to global market conditions.”

While most of the big tech beneficiaries are US-based, he sees the AI trade broadening because those further back in the supply chain who are actually responsible – “the picks and shovels”, as he describes them – are predominantly in Asia.

Hart also points to the tech theme; he says earnings growth is coming largely from data centres, with high levels of capex in electronic components.

Auto giant Toyota (TSE:7203) was Japan’s most valuable listed company by market capitalisation (market cap) for 20 years, holding the top position on the Tokyo Stock Exchange (TSE) before it was displaced by communications company SoftBank (TSE:9984) at the beginning of June.

Now in pole position on the TSE is computer memory manufacturer Kioxia Holdings (TSE:285A).

There is currently a ‘bottleneck’ in NAND flash memory (the type used in memory cards, USB sticks and SSD drives) and Hart says Kioxia (which spun out of Toshiba in 2018) is a pure play on that market.

How should you invest in Japan?

Investing passively in Japan right now is a big play on technology. For investors in index funds understanding the construction of the underlying index is crucial, especially if you’re looking at Japan to add diversification – you might end up doubling down on technology exposure.

The iShares Nikkei 225 UCITS ETF (LON:CNKY), which tracks its namesake index, has an approximately 40% weighting towards tech as of 26 June.

“The Nikkei 225 is share price constructed, which is one of the reasons why Advantest and Tokyo Electron are dominating the Nikkei. In the MSCI, they each make up less than 3%, so it’s a huge discrepancy,” Gardner points out.

It’s possible to invest directly in Japanese shares on some platforms, but this typically comes with restrictions, such as higher minimum investment amounts (Saxo) or having to give instructions over the phone (AJ Bell).

For more diversified exposure to the broader Japanese equity market, actively managed funds can cast their net wider.

Japan has around 4,000 listed companies, while even the TOPIX only has 1,500 names.

“Most of the inefficiency in terms of market pricing – given poor sell-side analyst coverage and so on – is potentially more exploitable with smaller and less-known companies, which active management can find,” says Hart.

Baillie Gifford Japanese is a growth-focused fund that invests in large and medium-sized companies with high and sustainable growth potential, while Man Japan CoreAlpha is another popular choice.

If you prefer closed-ended funds, some specialist investment trusts include J.P. Morgan Japanese Investment Trust (LSE:JFJ), Schroder Japan Trust (LSE:SJG) or AVI Japan Opportunity Trust (LSE:AJOT).

For broad Japanese index exposure, any of the major index fund providers likely have a Japanese equity offering at relatively lower cost, such as iShares Japan Equity Index or Vanguard Japan Stock Index.

Japan makes up around 5-6% of the global stock market (the second-largest regional exposure after the US), so indirect access via any number of global model portfolios or tracker funds will provide some exposure to the region.

It’s the British dream to become a homeowner, but for many young people it’s just that – a dream.

The average house price in the UK now sits at around £300,000, but if you have your heart set on the capital then it’s more like £550,000.

So, if you’re fledging, you will need to cough up a deposit of around £30,000 to £55,000 as a 10% deposit. You may be able to get a lower loan to value, with some lenders going as low as 5%, but you will need a polished credit score.

And remember, what you do not fulfil with a deposit ends up going to mortgage debt, the cost of which will vary throughout your mortgage term, which is typically 25 years.

For most first time buyers, this deposit is out of reach; after all, the average salary for 22 to 29-year-olds is £33,000. This would generate an income of £2,273 take home pay a month, and that is not taking into account pension contributions. It’s around £2,163 with a 5% pension contribution.

Now the average rent in the UK is £1,374, according to the Office for National Statistics, but it largely depends on where you live. London rent prices can exceed £2,000 a month on average.

So, there’s little left to save after living expenses, household bills and hopefully some fun.

But could moving back home for at least three years be worth it? And if you are a parent, would you let your adult child return rent free?

How long would you have to live with parents to save for a deposit?

Based on the median salary and a gross income pay of £2,163, which includes pension contributions, if you could put away £1,200 a month (just below the average rent) strictly and use the remaining for living expenses and to help support household expenses, then you could accumulate over £43,000 over three years.

Saving or investing the deposit over time means your final cash pot could be bigger, though if you want to use that deposit in fewer than five years, investing it may not be the best option as your cash won't be as liquid.

Of course, your savings habit would have to be strict – but staying with your parents and removing the rent pressure for at least three years could finally help you get onto the property ladder.

Rent is one of the biggest expenses young people face and even if they earn more, their ability to save is stumped by high renting costs.

Would you live with your parents for three years?

I asked a few ‘young’ people if they would live with their parents for three years. Some said they would take the hit whereas others said it would not work because their parents lived too far from where they worked. One person said it was simply not worth it as it could damage their mental health.

Checking in: the hotel of mum and dad

Recent research from think tank Resolution Foundation shows two in three young adults are now residing with their parents to save money.

Gen Z have become the stay at home generation, with 63% of young adults aged 20 to 24 living in their family home, and those aged 25 - 29 are also heading back to their childhood bedroom.

While the hotel of mum and dad is helping to make it easier for young people to save for a house deposit, the report found that the bank of mum and dad is still pivotal in helping them get a foot onto the property ladder.

But whether it’s the hotel or the bank of mum and dad, or even grandparents in some cases, for most adults born in the mid-1990s onwards, buying a house is simply out of reach without additional support.

These prolonged stays at the ‘Hotel Mum and Dad’ should theoretically also make it easier for young people to save for a deposit for their first home. However, the separate, but related, ‘Bank of Mum and Dad’ is still pivotal to getting people onto the housing ladder. Around one-third of first-time buyers last year had parental help, around 20 percentage points more than twenty years ago.

Oil giant Chevron (NYSE: CVX) has underperformed the broader energy sector by a significant margin, with a return of just 16% for the year. The company has greater exposure to oil prices than some peers – a $1-per-barrel drop in the price of Brent, for example, costs the company $600 million in cash flow.

Continued progress in the Middle East peace talks has had a positive impact on oil prices, however. Since the beginning of the month, the price of Brent crude has fallen by around $15 per barrel to $80, down from $95. This is good news for consumers and economies around the world, but it is bad news for oil producers. The S&P Commodity Producers Oil & Gas Exploration & Production index has fallen around 13% over the same period. The index, which was up 40% at one point this year, is now up just 19% year-to-date.

But now seems like an interesting time to buy into a business that's no longer just about oil. Indeed, Chevron is increasingly becoming a major player in the power business.

Chevron is branching out

Chevron is best known as an oil producer, but its most exciting business is the production of liquefied natural gas (LNG). The company does not break down exactly how much it earns from each facility and production line, but it does break down upstream (oil and gas production) and downstream (refining and trading) earnings. For 2026, UBS has pencilled in $20.4 billion of upstream and $4.3 billion of downstream earnings. Of this, analysts estimate that around 60% of upstream is liquids production, with the remainder gas and LNG.

LNG markets tend to operate differently from global oil markets. Due to the huge sums of capital investment required to set up and maintain LNG facilities, producers have to agree multi-year contracts with customers to guarantee a return. Chevron's flagship Gorgon LNG facility in Australia, for example, cost the company and its partners $55 billion in total.

Of the roughly 4.1 million barrels of oil equivalent the company is expected to produce in 2026, 80% is tied to long-term fixed contracts, with the remaining 20% sold on the spot market. These contracts are fixed, but still influenced by market prices. LNG contracts linked to Brent prices, for example, adjust with a three- to four-month lag. Analysts at UBS reckon that for every $10 rise in the price of Brent, Chevron gets $450 million in after-tax earnings from production from its two major Australian LNG facilities.

Crunching the numbers for LNG cargoes isn't easy for those outside the business. Prices are heavily influenced by natural-gas prices and demand. For example, prior to March, the profit on a single LNG cargo moving to Europe from the US jumped from about $25 million to $50 million as the spread between natural-gas prices in the US and prices for gas in Europe rose due to the Middle East supply shock, according to Energy Flux, an industry news site. While the world has been focused on Brent prices, it's US natural gas that's the important metric for Chevron. It estimates that a $1 move in price will add or subtract $700 million from its bottom line and, due to higher demand, prices have risen nearly 30% to $3.2 MMbtu since the beginning of April.

Chevron also has a smaller facility in Angola, which UBS estimates could generate a $180 million boost in Ebitda for every $2 increase in the price of the European gas benchmark, which is up around $5 per MMbtu in the past six months.

Ultimately, prices are linked to demand, and the LNG market cannot quickly adjust to demand as it can take decades to build an LNG facility. According to Shell, the world's largest LNG trader, demand is expected to rise by 68% by 2040 in the best-case scenario and by 85% by 2050, driven by stronger requirements for electricity. The IEA believes higher demand from electric vehicles and data centres and the like will add the equivalent of two European Unions to the global need for power by 2030 – only half of which will be met by increased renewable-energy and nuclear-power generation.

Chevron's new venture with Microsoft

Chevron has also launched a joint venture with Microsoft called Power Solutions, which will, for the first time, take it into the business of selling power. The first major deal was announced at the end of March and will see the partners develop a $7 billion, 2.5-gigawatt, natural-gas-fired power plant to support Microsoft's data centres. It will be powered by gas from Chevron's assets and will be built with room to double in size to meet demand.

Production should begin in 2027 and Chevron's bottom line is set to see the benefit from 2028 onwards. The business could become a significant contributor to profits over the coming decade, but this is not reflected in the share price. Chevron wants to build power plants producing seven gigawatts over the coming years. Selling power on long-term fixed contracts to the technology “hyperscalers” will add another predictable stream to Chevron's top and bottom lines, reducing the earnings volatility that's dogged the firm in the past.

That should justify a higher multiple and stronger cash returns. Based on current projections, UBS's analysts believe the shares are trading at a forward price/earnings (p/e) ratio of 16.6 for 2027, falling to 15.8 for 2028, assuming a 4% increase in production. The dividend yield is expected to come in at 4% this year and 4.2% next year. Recent declines in the share price could present a good opportunity for long-term investors.

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When Gianni Infantino, 56, was elected to take over FIFA in 2016 – following his predecessor Sepp Blatter's ousting in a corruption scandal – there were hopes he would wield a new broom. The message from his office, says The Times, is that he has done just that. On his watch, a new FIFA has emerged: “clean, transparent, accountable”.

True, FIFA is more transparent than it was, says the BBC. It now publishes the salaries of all top executives. Infantino might also argue that he has delivered on his pledge to keep the funds that FIFA generates “within football”. Some of the “poorest and smallest footballing nations” have received vital funding for infrastructure and development. Moreover, he has proved an absolute dynamo at fundraising, says The New Yorker. Since taking over, FIFA's “revenues have more than doubled” – during the next cycle, which will run until 2030, the organisation is projected to have $14 billion to spend.

The question tabled by critics is, at what cost? Infantino's “profit-above-all-else approach” has paved the way for many questionable partnerships. The governments he has worked most closely with as FIFA president have been those of Vladimir Putin, the Emir of Qatar, the Trump administration and the Kingdom of Saudi Arabia. Like any other multinational organisation, FIFA must follow the money. Yet his “fascination with autocracy” seems to have grown with his role.

Gianni Infantino and Donald Trump could be this tournament's villains

At every World Cup, there are several prestigious titles at stake besides that of “Champion”, says the Financial Times. There's the “Clown” – a big country that trips up and fails; the “Cinderella” – a small country that experiences a fairy tale; the “Beautiful Loser”; and, above all, the “Villain”. In the latter half of the 20th century, this was often the German team. More recently, individual players have won the laurels. But this year, “the front runners” are Donald Trump and FIFA's president Gianni Infantino.

Notoriously thin-skinned, Gianni Infantino was dismayed at being mocked for a grandiose and right-on speech he made at the 2022 World Cup in Qatar – not least because being the underdog has always been part of his shtick, says ESPN. Growing up in small-town Switzerland, he claims to have suffered prejudice over his red hair and his Italian roots, later arguing that his determination “to drive football as a force for peace and togetherness” was influenced by this experience. After taking a law degree, he became legal counsel and general secretary for the International Centre for Sports Studies, based in Neuchâtel, Switzerland, before joining UEFA – the governing body for European football – where he worked his way up to become general secretary in 2009. While there, he generated “a fierce loyalty” among a small group that followed him to FIFA.

How Gianni Infantino is 'Trumpifying' FIFA

Gianni Infantino's ultimate grand gesture – awarding Donald Trump with “The FIFA Peace Prize” – made headlines for taking his efforts “to flatter and ingratiate himself with Trump to new heights”, says The New York Times. But they overshadowed the bigger story – “the Trumpification of FIFA itself”. As the US president himself observed admiringly: “Everybody knows this man [is] the king of soccer” – and one increasingly insisting on top-down compliance to his every narcissistic whim.

This World Cup's exorbitantly priced tickets and concessions to US commercialism such as the new hydration (advertising) breaks won't have endeared Infantino to many fans. Nor will his increasingly expensive lifestyle: his pay has more than trebled from £1.3 million in 2016. “With nothing to stop him winning a landslide in the presidential election next year”, the FIFA president looks set to “remain in power until at least 2031”, says The Times. Even so, “this might just be the tournament when his crown starts to slip”.

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Investment platform AJ Bell (LSE: AJB) will benefit from people investing more for their retirement. Good news, then, that politicians aim to persuade people in the UK to do just that, increasing the amount of money they put into shares and so helping make sure that they can accumulate enough savings to fund a comfortable retirement.

AJ Bell offers financial products to consumers who want to manage their own investments by putting money into ISAs and SIPPs, and to those who are investing via financial advisors. At present, AJ Bell's assets under management (AUM) are split evenly between the two segments, though its direct-to-consumer segment has been growing at a faster rate.

Should you invest in AJ Bell?

AJ Bell has a strong brand: it boasts high customer satisfaction scores in addition to customer retention rates of around 93.5% for advised customers and 95% for those who directly invest with the platform. The average customer sticks with AJ Bell for 17 years. This has helped it grow to the point where it is now the third-largest investment platform, with a market share of 8.3% in terms of assets under management. However, it is capturing around 16.1% of the inflows into investment platforms, which suggests that its overall market share will continue to increase.

Of course, as with any service business, there is always the risk of disruption, either by a new entrant or from AI. But its solid reputation and regulatory barriers both help fend off rivals, while the company is also using AI to reduce its administrative costs and make its platforms even more efficient. The long-term problems caused by ageing should also reduce any political risk.

Overall, AJ Bell has seen its AUM more than double between 2018 and 2026. Sales have increased even more quickly, soaring 150% between 2020 and 2025, and are expected to keep on growing at a double-digit pace. AJ Bell's asset-light business model gives it a very high return on capital employed, enabling it to increase its dividend consistently and return money to shareholders via buybacks even as it continues to expand. Despite this, the stock trades at a more than reasonable 19 times expected 2027 earnings, with a dividend yield of 2.8%.

These strong fundamentals, in addition to unexpectedly good recent quarterly results, have been received positively, with AJ Bell's share price beating the wider market by 25% over the past six months. The shares are also well ahead of both their 50-day and 200-day moving averages. I would therefore suggest that you go long at the current price of 597p at £5 per 1p. I would put the stop-loss at 400p, which gives you a total downside of £985.

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Scaremongers claim that private credit is an impending financial disaster that will lead to a re-run of the 2008-2009 financial crisis. And in fairness, there is some justification for concern about the sector. “The credit loss cycle is upon us,” said asset manager Pimco earlier this month, warning that some riskier companies will struggle to service their debts.

There is significant exposure to software firms among leading investors in private credit and not all of it is disclosed, as The Wall Street Journal has found. The disruption of software by AI is putting many of their business models at risk. This sector accounted for $500 billion of loans at the end of 2025 (19% of the total), says the Bank of International Settlements.

Defaults are rising and nervous investors have switched to selling. Private credit funds have had to exercise redemption limits to prevent the forced liquidation of investments. Lending is slowing, terms have been tightened and credit spreads have widened.

Don't fear private credit defaults

Yet “it is hard to see how private credit could be a systemic issue for bond markets”, says Pieter Staelens of CVC Capital. After all, private credit accounts for just $3 trillion of the $140 trillion global fixed income market, he says. “The rate of defaults across credit markets has picked up a little recently but there is no red flag.” At close to 2%, it sits below the 20-year average. “The first quarter saw the best earnings on record; with strong earnings, defaults will stay low.”

Besides, defaults are part and parcel of credit investing; avoiding them is not always the answer. “I can run a portfolio with zero defaults if you are prepared to incur a loss in selling a position,” says Staelens. “Credit losses, not defaults, are the key. We are used to defaults, which average 1% each year, so they won't destroy our funds.”

What matters in defaults is what you get back. “We typically recover 80 cents in the dollar in an insolvency,” says Staelens, although this would probably be lower for an asset-light software company. Sometimes these situations can be very profitable. In 2020, CVC took part in the restructuring of Doncasters, a maker of precision parts for aerospace. The firm is set for an initial public offering (IPO) soon and will use the proceeds to repay debts. CVC “will receive way more than we invested”.

Get paid for the risks in the private credit market

“There is a lot of misperception about how risky the credit market is,” says Staelens. Of course, there are risks: default, foreign exchange, liquidity, inflation, early repayment, duration and interest rates. However, the aim is not to avoid risk, but “only take exposure when you are paid for the risk”.

Private credit has been one of the fastest-growing sub-sectors, so some fallout from that boom is likely. “Some people probably cut corners in assessing risk. Any asset class that grows quickly will see wobbles along the way but it won't disappear. Bad risk management rather than structural risk is the problem. You need to invest with people who know what they are doing.”

CVC is sceptical of credit-rating agencies, “which are too backward-looking to be helpful”, he says. “A large part of what we do is working out where credit ratings are wrong. Much of the market, especially passive funds, invest according to the agencies' ratings.” That means a debt downgraded to CCC and now trading at 50 cents in the dollar – as a result of forced selling by funds that are no longer allowed to own it – could be a great opportunity.

CVC Income & Growth (LSE: CVCG) trades at net asset value (NAV) and yields 8.5%. Rivals such as Invesco Bond Income Plus (LSE: BIPS), M&G Credit Income (LSE: MGCI), CQS New City High Yield (LSE: NCYF) and TwentyFour Select Monthly Income (LSE: SMIF) have similar 7% or 8% yields. CVC leads the pack with a return of 61% over five years, far above what government bonds have delivered. Don't be put off by the scaremongers.

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We will find out soon whether Andy Burnham will face a contest for the leadership of the Labour Party or take office unopposed. Either way, it makes little difference now. One way or another, he is likely to be our next prime minister before the end of the summer.

There are some ways in which Andy Burnham will be an improvement on the outgoing Keir Starmer. He is a better communicator and more personable. As mayor of Manchester, he is untainted by the failures of the last two years and can make a fresh start. Perhaps best of all, he can get rid of the hapless Rachel Reeves as chancellor and replace her with someone less obviously out of their depth and with at least some grasp on how businesses operate and the challenges they face. Temporarily at least, this may start to lift Labour's dismal poll ratings.

There's a problem, however. Prime minister Burnham will be heading straight into a financial crisis. Britain's economic outlook keeps on getting worse and worse. At the end of last week, we learned that government borrowing in May came in way above forecast, with a 30% year-on-year rise. For the month, government spending was up by 7% year on year, while tax receipts, even with record increases, were up by just 4% (it is hard to see much sign of the “neoliberalism” Burnham complains about in those figures). Growth stagnated last month, despite all the extra spending the government has thrown at the economy. Unemployment is rising relentlessly, especially for young people, and the welfare bills are running out of control, with the number of working-age people on benefits above four million. All the warning signs for a crash are already flashing red.

Andy Burnham is only going to make things worse. It is hard to detect much in the way of a serious economic programme in the collection of soft-left soundbites that make up his standard stump speech. But insofar as he has one, it involves yet more borrowing and spending. He has promised to bring the utilities under greater state control but said nothing about how that would be paid for. He has promised to cut business rates for small companies and launch a massive programme of council-house building, without attaching any kind of a budget. And if Burnham has ever said anything about controlling public spending, especially the soaring welfare bill, he has kept it very quiet. Even if he only keeps a fraction of his spending promises, and it will be very hard to break all of them, then the deficit will keep climbing higher and higher.

Can Andy Burnham succeed as prime minister?

Even as the deficit rises, Andy Burnham has said almost nothing about how he intends to boost growth to pay for it all, nor has he made any attempt to bring business on board. Celebrity chef Tom Kerridge has backed him, but only because of his promise to reduce the rate of VAT on hospitality businesses to 10% (yet another unfunded promise). Other than that, Britain's major corporate leaders have remained silent. There is not going to be any wave of investment to welcome the new regime, nor is there likely to be any dramatic measures to encourage investment into the UK. In the background, Britain's financial position is steadily deteriorating. Very quickly, the markets are going to test the new government. Is it willing to cut welfare, or will it raise taxes to keep paying the £125 billion a year in interest on the national debt the country now has to pay? Traders will want to find out, and find out very quickly, and if the answer is no, then gilts will be sold off.

The last PM to take over from one who had been elected with a big majority was Liz Truss in 2022. We all know how that worked out – her lifespan in office was famously shorter than that of a lettuce. Burnham won't face quite the same set of challenges, nor is he likely to attempt anything as risky as the mini-budget that led to her unravelling. Even so, the British economy is in far worse condition than it was then, our debts are far higher and the bond markets already view us with suspicion. Andy Burnham will soon face the heat – and may well wilt as quickly as a lettuce.

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Just how much cash will you be able to hold in your ISA from next year and what will it cost you to do so? At first sight, new rules for individual savings accounts (ISAs) due to come into force from 6 April 2027 look straightforward. In practice, they are likely to prove anything but, thanks to tricky new regulations published this week.

The confusion stems from changes announced in last November's Budget. Chancellor Rachel Reeves stressed her determination to use the tax system to encourage risk-taking investment into UK companies and infrastructure; she therefore announced that from the 2027-2028 tax year onwards, the annual limit on investments into cash ISAs – where your money is simply held in a risk-free bank or building society account – will fall to £12,000. By contrast, the annual stocks and shares ISA allowance – where your money flows through into productive investments – will remain at the full £20,000.

So far, so good. But what about cash held in a stocks and shares ISA? You're also entitled to hold cash in these accounts. Perhaps you're concerned about market volatility, or think you might need to make a withdrawal soon; maybe you just want to maintain a small cash balance to fund fees and investment charges; you may even have opted to take dividends from existing holdings in cash, potentially to be invested later on.

Moreover, what about cash-like investments in a stocks and shares ISA? Opting for a money-market fund, say, is akin to holding your ISA savings in cash, even if you're technically making an investment.

Reeves's new ISA changes will affect everyone

These complexities have prompted some head-scratching at the Treasury, which delayed publication of the detailed regulation on how the new rules will apply to stocks and shares ISAs until earlier this week. Now, however, it has published an “anti-circumvention rules fact sheet” that is more demanding than many had expected. Most strikingly, the Treasury plans to introduce a new tax on interest earned on cash held in a stocks and shares ISA, even though the tax-free nature of money held in such accounts is meant to be sacrosanct. A 22% tax charge will apply, in line with the rate of savings interest tax, from April 2027 onwards.

While a similar arrangement operated in the UK until 2014, some ISA providers believe the change will fundamentally undermine the tax efficiency of ISAs. Providers will no longer be able to describe all ISAs as tax-free in order to encourage savers and investors, they say. Some ISAs will be more tax-free than others.

The Treasury has also confirmed plans to restrict savers from holding cash-like investments in their stocks and shares ISA. Money-market funds will not qualify for ISAs if they account for the entirety of the investor's stocks and shares ISA portfolio; ISA managers and platforms will then be forced to intervene.

There will also be a veto on transfers of money into a cash ISA from holdings in a stocks and shares or innovative ISA, which is currently allowed. Again, while the goal is to stop investors getting round the new rules, one result will be to limit financial planning and constrain the flexibility of investment strategies.

This will affect everyone. In last November's Budget, the Treasury said savers and investors aged 65 or over would be exempt from the lower annual allowance on cash ISAs, maintaining their full £20,000. The thinking is that older people are often in a phase of running down their savings and may therefore need to take a more risk-averse approach to managing their money. This week, however, the Treasury revealed that the over-65s won't be exempt from tax on interest from cash or from the ban on investing an entire stocks and shares ISA in money-market funds, although they will be allowed to transfer to stocks and shares Isas to cash ISAs.

All of which adds a great deal of complexity to the ISA rules – and plenty of scope for adverse outcomes for investors. Plus, ISA providers themselves will muddy the waters. JPMorgan Personal Investing, for example, has already announced that, from this week onwards, it will no longer pay interest on cash held in a stocks and shares ISA if an investor's entire pot is held in cash. The move is in line with the intent of the Treasury's thinking, but will naturally save JPMorgan Investing some money. And previously, the Financial Conduct Authority has warned the whole ISA industry about paying poor interest rates on cash held in a stocks and shares ISA.

Elsewhere, ISA providers – including leading online platforms – are already beginning to rethink their policies on what they will and won't allow investors to do. They will want to get ahead of restrictions and may simply withdraw certain products and services completely. Maybe they'll no longer allow investors to receive cash dividends, for example, requiring everyone to use accumulation funds.

Will Reeves stay chancellor long enough?

All of which is a reminder of how strongly the law of unintended consequences applies in the world of tax. The desire of the Treasury to shift money out of cash ISAs into stocks and shares accounts that are seen as more supportive of economic growth is understandable – the most recent official statistics reveal investors put £69.5bn into the former in the 2023-2024 tax year against only £31.1bn in the latter. But more doubt and complexity may simply put people off, reducing the size of the whole pie.

There's one final unknown, meanwhile. This scheme is the brainchild of Rachel Reeves and her team. But will she remain chancellor long enough to finalise the remaining details – a short technical consultation will take place between now and the autumn – let alone to see it come into operation next April? Maybe a different chancellor will want to do something completely different.

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Korea is still an emerging market, or so MSCI reckons. On Tuesday, the most important provider of global indices – the MSCI World and the MSCI Emerging Markets matter much more than the equivalents from FTSE Russell and S&P Dow Jones – once again declined to put it on the watch list for upgrade to developed status.

On one hand, this situation feels increasingly ridiculous. Korea is a very advanced, high-tech economy, home to key tech players such as Samsung Electronics and SK Hynix. GDP per capita measured at purchasing power parity is higher than the UK, France, Japan and many other heavyweights. How can this be an emerging economy in any meaningful sense?

Yet there are aspects to Korea that feel like an emerging market. The ones that MSCI cites are certain limitations that bother institutional investors (restrictions on trading the Korean won offshore is a key one) – although FTSE Russell has classed Korea as developed since 2009, so the importance of these is not cut and dried.

However, perhaps more significant for the long-term future of the Korean stock market is the dominance of large business conglomerates (chaebols), of which the Samsung group is the biggest. The founding families of these groups still control them – often using a series of shareholdings between different listed entities – and frequently make decisions for their own benefit to the disadvantage of minority shareholders.

Generational changes are happening in Korea

Corporate governance is a major reason for the “Korean discount” – the fact that Korean stocks trade at lower valuations than peers elsewhere – but there are signs that this is changing. Policymakers have been pushing reforms, inspired by what governance changes in Japan have done for that market, with some success.

Generational changes also mean a structural shift in attitudes is inevitable, suggested a Korea manager at a recent conference. The individuals who built up chaebols in the 1960s and 1970s put huge importance on passing on control to their heirs as cheaply as possible (Korea has very high inheritance tax). They are now largely dead, the handovers are being completed, and tax bills are being settled. Their heirs will have different priorities that may often be better served by unlocking the full value of their businesses.

So the bull case for Korea sounds easy to make. It does not depend on MSCI one day acceding to the obvious, although being added to the developed index would result in significant inflows from tracker funds. And on the face of it, Korean stocks look very cheap – the MSCI Korea stock market index is on a forecast price/earnings ratio (p/e)of eight.

Yet this reflects the huge weight in Samsung and SK Hynix (65% combined) and how fast they are expected to grow. The MSCI Korea Equal Weight is on a forward p/e of 15, which is not cheap. Most of all, note the market is up by 260% in won terms in a year. If the AI boom continues, it will go higher, but have no illusions. Right now, a Korea stock market tracker is not a valuation play or a reform play – it is entirely an AI play.

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The SVS Baker Steel Electrum Fund invests in mining stocks that produce the metals and materials needed to power the global economy. While technology and consumer stocks receive significant attention from investors, the mining sector is often overlooked yet offers exposure to commodities that are essential for everything from electricity generation to renewable-energy infrastructure.

Metals have become strategic again, with demand growth driven by electrification, rising energy consumption and increasing concerns about energy security. At the same time, years of underinvestment in mining and resource development have resulted in tight supply across many markets. This combination of rising demand and constrained supply is creating compelling opportunities for investors. Here are three stocks that currently stand out.

Three promising mining stocks for your portfolio

A play on geopolitics

Century Aluminium (Nasdaq: CENX) is a play on both geopolitics and industrial demand. It produces aluminium in the US, a metal that is vital for construction, transport and technology. Aluminium is also a beneficiary of structural tailwinds from electrification, being increasingly used in energy infrastructure. The investment case for aluminium producers has strengthened as governments place greater emphasis on domestic manufacturing and secure supply chains. Trade tariffs have highlighted the strategic importance of producing key industrial materials closer to home and reshoring supply chains. The war in the Middle East has also reminded investors how quickly global supply routes can be disrupted. Aluminium prices have risen during the crisis.

Strong demand boosts silver

Pan American Silver (NYSE: PAAS) is a mining stock that offers exposure to silver and gold at a time when interest from investors in precious metals is on the rise. The company operates a portfolio of high-quality mining assets across the Americas and is one of the world's leading silver producers. The importance of world-class silver assets is growing amid strong demand from investors and a tight supply side, with the silver market having faced a supply deficit for several years now.

A part of silver's appeal is that it is both a precious metal and has industrial uses. Investors often buy it as a store of value, much like gold, but it is also used extensively in certain fast-growing technologies, notably solar panels and more broadly across electronics. These dual sources of demand are supportive for silver prices and miners.

A mining stock with exposure to nuclear energy

Cameco (NYSE: CCJ) is one of the largest uranium producers globally, with exposure to the development of reactors, offering investors a way in to the growth of nuclear energy globally. As demand for electricity rises, governments and companies are increasingly seeking reliable sources of low-carbon energy. Nuclear power is becoming a more important element in the energy mix as a reliable source of baseload power, without the intermittency issues associated with wind and solar generation.

We consider that his trend could support demand for uranium or many years to come. Countries are extending the lives of existing reactors, while others are planning new nuclear projects as they seek to improve energy security and reduce carbon emissions.

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David Hockney, who died on 11 June, aged 88, was never shy about experimenting with technology. In April 2020, then almost 83, he was interviewed by The Spectator's art critic, Martin Gayford, saying about his iPad that “I was just drawing on this thing I'm talking to you on.”

In his “provocative” book Secret Knowledge, published in 2006, Hockney suggested that old masters, such as Vermeer, had used optical aids in their paintings, says Michael Prodger in The New Statesman. So, Hockney saw no reason why he shouldn't use “fax machines, Polaroids, photocopies [and] high-resolution cameras” to create his works.

It was from a photograph that somebody else had taken that Hockney created what is arguably his most famous painting, A Bigger Splash, in 1967. The pink modernist building that forms the backdrop to the sun-drenched Californian swimming-pool scene came together fairly quickly, but Hockney laboured on the split-second splash in the pool for two weeks to get every drop right – an irony that wasn't lost on him.

In 1972, he painted Portrait of an Artist (Pool with Two Figures), which in 2018 set a new record for a painting by a living artist sold at auction. It fetched $90.3 million with Christie's in New York. And the comparisons with earlier artists didn't end with the use of technology. In leaving his native Yorkshire and “gloomy” London for California, Hockney has been compared with the painters of the late 19th and early 20th centuries, such as Van Gogh and Gauguin – and later Matisse and Dufy, says The Times.

David Hockney is a national treasure

And while Portrait of an Artist represents the intersection of the two periods with which Hockney is most often associated – the “swimming pool period”, beginning in the 1960s, and the “double portraits” of the 1970s, these represent “a relatively small slice of his overall production”, notes the paper in its obituary. Hockney's more recent landscapes of northern France, including a 90-metre frieze called A Year in Normandie, are a case in point. That series of paintings can be viewed at the Serpentine Galleries in London until 23 August.

“I can't think of an artist so loved by millions today,” writes Andrew Marr in The New Statesman. “The man is gone, but the pictures live on. ‘Spring cannot be cancelled' was one of his more recent slogans. Nor can David Hockney.”

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You cannot help but be struck by a sense of grandeur the moment you arrive at Mallory Court in Warwickshire. This elegant and welcoming country house hotel sits in the grounds of a former stately home, just outside Leamington Spa. The pristine lawn of the main courtyard ushers you towards the entrance, past a neat square of bright tulips. The main building was built during World War I, but, festooned as it is with vibrant ivy and plush wisteria, it gives the impression of being older.

This central, surprisingly modern building is situated amid a swathe of quiet, pretty gardens – some for growing herbs and produce for the restaurant, some mowed short for playing croquet, most of the rest with patches left to grow wild for the benefit of local insects. Thanks to this, there are bees aplenty, as well as a clutch of hives that the hotel keeps – you can, given notice, arrange an “immersive” beekeeping experience. The hives are kept on the edge of the gardens, meaning the rest of the estate remains a perfect spot for an uninterrupted wander.

Inside the hotel, the suites are generously spacious, handsomely and individually decorated to give each a distinct sense of character and fitted with plush, super king-sized beds. Most of these rooms are in an extension built in the 1990s that overlooks the picturesque herb garden, although if you are checking in for a spa weekend, then those above the spa building may be more convenient.

The spa's facilities include indoor and outdoor saunas and pools, a steam room and a gym. There's a fantastic selection of treatments on offer too. The Revive & Rebalance Ritual is a body scrub followed by a back massage that leaves you feeling cleansed and refreshed, and I also heard great things about the My Kinda Skin facial.

Timeless classics with a swish of elegance at Mallory Court

Besides the spa, Mallory Court's flagship restaurant, the Warwick (under the stewardship of Stu Deeley, who won Masterchef: The Professionals) is the other standout reason to visit. The restaurant takes timeless classics and adds a swish of elegance to turn out true excellence in its dishes.

The menu is quintessentially British, with some European and Asian influences. Vegetarian options are clearly no afterthought, and despite the allure of meat dishes, such as Ibérico presa (pork shoulder) and Lake District lamb, I went almost entirely veggie.

Burrata with beetroot makes an excellent starter, especially when the beetroot is grown in the hotel grounds, and the pine nut and furikake (a Japanese seasoning) garnish gives it a modern, umami twist. Cacklebean egg with coco bean and nduja cassoulet is as intriguing as it sounds – the egg topped with a nest of string pastry and swimming in what amounts to a rich bean soup that hums with the meaty tang of nduja.

For mains, that local beetroot once again stands out – in the form of a sumptuous beetroot wellington. Sweet and sour chicory and crispy hen-of-the-woods mushroom are worthy accompaniments, but the star is the smoked beetroot sauce, which delivers a meaty punch to this vegetarian dish. Black Bomber cheddar gnocchi with wild-garlic sauce is another hit – the gnocchi served like little fondant potato cylinders, pleasantly but not overpoweringly cheesy, adorned with peas, a verdant garlic sauce, and another little clutch of hen of the woods.

If, like me, you enjoy a Snickers, then you have to order the Dulcey Blond chocolate delice for dessert. It's basically a snazzy Asian take on the classic chocolate bar. Caramelised miso and peanut brittle combine to bring the sweet, indulgent nutty flavours we know and love together with decadent levels of salt and umami. It's addictive if you're into that kind of thing. If you're not, the baked Alaska might be more up your street – a sharp, fruity number singing with rhubarb (again, much of which is grown on the estate). On Sundays and bank holidays, you can also enjoy a superb afternoon tea, highlights of which include a fine rhubarb-and-custard macaroon and excellent home-made scones.

Connect with nature at Mallory Court

While you're in the area, Leamington Spa is just a short drive away – or, if the hotel's grounds have whetted your appetite for nature and wild flowers, Oakley Wood (around a seven-minute drive from the hotel) is a wonderful spot for a walk.

Between the spa, the restaurant and the charming gardens, Mallory Court is an excellent place to unwind for a leisurely weekend, connect with nature, and feel thoroughly well taken care of in the process.

Dan was a guest of Mallory Court. Double rooms start from £157 a night. À la Carte dinner at the Warwick costs £95 per person for three courses, plus canapes. Afternoon tea from £42.50 per person. Visit mallory.co.uk.

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Investors will face a charge on any interest paid on cash in a stocks and shares ISA, the Treasury has confirmed in its latest guidance on ISA reforms.

Plans are underway to reduce the cash ISA allowance to £12,000 per year from April 2027 for savers under age 65.

The Treasury is also disincentivising holding uninvested cash in a stocks and shares ISA and restricting how much can be held in cash-style products within this type of ISA.

It has confirmed plans for a 22% charge on any interest or alternative finance return paid on cash held within a non-cash ISA, from April 2027. This may be money that account holders haven’t invested yet or from dividends paid out.

But in some good news for investors, money market funds will be allowed in a stocks and shares ISA as long as they do not make up 100% of the investments.

Common investments held in stocks and shares ISAs such as individual shares, funds, investment trusts, exchange-traded funds and corporate and government bonds, including UK gilts, will not be treated as cash-like assets, the Treasury said.

James Carter, head of platform policy at Fidelity International, said: “We are pleased to see that cash-like investments will remain eligible for non-cash ISAs.

“These products are genuine investment products, holding short-term government and high-quality debt, and form a valued part of many balanced portfolios. Removing them from the stocks and shares ISA framework would have undermined the government’s objective of encouraging more people to invest, by giving customers a cliff edge choice between staying in cash or moving directly into higher-risk, more complex products.”

New restrictions on transfers into cash ISAs

Transfers from stocks and shares ISAs into cash ISAs will not be permitted but it will be allowed the other way round.

Individuals aged 65 and over will still benefit from a higher cash ISA limit of £20,000 per year, if they wish to use the full annual ISA allowance for that type of account.

The transfer restriction will be stopped from this point but the charge on interest earned on cash in a stocks and shares ISA and the prohibition on 100% cash-like investments will remain in place.

A technical consultation is due to be released by the Treasury on how the charge will work.

Greg Davies, head of behavioural finance at Oxford Risk, has already warned that the measure risks backfiring.

He said: “Getting people invested is an inherently behavioural challenge. You do not encourage nervous savers into investing by making the first step feel more complicated, more punitive and harder to reverse.

“People move from cash into markets when the journey feels clear, safe enough, and matched to their goals, time horizon and financial circumstances. Adding tax charges and transfer restrictions to an already confusing ISA system sends precisely the wrong behavioural signal.

“For many would-be investors, this will not create confident investors. It will create more hesitation, more disengagement, and more people doing nothing.”

Rachel Vahey, head of public policy for AJ Bell, warned that the changes are “increasingly complex” and “riddled with unintended consequences” and may mean people just keep money in cash ISAs instead.

She said: “The new rules mean a charge of 22% will be applied to interest paid on cash in investment ISAs. This is a flat rate charge, meaning the same rate applies whether the ISA account holder is a basic rate taxpayer, higher rate taxpayer, or indeed doesn’t pay any income tax.

“The ISA holder cannot invest 100% of their (non-cash) investment portfolio in money market funds, or that would be classed as a ‘non-qualifying’ investment. This means they could invest 99% in money market funds and 1% in, say, UK equities and that would be allowed.

“It also means they could hold 50% of their portfolio in cash, but if the remaining 50% was held in money market funds that wouldn’t be allowed. Whereas if they held 49% in money market funds and 1% in UK equities, this would be permitted under the rules.”

Will investment platforms stop paying interest on cash?

Several investment platforms such as Bestinvest, AJ Bell, interactive investor, Fidelity and Hargreaves Lansdown pay interest on cash held within a stocks and shares ISA.

The rates are not that competitive but the benefit for investors is that they can get cash in the wrapper or receive dividends and decide how they want to invest it.

It is currently unclear if platforms will stop paying interest or if investors will just need to be aware of the charge.

Carter said: “We have consistently welcomed the government’s recent focus on encouraging more people to invest, supporting better long-term outcomes. Recent initiatives such as a review of risk warnings, the introduction of a targeted support regime, and an education campaign on the benefits of investing, will all help to reset the approach to risk and bridge the gap between precautionary cash savings and long-term investment.

“We look forward to the publication of the technical consultation which will include further details required to enable providers to implement these changes.”

A spokesperson for AJ Bell was unable to comment on whether the platform will stop paying interest on cash.

Jason Hollands, managing director of Bestinvest, described the anti-circumvention measures as a "disproportionate response to a problem that may never meaningfully materialise."

He added: "Investors will also need to weigh up the relative difference in returns on a money market fund minus any platform fees, versus holding cash and having the 22% charge deducted."

MoneyWeek has asked Hargreaves Lansdown and interactive investor for comment.

The past decade has been a busy time for global markets, which have experienced countless shocks and transformations.

Each shock inevitably creates winners and losers. Take Nvidia for example. In 2016, few would have expected that a firm specialising in making computer components for gaming would become the most valuable company in the world – and yet it has.

Nvidia’s valuation is a result of it occupying a unique position. The firm’s chips, initially made to help process computer graphics for video games, are now incredibly valuable to the development of AI models.

Nvidia was, and still is, a leader in a market segment where demand for its goods increased faster than supply – it occupied a ‘bottleneck’.

These bottlenecks – firms with a unique place in markets that will be vital in a changing economy and showing the potential for generating value – hold clear appeal for the managers of Monks Investment Trust (LON: MNKS).

Monks is run by Baillie Gifford, the investment manager which also looks after the Scottish Mortgage Investment Trust (LON: SMT), one of the most popular funds for DIY investors.

While both trusts aim to invest in themes and companies with the potential to change the world, Michael Taylor, one of the managers of Monks, said the two trusts take different approaches.

Taylor said: “Some do things that will not strike you as exceptional but they do it well and the returns to shareholders may well be exceptional in the long run. We seek out and celebrate a diversity of growth businesses.”

That diversity is reflected in its holdings. Compared with the more concentrated Scottish Mortgage, where the top 10 names make up around 54% of the portfolio, Monks’ top 10 comprise around 36% of its total.

Growth investing in the age of the hyperscaler

Broadly, Monks’ investments sit in one of three categories: rapid growth, growth stalwarts and cyclical growth.

Rapid growth businesses include publicly listed firms like Nvidia, Alphabet, Amazon and other big-tech darlings, including SpaceX.

While these stocks have dominated broader index returns, their rapid growth has meant that more diversified trusts like Monks, which is long-term growth-oriented, has struggled to beat its index in recent years.

Further, the rapid nature of big tech’s growth means pressure on the resources needed to support it, with parts of the value chain unable to respond fast enough.

Taylor said this is where such bottlenecks are found, and where subsequent value can accrue.

Investing in the AI bottleneck

“What has often been in scarce supply historically has been intelligence. Coders, designers and skilled, knowledgeable workers. The business models that dominated had these people and they didn’t need much of the physical stuff,” said Taylor.

However, with the AI revolution, requisite intelligence is becoming less scarce and this trend may be set to flip.

Now, these opportunities – the AI-centred resources in short supply – are not human but physical. Taylor is looking at data centres and semiconductors, for example.

Take Disco Corporation, a Japanese firm that Taylor pointed out occupies a niche part of the AI value chain. It makes precision tools for use in the semiconductor industry, producing machines that can cut, polish and grind silicon.

As chips continuously decrease in size the demand for Disco’s machines, which cut silicon to a fifth of the width of a human hair, looks set to increase. The business is well-placed to provide growth in this area.

Taylor also picked out Freeport McMoRan, a copper miner heavily geared towards the US. It is set to benefit from higher copper demand as a result of increased electrification, including additional AI-related infrastructure like data centres.

Freeport’s US tilt is the bottleneck Monks has identified. In a world of tariffs, it is well-placed in the supply chain to provide copper to US firms, Taylor said.

But he added these positioning advantages are not enough for a firm to be successful.

“Not all businesses in the real world will develop or provide great outcomes. You need to pick the right companies with the right teams, and you need to pick a bottleneck which will endure through time.”

An ageing population presents unique opportunities

None of us are getting any younger. Quite the opposite, for some developed economies, where the birth rate is declining and life expectancy growing .

In 2022, around 19% of the British population was aged 65 or over but projections warn that by 2072, this figure could rise to around 27%.

It is a similar story in the US, where around 18% of the population is 65 years or older and projected to rise to 23% by 2050.

An ageing population presents both unique challenges and opportunities.

One example is the funeral industry, where an increasingly older population and rising death rate is set to increase demand for funeral services.

Taylor named Service Corporation International, which lands in the ‘growth stalwart’ category of Monks’ investments – firms he described as growing at a “statesman-like pace”.

Service Corp seeks to professionalise and consolidate the funeral industry. The company has been long-held by Monks as it’s set to benefit from the rising death rate that comes with an older population.

Taylor noted this investment is “far from exciting, but it’s steady, it’s dependable and grows at an above-index rate. It’s the biggest company in that industry and yet it is only 15% of the market, so we expect that figure to go up over time.

“Now, the market is always expecting that kind of business to experience a fade in its growth rate but we have the confidence that the duration of its growth is going to be remarkable,” Taylor added.

Growth can be found in less obvious places too

While the prevailing narrative in the market is how AI will transform (or potentially crash) the economy, Taylor noted that such narratives are simplifications, with the real world much more complex.

“There is a world of growth beyond just artificial intelligence,” he said.

Healthcare, for example, saw funding dry up after the pandemic. While that period itself was difficult for healthcare firms, it presents a new opportunity.

For example, access to new drugs. The bottleneck here is the length of time it can take for newly discovered drugs to come to market as smaller biotech companies can find it difficult to deal with the process.

Last year, Monks looked at this growth opportunity and invested in a firm called Medpace that designs, implements and analyses clinical trials for smaller biotech firms, helping reduce the time for their drugs to come to market.

Another example is Ensign Group, which Monks also invests in. This firm specialises in running nursing facilities that provide assisted living, rehabilitative and post-acute care. It has expanded to take care of over 300 businesses offering these facilities, and demand is set to soar with an ageing population.

While healthcare is perhaps less exciting than AI, it nevertheless has the potential to tell an exceptional growth story, bringing possible profits for investors who correctly identify the firms best-placed to make the most of a world full of bottlenecks.

A new world calls for new stocks. In the VT De Lisle America Fund, we use the paradoxical combination of value plus momentum to find winners for the next decade. For 40 years, declining interest rates and disinflation created a powerful tailwind for steady growth stocks such as McDonald's, Nike and Procter & Gamble. Their predictability was rewarded with rising price-to-earnings (p/e) multiples, thus they strongly outperformed the market. That all changed in 2021 with the return of higher interest rates and inflation, combined with the launch in 2022 of ChatGPT, which funnelled capital into AI infrastructure.

Higher rates and inflation tend to push down p/e multiples and put pressure on profits due to rising costs of materials and labour. At the same time, the urgency to spend on building out AI pushed capital into different, previously unloved, parts of the economy: construction, manufacturing and blue-collar jobs. Investors like to find a comparison with past cycles. We think the 1970s provides the best precedent, but with the addition of AI. So how will that play out today?

Companies that own scarce real-world assets and have growing order backlogs gain pricing power in this new capital-expenditure-driven cycle, positioning them to thrive in the new industrial economy. Within these big macro themes, minor ones are also emerging. One we like is the break-up of old industrial conglomerates via “spin-offs” – the packaging of overlooked industrial assets into attractive new listed companies.

Three stocks for your portfolio

In 2025, Honeywell spun off its speciality chemicals division, Solstice Advanced Materials (Nasdaq: SOLS). Solstice holds an oligopolistic position in refrigerants (its cash cow, increasingly necessary for data-centre cooling) while expanding capacity in its specialist chemicals business, supplying America's semiconductor supply chain. But the hidden crown jewel is its stake in the only US uranium conversion facility – one of only seven in the world – and a scarce asset during a nuclear renaissance. Although expensive-looking at a high 20s p/e, its earnings power is underappreciated as its chip exposure grows and higher-priced uranium contracts begin to roll in.

Forum Energy Technologies (NYSE: FET) makes high-tech parts for oil wells and subsea exploration. It is a picks-and-shovels play on rising global energy needs due to AI and on the increasing complexity of extraction. Forum operates in a high-value niche and is a leading player in all its product lines. The company prides itself on its patented technical know-how, which makes it hard to compete against. Low reinvestment requirements also provide high levels of cash generation. Even after a near tripling over a year, we think Forum's stock is a buy given its cheapness relative to cash flow.

Demographic trends offer another type of steady growth. Pennant Group (Nasdaq: PNTG) owns, leases and operates care facilities for the elderly and sees the ageing population in the US as a steady tailwind to increase sales for years. Its ability to renovate old buildings to add value in a market where supply is constrained by the cost of new-builds is impressive. Growing demand and scarcer assets, plus entrepreneurial local management teams, are giving it the chance to execute its vision. Pennant trades on a low 20s p/e and has a high double-digit growth rate, giving it an enviable p/e to growth ratio of not much above one.

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Tadashi Yanai is living out his dream. Of all the many art books lining his wood-panelled office in Tokyo, the most “sacred text” turns out to be a Next catalogue from 1987, shot by the now famous Vogue and Vanity Fair photographer Koto Bolofo. “This inspired me most, back in the Eighties,” says Yanai, who at 77 is Japan's richest man with a fortune put at around $69bn. “Ordinary people looking cool and casual… I wanted to deliver this kind of clothing for current times. Clothes to make people happy.”

You know when a brand has conquered the zeitgeist when the vocabulary around it goes mainstream. For Uniqlo – the fast-fashion phenomenon with a mission to dress the world in its anonymously chic “wardrobe building blocks” – that moment came when the word “unibare” entered the lexicon, says The Times. It expresses the moment you realise that someone is wearing Uniqlo, “rather than anything more expensive”.

In April, shares in Fast Retailing – Uniqlo's parent company – hit a record high on the back of roaring overseas growth in the US and Europe, says Bloomberg. They've now gained 45% year-to-date. Fast Retailing is the third biggest apparel company in the world after Zara's Inditex and the H&M stable, and its humble brown paper bags have become a fixture from Oxford Street to Fifth Avenue.

In a business culture “famed for grey conformity”, Tadashi Yanai “can't help but swim against the tide”, says Time – happily flaunting his success despite local taboos against ostentatious wealth. He owns two golf courses on the Hawaiian island of Maui alone. Yet when you walk with him through Uniqlo he reveals some “quintessentially Japanese traits”, says Bloomberg Businessweek: “attention to detail, supply-chain prowess, minimalist aesthetics” – and frugality.

Tadashi Yanai was born into the rag trade

Tadashi Yanai grew up in the trade – his parents ran a menswear shop in Ube on the main Japanese island of Honshu. The event that changed his life was the Vietnam war, which interrupted his studies in political economy at Tokyo's Waseda University because of a student walk-out. The break enabled him to travel to the US and UK, where the proliferation of mid-market clothing shops planted a seed. In 1972, after a brief stint selling men's clothes for a supermarket chain, Tadashi Yanai was handed the keys to his father's now expanded business.

In 1984 he opened the first branch of the Unique Clothing Warehouse in Hiroshima to pursue a more casual style. The firm's big breakthrough came in 1998 – as Japan was reeling from its burst economic bubble – when Yanai opened Uniqlo's first Tokyo outlet and sold a lightweight fleece for just £15. “Every fourth Japanese consumer bought one.”

When Tadashi Yanai published his autobiography, One Win and Nine Losses, he had a cathartic time describing his many mistakes down the years – not least overhasty expansion efforts, which necessitated a humiliating retreat. These days, Uniqlo's expansion is more measured, but has a relentless quality, says The Times. Having targeted national capitals, it's going for the regions – in the past year, opening new British stores in Liverpool, Glasgow, Edinburgh and Bristol. A series of designer collaborations – with minimalist Jil Sander and, latterly, Dior maestro Jonathan Anderson – has boosted the brand's appeal.

Tadashi Yanai, who is building sponsorship programmes with art galleries globally, has strong ideas about being “a force for good” and giving back to society. Yet he runs his own fiefdom like “a dictator”, says Time. With two sons now working in the business, questions about the succession abound. But he's giving nothing away. “When I get older my dream is to take a walk every day on the streets of London” – a continuing source of inspiration, he told The Telegraph in 2015. No sign of that happening any time soon.

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This year marks the tenth anniversary of an event that has proved to be of huge consequence for the UK stock market. No, not the Brexit referendum – 2016 was the year in which Japanese company SoftBank, led by founder and chief executive Masayoshi Son, acquired the UK's leading technology company, Arm, for £24 billion. Unlike American investors, professional UK fund managers became permanently disillusioned with the technology sector as a result of the collapse of the technology, media and telecoms bubble in 2000-2002, and so were delighted to be shot of its flagship domestic representative at a 40% premium to the prevailing share price.

With the yield on ten-year gilts at historic lows below 1.5%, pension funds were desperate to ditch equities and buy even more gilts, even leveraging up in their chase of the “liability-driven investment” delusion, which was to cost them hundreds of billions six years later. New solvency rules introduced after the 2008 financial crisis required insurance companies to invest in “safer, more liquid” securities, that is, short-dated gilts. Wealth managers could crow to their clients about short-term performance.

Only one major investor vehemently disagreed; James Anderson, the then manager of Scottish Mortgage Trust, bitterly criticised the sell-out on behalf of Baillie Gifford, with a holding of more than 10%. “We found it deeply depressing that Arm's management, and particularly its chairman, were so influenced by short-term shareholders.” Anderson said it was a premature sale of the UK's leading technology and intellectual property champions, “Britain's sole serious shot at building a global tech giant”.

In September 2023, Arm again went public when SoftBank floated the company on the New York Stock Exchange at a valuation of £40 billion, while retaining 90% of the shares. Unsurprisingly, pleas to list the shares in London were shunned, though Arm remains a Cambridge-based company. Since then, the shares have multiplied more than sixfold, although they are now down 17% from their early June peak.

Had Arm listed in the UK, it would be by far the biggest company on the London Stock Exchange. London is now only the world's eighth-largest stock market, accounting for just 3.1% of the MSCI All Countries World index. It has been steadily slipping down the rankings owing to its low exposure to the technology sector, which accounts for just 1% of the FTSE 100. This compares with 8%-9% in Europe, 27% in the US (not including Alphabet and Amazon) and 37% in Asia.

Britain's technology firms are condemned to stagnation

Also easily forgotten is the 2014 sale of Britain's DeepMind, a pioneer in AI, to Google for just £400 million. In 2006, US-based Illumina bought Solexa, the UK-based inventor of gene sequencing, for £315 million. It became the key building block in Illumina's climb to a market value of more than £50 billion (although the shares have fallen by two-thirds in the last five years). These and other examples show that Britain has a good record of creating and building technology champions, but that unambitious management, combined with uninterested and short-sighted institutional investors, means that they sell out rather than scale up in the way that American giants have shown is possible.

Without the “ecosystem” that results from successful technology firms, Britain's pool of talent will go elsewhere, there will be no pool of capital looking for the next potential breakthrough, a diminishing appetite for risk and no list of success stories to inspire future entrepreneurs. The London Stock Exchange has become a value trap – a shrinking pool of reasonably managed solid businesses with mediocre prospects. Such a market can have an occasional catch-up year of outperformance, but without a cadre of proper growth firms, is condemned to an ever-shrinking share of global capitalisation. Arm's sale to SoftBank, now Japan's largest company, didn't start this process, but it marked the point at which it became irreversible.

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Alphabet, Google's parent company, is listed in the US with a total value greater than that of the entire UK stock market. Billions of people use its search engine every day – indeed, the Google name has become so ubiquitous that it is now used as a verb around the globe. Yet there is more to Alphabet than Google.

Beyond search and advertising revenues lies an empire that includes everything from deep-sea cables to self-driving cars and energy storage. The business uses the billions harvested from search advertisements to fund massive bets on the future and is fast becoming one of the most influential companies in history.

The Alphabet name reflects a corporate mission to fund independent bets that produce “alpha” – the term in finance for an investment that outperforms the broader market. Alphabet wants to be the structure underpinning countless future innovations. The name signalled to the market that the firm was no longer just a search engine, but an incubator of new technology.

Alphabet's rise from Google search to global dominance

Search remains Alphabet's largest source of profits. Its enormous scale explains why the company can afford to fund so many broader ambitions. When the business launched from a garage in 1998, it was just one of many experimental search engines competing on the early World Wide Web. Its rapid rise to dominance was driven by a proprietary algorithm called PageRank. Unlike rival systems that mainly counted how often a keyword appeared on a page, Google ranked pages based on the quality and importance of links pointing towards them. A link from a respected university or major news site carried far more weight than one from an obscure blog. This breakthrough produced far more useful search results, triggering a wave of adoption that quickly led to dominance. Put simply, Google search worked much better than everything else.

Today, Google remains the search engine used by most. It controls more than 90% of the worldwide search market and processes billions of queries every day. Its closest rival, Microsoft's Bing, holds only a tiny share by comparison. Google's reach also extends far beyond its own homepage. The company provides the underlying search infrastructure for countless browsers and software applications around the world. Competitors struggle to replicate what Google has built because search engines improve through users' behaviour. The more people who use the platform, the more data it collects and the better the system becomes. By capturing most of the world's search data, Google continuously improves, creating a self-reinforcing cycle that keeps competitors behind.

This constant stream of searches is transformed into revenue through a system of paid results. When a user searches for a term with commercial value, the engine places sponsored links at the very top of the page, positioned directly above the information. Google avoids charging businesses a flat fee simply to display these links. Instead, it operates on a pay-per-click model, collecting a fee when a user selects a sponsored result. Because millions of consumers use the search box to find products, services and local businesses every second, these small fees accumulate into billions of dollars of highly predictable revenue.

This is so profitable because the underlying mechanics require little human involvement. Traditional advertising agencies only grow by hiring armies of account managers and media buyers to manage campaigns. Google removed much of this by building an automated, self-service advertising platform to run its pay-per-click business. Advertisers simply log into a dashboard, set their budgets and bid against one another for visibility tied to specific queries from users. Valuable searches, such as those related to legal or financial services, command extremely high advertising prices. This allows Google to generate enormous profits from everyday internet traffic without relying on large numbers of highly paid employees.

At the end of last year, Alphabet employed roughly 191,000 people worldwide. However, those workers are spread unevenly across the business. Most do not work directly on the core search or advertising operations. Instead, they are concentrated in labour-intensive divisions such as Google Cloud and areas such as compliance and other administration. The core systems and software that power Google's search engine require only a small group of engineers to maintain and monitor it. By the end of 2025, Alphabet was generating annual revenue equivalent to more than $2.1 million per employee, although the figure within search alone is probably far higher, perhaps as much as $10 million per employee. This ultra-low headcount relative to sales creates a self-operating engine that supports the rest of the organisation, funds Alphabet's broader ambitions and produces vast profits – thought to be $1 billion every two to three days.

Branching out into Google Cloud and beyond

The fastest-growing large-scale part of the business outside of search is Google Cloud. This division sells computing power and data storage to large corporations and public-sector organisations, providing a platform for businesses to build, host and run their own software applications. Unlike the search engine, the cloud business is inherently labour-intensive, requiring a global sales force. By the end of 2025, the unit had exceeded $70 billion in revenue, driven by demand for machine-learning applications. This segment spent years burning cash to build physical data centres, but has now matured into a highly profitable operation, generating billions in quarterly operating income. The third large division within Alphabet is subscriptions and devices. This includes premium, advertising-free access to YouTube, digital storage upgrades through Google One, which pools together personal consumer storage for Google Drive, Gmail and Google Photos. This is distinct from the corporate cloud, focusing instead on individual consumers' hardware, such as Pixel smartphones. Total consumers' subscriptions have climbed past 325 million globally. This division generates more than $50 billion annually.

What ultimately cements Alphabet's dominance is how seamlessly it intertwines these separate businesses. Google Video's early failure was solved by acquiring YouTube, for example, which was then deeply integrated into core search results. Google Maps was built to serve local search needs, but is now embedded directly into the Android operating system and Android Auto vehicles' dashboards. This interconnected web provides built-in, zero-cost marketing across the entire portfolio, making the user's experience smoother while locking consumers firmly inside Alphabet's systems.

The relentless flow of cash allows the parent company to invest on a scale few companies in history can match. Rather than returning profits to shareholders through dividends or share buybacks, Alphabet operates like a vast venture-capital fund. Its investment strategy is divided into three tiers. For near-term product improvements, it uses Google Labs, a fast-moving environment where software teams test early features, such as improved AI systems, directly with the public. For medium-term time horizons, the company focuses on strategic acquisitions, buying external platforms and scaling them over time. Finally, the long-term horizon is handled by X Development (formerly Google X), the “Moonshot Factory” created to back speculative technologies ranging from self-driving cars to grid-scale energy storage. In these ways, Alphabet channels its search, cloud and subscription revenues into tomorrow's cutting-edge technology.

Alphabet's formula for acquisitions

Alphabet has acquired more than 250 technology companies over the years. Each deal has followed a similar formula: acquire a promising but financially constrained technology and scale it using the company's engineering expertise and vast profits. Google Maps originated from Keyhole, a struggling start-up founded in 2001. Keyhole developed a 3D digital globe called EarthViewer 3D and even received early backing from America's Central Intelligence Agency. The technology was impressive, but the business model weak. Keyhole sold its software on physical CDs to real-estate firms and defence agencies. Google recognised that around a quarter of all web searches were location-related and acquired Keyhole in 2004 for roughly $35 million. It removed the expensive pricing, introduced a cleaner, more accessible interface, and relaunched the platform as Google Maps. In the process, it transformed a niche military-style tool into a free utility that has become almost as recognisable as the search engine itself.

The acquisition of YouTube in 2006 stemmed from Google's own failure in online video. Its in-house platform, Google Video, was losing ground to its rapidly growing rival. YouTube succeeded by offering a simple interface that allowed anyone to upload and stream videos easily. However, by the summer of 2006, the company was struggling under the weight of its own popularity. Hosting costs were soaring, while copyright lawsuits from traditional media companies threatened its survival. Realising Google Video had lost the battle, management stepped in with a $1.65 billion acquisition. The takeover rescued YouTube from likely insolvency and allowed Google to secure the leading destination for online video before legacy media companies could shut it down. By the end of 2025, YouTube was generating more than $40 billion in annual revenue.

The 2005 purchase of Android is probably the most successful acquisition. As a start-up, it had been developing an operating system for mobile handsets, but ran short of cash to fund engineering salaries. At the time of its purchase, it was a small company employing eight people and was bought for just $50 million. This was such a small sum at the time that it wasn't even disclosed to the stock market. The goal of the acquisition was to prevent competitors from blocking its search engine on mobile devices. By making Android free, Google rapidly came to dominate mobile software, eventually capturing more than 70% of the global smartphone market. This comparatively small investment helped ensure that the search business continued to grow even as smartphone usage overtook computer usage.

The 2014 acquisition of DeepMind secured Alphabet's lead in AI. The laboratory, which was founded in London by Demis Hassabis, Shane Legg, and Mustafa Suleyman, had assembled one of the world's strongest machine-learning research teams. DeepMind focused on neuroscience-inspired AI and deep reinforcement learning. Yet cutting-edge AI research is very expensive, requiring vast computing resources and highly paid engineers while producing little immediate revenue. Much of Hassabis's time was spent raising venture capital. Recognising that DeepMind needed the support of a company with deep pockets, the founders agreed to a £400 million sale to Google, with Hassabis taking on the role of CEO of the renamed Google DeepMind. The deal kept the research group based in London and provided the resources needed to pursue foundational scientific breakthroughs. That long-term backing ultimately paid off. Among other things, Hassabis's work on protein folding using DeepMind recently won the Nobel Prize in chemistry.

How Alphabet is shooting for the moon

Where Alphabet stands apart is its willingness to invest in technologies that may take decades to mature. The X Development division filters all ideas through a demanding three-part screening process to protect capital. Projects must address a global problem affecting millions, propose a radical breakthrough solution and rely completely on technology that does not yet exist. Incremental improvements are rejected outright. To encourage bold experimentation, X is also designed to reward failure. Teams are expected rigorously to test their ideas and can even receive bonuses for proving a project is technically or economically unworkable before significant resources are wasted.

This strategy has produced a trail of discarded technologies, including mysterious, giant floating barges intended to be high-end, floating marketing showrooms; a technology for storing renewable energy by pumping electricity into massive tanks of molten salt and chilled liquid; high-altitude, helium-filled balloons designed to float in the stratosphere, creating a shifting network to beam wireless internet down to remote rural communities. But the crown jewel of the moonshots to date is Waymo, the autonomous-vehicle division that began life in 2009. Waymo shows how a massive cash cushion allows a company to outlast an industry cycle. While some car makers promised self-driving fleets by 2018 only to scale back their ambitions when machine learning proved too difficult, Alphabet simply maintained its multi-billion-dollar funding trajectory. By refusing to rush out unproven systems to market, the division solved the major challenges.

Waymo has now achieved scale, with roughly 3,700 vehicles operating, servicing half a million paid rides per week. Its fleets of autonomous vehicles operate robotaxi networks across major American cities, including Phoenix, San Francisco and Los Angeles, completing passengers' trips without human drivers. In September of this year, it is due to launch in London. What began as a highly speculative experiment has matured into a genuine advancement in transportation.

Deep underwater, Alphabet is also building global subsea cable infrastructure. This is an ongoing project that has so far created a total of 60,000 miles of armoured cabling crisscrossing the oceans. To support the growth of its cloud services and advertising, Alphabet shifted from renting space on third-party telecommunications networks to owning its own. These subsea lines are the plumbing of the internet, moving vast amounts of data across the world at the speed of light. In owning this infrastructure itself, Alphabet ensures its consumer services operate with lower latency than that of competitors.

Is Alphabet worth owning?

Turning digital advertising revenue into real-world infrastructure requires enormous investment. For investors, the key question is whether these assets will create lasting value or simply become an expensive distraction. The shares of Alphabet rarely look cheap on any conventional valuation metric, but waiting for a deep-value entry point has been a fool's errand. Ever since the company listed on the stock market in 2004, there has never really been a bad time to buy its shares.

Not that the shares have risen consistently. Alphabet's shares have fallen quite significantly a few times over the years, dropping roughly 50% during the 2008 financial crisis and weathering several 20%-30% declines since. Every single decline has proved to be an exceptional buying opportunity, as the underlying earnings have moved relentlessly higher. This compounding has generated astonishing wealth, transforming its founders into centi-billionaires and ranking them among the wealthiest individuals on Earth. The model does not just reward senior executives. In 1999, when Google employed just 40 people, massage therapist Bonnie Brown joined the company part-time. Her pay was only $450 a week, but she also received stock options. Five years later, she retired a multi-millionaire and went on to create her own charitable foundation. Had she kept her shares, she would now be a billionaire.

Despite a massive market valuation of about $4.5 trillion, Alphabet is still growing remarkably quickly. A simple heuristic for evaluating growing companies is to ask whether the business can generate enough operating profit within five years to make its current enterprise value look cheap. Specifically, can its future operating profits reach a tenth of that valuation? For Alphabet, that means aiming for roughly $450 billion in annual operating profit. Last year it made about $190 billion and is forecast to grow at 20%-25% per annum for the next five years. At that level of growth, the company's current trajectory makes $450 billion perfectly feasible.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

The Gulf states have been crucial to the global economy ever since the first oil shock in 1974 broke the post-war monetary system and ushered in an era of high inflation. With the world's biggest concentrations of oil and gas in Saudi Arabia, Iran, Iraq, Kuwait and Qatar, and with producers locked into the Opec oil-exporters cartel, which could switch supplies on and off at will, the region held the world's energy supplies in its hands. That gave its rulers immense power and the wealth to buy up a vast range of assets. Interest rates, equity prices and inflation all over the globe were often determined by events in that one small region of the world. It mattered.

That looks to have changed. As the US and Israel attacked Iran, there were plenty of dire warnings that the oil price would go to $150 a barrel, or perhaps even $200. Flights would have to be cancelled as we ran short of jet fuel; petrol would have to be rationed. The closure of shipping lanes would send chemical and fertiliser prices soaring, triggering food shortages and factory closures. The global economy would be plunged into recession. Central banks started to consider an emergency response.

In the event, none of that happened. The price of oil did go up sharply, rising from $60 a barrel to close to $120 shortly after the conflict started. But rather than spiralling out of control, it steadied and then started to fall again, dropping below $80 as Iran and the US agreed a 60-day ceasefire at the start of this week. There is little sign of food shortages, or any basic commodities running low, and there are still plenty of cheap flights available. Most of the European economies are sluggish, but that is for a whole host of reasons. They have not collapsed and the US is still doing well, with strong growth, plenty of new jobs and the stock market hitting record highs. Inflation has ticked up a little, but should come back down again as the price of oil falls.

In reality, the Gulf states just do not matter as much as they used to. There are three big reasons for that. To start with, there is a lot more oil in the world than there used to be. Despite all the catastrophic warnings during the 1980s and 1990s that the world would have run out of the stuff by now, there seems to be more of it than ever. The US has turned itself into both the largest producer and net exporter of oil in the world, largely because of fracking. Despite all the fear-mongering, more countries, such as Argentina and Mexico, are developing their own shale oil and gas reserves. After the US strikes on the country, Venezuela will start to restore its oil fields and it has the largest reserves in the world. Far from running out, there will soon be too much oil. The Gulf can't hold the world to ransom when the global market is awash with oil.

Why the Gulf states' money is no longer so important

Second, alternative energy is rising in importance all the time. We can all debate whether the drive to achieve net-zero is too rapid, but there is no turning back the clock to the fossil-fuel era now. China's huge electric-vehicle industry is not going to disappear, and most open car markets will be electric within a decade or so. Renewables account for 45% of electricity generation across the EU and already for 25% in the US, the world's largest economy (and that share is rising fast, with solar last month overtaking coal as a source of power). Oil is a shrinking market.

Finally, Gulf states' money is no longer so important. Dubai and Qatar will take time to recover from the bombing campaign launched by Iran. A lot of money invested around the world will have to be brought home to pay for reconstruction and cover losses. The region's wealth funds won't be splashing billions on trophy assets as have done for the last 20 years. In a world where Wall Street is minting space- and AI trillionaires, there is a lot of spare capital around. The Gulf states won't matter so much. Add it all up and one point is clear. The main lesson from the Iran war is that the Gulf states' influence has evaporated. They are part of a small region, which no longer matters very much except to the people who live there. Investors will still have plenty of things to worry about – but the Gulf states and their oil resources can be dropped from the list.

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Private debt went through a “golden moment” after the rapid post-pandemic rise in interest rates, said Jonathan Gray, president of alternative-asset giant Blackstone, in 2023. The question now is whether that golden moment is past. With interest rates expected to stay higher for longer, sovereign yields rising sharply, and cracks appearing last summer in US business development companies (BDCs), some investors wonder whether private debt is entering its first real test as an asset class – or even facing a day of reckoning.

Private debt is a broad label. It includes syndicated leveraged loans, direct lending, asset-backed finance and even fund financing. These distinctions matter. Syndicated loans are liquid and volatile, but trade at tighter yield spreads (ie, they promise lower returns). By contrast, direct lending – where investors such as funds lend directly to borrowers – is illiquid and assets are rarely marked to market.

Direct lending is often presented as the core of “true” private debt, due to its potential for higher risk-adjusted returns. So far, that record has proved hard to ignore for institutional investors. Spreads of around 550 basis points over base rates remain appealing, while reported default rates are still modest. As a result, it attracted large inflows from pension funds and insurers. Assets could reach $2.8 trillion by 2028, up from $1.8 trillion currently, according to private-markets data firm Preqin.

However, this influx of capital and its potential ability to skew industry fundamentals has meant that some participants and regulators have begun to voice concerns about the risks of a private-credit crisis. Some signs of stress have emerged. US BDCs made the headlines last year after a rise in the number of investors who tried to redeem their holdings. Open-ended funds that invest in illiquid assets can enter a vicious cycle when redemption requests rise: as funds sell their most liquid assets (often assets of better quality) to meet redemptions, that news creates an incentive for other investors to also redeem so as not to be the ultimate “bagholders” of the riskiest and less liquid assets. In order to avoid the proverbial rush for the exits, some BDCs were obliged to cap redemptions – which obviously does not improve investors' sentiment.

A more challenging macro-economic environment, slower growth, persistent inflation and rates that are higher for longer also raises the risk that the asset class could be entering a more difficult phase. A further concern for investors trying to understand these risks is that valuations are opaque and largely controlled by managers. However, as the asset class is becoming more institutionalised, index providers such as S&P and Bloomberg are developing private credit benchmarks. Along with BlackRock's acquisition of Preqin in 2024, this suggests private markets will become more standardised and scrutinised despite some fund managers fighting this trend.

Private debt may like high interest rates, but borrowers don't

However, the primary concern at present is that the same high interest-rate environment that makes private debt attractive to investors is also increasing pressure on borrowers. The probability of default is growing, while recovery rates in private debt have never really been measured. Defaults can be obscured: for example, the restructuring of US educational technology firm Anthology last year did not trigger a formal default, as its lenders allowed flexibility in payments. Payment-in-kind (PIK) – where interest is added to the loan principal to be paid at maturity – can similarly mask stress by deferring payments out of cash flow. The covenant-lite nature of some lending offers less protection than investors might expect, while recovery rates in restructurings may be weaker than for senior debt that requires regular repayments in cash.

Meanwhile, diversification in some private-credit vehicles looks weaker than it first appears. A significant share of portfolios are exposed to software and/or software-as-a-service (SaaS) businesses, creating hidden concentration risk. These companies benefit from recurring revenues, predictable cash flows and healthy earnings before interest, tax, depreciation and amortisation (Ebitda) margins, but there are fears that artificial intelligence (AI) fundamentally threatens their business models. AI may not disrupt these companies overnight, but it could gradually erode pricing power, compress margins and weaken exit valuations, making refinancing more difficult.

The sell-off in these software stocks earlier this year, combined with the impact on private debt as investors realise how exposed some lenders are to the sector, has highlighted hidden correlation risks in supposedly diversified portfolios. All lenders now have their eyes on business-software firm Visma, which has reportedly delayed its planned initial public offering (IPO) until 2027 – a decision that perhaps suggests growing caution among investors despite strong operations and cash generation. This highlights another important feature of the market: concentration in a small number of large credits backed by private-equity sponsors. Jitters in private debt can – by definition – be less publicly visible, but the performance of HgCapital Trust, the specialist private-equity investor in software and services that has 13% of its portfolio in Visma, testifies to how sentiment has changed: it is now trading at a 25% discount to net asset value (NAV), having been on a premium in 2024.

Momentum remains in the private debt market

And yet, the market remains active. Despite slower mergers and acquisitions (M&A) activity in Europe during the first quarter, two large refinancings – of TK Elevator (€1.8 billion) and Global Sports Group (€2.2 billion) – drove solid deal volumes. “The prominence of these large-cap deals also suggests direct lenders have successfully taken advantage of the volatility seen in Q1 to reclaim some market share from the syndicated markets,” notes Debtwire. The amount of funds raised in 2022-2024 that are not yet invested (known as “dry powder” in the industry) will allow the market to keep momentum.

The fact that direct lending can offer 100-500 basis points of additional yield over what is available in the traditional syndicated loan market (depending on the amount of leverage used by the vehicle, or if it acquires subordinated debt and junior capital) – combined with the ability to negotiate better structural protections than broadly syndicated loans – should continue to attract strong interest.

Dry powder will help lenders to inject capital if needed and protect their initial investments, tempering the risk of a private-debt crisis. It will be used to address the “refinancing wall”: a large stock of debt raised in the low-rate era now needs to be rolled over at significantly higher cost. So far, this has been managed through extensions and amendments – euphemistically renamed as Liability Management Exercises (LMEs). Widespread defaults are rare.

We also need to keep in mind that there are important regional differences in private debt. The US market is more mature and increasingly competitive as banks re-enter leveraged finance, given an incentive by the Trump administration's new regulations. In Europe, private debt is still expanding, supported by a more fragmented banking system and structurally lower penetration. Note too that public markets are treating private credit as a homogeneous bet on leveraged buyouts. However, outcomes will depend less on the asset class itself and more on managers' capabilities: origination, underwriting discipline and balance-sheet flexibility. Scale is an advantage in stressed environments. Large managers such as Ares, Apollo and Blackstone have the ability to amend loans, provide follow-on capital and manage restructurings internally. Origination is the real moat, because it separates lenders that focus on financing commoditised leverage buyouts (LBOs), which are often syndicated loans, from those that source bilateral or semi-bilateral deals with pricing power and better protections. Collateralised loan obligations (CLOs) – securities backed by a pool of loans, often from LBOs – have held up so far and offer diversified exposure to leveraged loans. However, their lack of control over the underlying loans and consequently over the outcomes when borrowers come under pressure may become more apparent as the cycle turns.

The easy part – that “golden moment” – is over. Higher rates are a source of stress. As refinancing pressures build and dispersion rises, returns will be less a function of a rising tide lifting the whole asset class and more driven by selection, discipline, structure and scale. A broad opportunity is turning into a more challenging game.

High-performing private-debt funds generally require high minimum commitments (ie, institutional size – maybe €2 million - €5 million to a private-debt fund such as CVI with strong exposure to central Europe). Some managers are starting to target individual investors as a source of further capital, but one should always be aware that individuals are less likely to get the best opportunities. Avoid products offered by private banks where layers of fees accumulate.

More interesting are listed funds and managers exposed to the sector. Some merit caution, but fears of a crisis may create buying opportunities in the best ones. In Europe, there is Tikehau Capital (Paris: TKO), which has robust exposure to special situations, ICG (LSE: ICG) and CVC Income & Growth (LSE: CVCG). In the US, Ares Management (NYSE: ARES) and Blackstone (NYSE: BX) have developed the strongest platforms in terms of origination. Apollo Global Management (NYSE: APO) has the strongest exposure to direct lending, but readers may prefer to wait for the dust to settle.

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Stock markets are still setting record highs, despite the unstable geopolitical backdrop and economic uncertainty. Market euphoria has been boosted by SpaceX's initial public offering (IPO) last week, and by the potential IPOs of OpenAI, the owner of ChatGPT and its rival Anthropic.

Yet market breadth is at record lows. Just a handful of AI-related names have been responsible for virtually all of the MSCI World's performance this year. What's more, in the past, bumper IPOs have sometimes been the sign of a market top.

In the current environment, some investors may want to take some profits, reduce exposure to stocks and remove the temptation to trade, while still remaining invested. Adding some bonds to your portfolio could be part of the answer.

The return of bonds with the 60/40 portfolio

The traditional 60/40 portfolio (60% stocks and 40% bonds) fell out of favour between 2020 and 2024 after a series of unfortunate events. Throughout the pandemic, central banks held rates at, or below, zero, and bonds reached fresh highs. Yet from 2022 to 2024, inflation – which most investors had forgotten existed – returned with a vengeance. As interest rates spiked, bonds collapsed. As a result, a 60/40 portfolio of US equities and bonds returned 17.3% in 2022, its worst performance since 1937, according to Morgan Stanley.

Yet we are in a very different environment now. Yields on high-grade corporate and government debt are sitting at some of the highest levels since 2007, so investors don't sacrifice so much return in buying them (unlike 2020 and 2021). Higher starting yields mean that there is less risk of a sudden rise in rates sparking a 2022-style collapse. So a frothier stock market may make a 60/40 or 80/20 asset allocation look sensible again. The future is impossible to predict. However, a 60/40 approach has historically tended to offer good protection against volatility. A 60/40 US portfolio achieved a compounded annual growth rate of 7.3% over 200 years to 2024, according to Morgan Stanley. Stocks and bonds experienced negative returns in the same year on only 16 occasions, illustrating just how unusual 2022 really was.

Having a mix of bonds and stocks rather than all stocks has meant lower long-term returns. A global 60/40 portfolio would have returned 4% per year between 1901 and 2022 and an 80/20 portfolio would have returned 5%, but an all-stock portfolio would have returned around 6%, according to a report for the CFA Institute. Note also that the risk-adjusted return (the return relative to the volatility) was similar for both the 60/40 and 80/20 portfolios. However, a much more conservative portfolio of 30% stocks and 70% bonds had worse risk-adjusted returns. In other words, once you get beyond a certain point, being more cautious keeps reducing returns, but yields a more marginal reduction in risk.

All this implies that long-term investors should gauge bond exposure carefully and not be too conservative. Overdoing it will probably lead to lower returns. But it can still make sense temporarily to increase exposure in volatile markets.

How to adjust your bond exposure

One easy way to adjust your bond weight is to use a fund series such as Vanguard LifeStrategy, where you can move between the 100% Equity and 60% Equity or 80% Equity funds in a simple transaction. These funds are rebalanced daily and are very cost-competitive, with ongoing charges of 0.2%. Other choices include the Fidelity Multi Asset Allocator and the HSBC Global Strategy series of funds.

Alternatively, consider using a selection of index funds or exchange-traded funds (ETFs), such as iShares MSCI ACWI ETF (LSE: SSAC) for global stocks and Vanguard Global Aggregate Bond GBP Hedged (LSE: VAGS). This lets you adjust the stock and bond weight to your own preference.

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We've all stayed in hotels with noisy neighbours. But perhaps not the kind of neighbours who have fluffy tails or fly. Still, when you stay in one of the new and rather luxurious Treehouse Suites at Fairmont Windsor Park in Surrey, you are choosing to inhabit their world, if only for a short time – the world of the scampering squirrel, the rustling deer, the flitting bat, the warbling song thrush, the rattling magpie, the hooting owl… and, of course, being so close to London, the incessant squeak of the antisocial parakeet, no matter how well dressed. One must always make allowances for the locals.

On the lake behind the copse that is your immediate neighbourhood while staying in a Treehouse Suite, you will hear the ducks quacking and the seagulls laughing, although I don't believe I heard a peep out of the swans and herons. Your fellow guests have also come from far and wide – the geese from Canada and Egypt, and the Mandarin ducks from China (at least originally). All the while, a kite hovers high in the sky, keeping a beady eye on the busy natural world unfolding below.

Treehouse Suite at Fairmont Windsor Park

Magpie is the name of the Treehouse Suite I was staying in during an unseasonably warm and sunny weekend in April. These are wooden structures (four in all), which helps them to blend in with their woodland surroundings. And before you complain about false advertising, the suites are not actually in the trees as per the arboreal clubhouse of your childhood. Think of the size of the mighty oak that would be needed to support such an edifice! Rest assured, the trees of Fairmont Windsor Park remain unburdened. Rather, the four raised Treehouse Suites have been strategically built among the beeches and silver birches, with new saplings planted that will, in time, make the Treehouse Suites feel even more secluded. That said, privacy isn't a problem even now. You can wallow all you like in your elevated, outdoor Jacuzzi, up on the deck and away from the prying eyes of people. To be sure, the squirrels will get a good look at you.

My Magpie suite, in fact, had two hot tubs on the wraparound deck. This two-bedroom suite is really two apartments, which makes it ideal for families with older children or perhaps two couples travelling together, who will inevitably come to value some time apart. The other three suites have one Jacuzzi. But dry yourself off and come inside, through the French doors and into the living room of the Magpie suite.

A cosy winter paradise

Those doors form part of a curved wall of glass that can be folded back to let the outside in during the warmer months.

For the winter, there is a log fire that transforms this space into a cosy nest. Facing the fireplace is a modern and fully equipped kitchen, with an induction hob, a fridge for food and another for wine. We arrived to a basket of goodies on the countertop – cake, biscuits, crisps; all the sinful things to nibble on while you're sipping your wine out on the deck.

The first spacious bedroom is accessed from the living room and it, too, opens onto the wraparound deck. At the far end of the room, on the other side of the bed, you will find the white and black-tile bathroom with his and hers sinks, a standalone bathtub and a separate shower.

This set-up is more or less mirrored in the other mini-apartment accessed from the area reserved for coats, brollies and muddy boots when you come in through the suite's front door – although that en-suite bedroom doesn't have direct access to the kitchen, which isn't always a bad thing. But, like the first bedroom, this also opens onto its own hot tub.

So you could, if you so wanted, nestle down with your furry and feathered friends for the duration of your stay. But that would almost be a shame, because Fairmont thoughtfully provides the denizens of its Treehouse Suites with their own golf buggy and mountain bikes. You can use these to explore the grounds of the hotel. You will certainly want to stop at the spa with its quaint courtyard heated outdoor spa pool with various massage jets. Inside, you will find a second, bigger spa pool and there is also a salt room.

A variety of dining options to choose from

And you will most definitely want to stop at restaurant Il Giardino 1215 (although, if you are anything like me with the wine list, you may want to walk, which you can do easily). The à la carte is Mediterranean – I started with a handful of sweet, nutty scallops (and a rather sensational house-take on a negroni) and progressed to the pan-fried veal chop.

As of this month, you now have another dining option in The Windsor Brasserie. It is, according to the press release, a “lively, design-led brasserie”, focused on modern European cuisine “with a sense of theatre”. It has an open kitchen with a charcoal robata grill, and some dishes, such as the tartare, are finished at the table. I might just have to come back to try it.

After the lovely meal at Il Giardino, it was time to stroll back to the Treehouse Suite, via the atmospheric Art Deco-style bar. Waking early the next morning, I peered over the deck railing to spy one of my neighbours already at the breakfast buffet – a fat, fluffy rabbit, munching on the grass at the foot of the treehouse. The neighbourhood was waking up to another fine day.

Chris was a guest of Fairmont Windsor Park. Treehouse Suites cost from £2,300 a night, visit fairmont-windsorpark.com

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What's happening at the World Cup?

It's not merely the geopolitics of this football World Cup – taking place in the US, Canada and Mexico – that are truly unprecedented. The main host nation, the US, is at war with a participant country, Iran, whose players must enter and leave US territory on the same day for their matches; one host country recently threatened to annexe another; a highly regarded referee was ejected from US territory for the crime of being Somali; and citizens of four competing nations are banned from the US. Meanwhile, the bellicose US president was recently awarded with a newly invented “peace prize” by football's governing body, FIFA.

The economics of this World Cup are the “craziest” ever, too, says Faisal Islam for the BBC. The three co-hosts are in the midst of an “epic trade war”. Between last week's kick-off at the Estadio Azteca, and the final on 19 July at New Jersey's MetLife Stadium, the three will be renegotiating their trilateral USMCA free-trade deal.

Why is this World Cup unusual?

On the footballing front, the fact that the breakout star of the tournament so far is Cape Verde's 40-year-old goalkeeper is pretty astonishing. So, too, is the fact that FIFA has allowed football's structure – this is the archetypal game of two halves – to be watered down by compulsory “hydration breaks”, regardless of the weather. Footballers can already access water as needed. But the unprecedented breaks, which allow broadcasters to sell another three minutes of advertising mid-game, have turned World Cup matches into games of four quarters, with coaches and teams now having three chances to regroup and reset. But perhaps most astonishing of all are the gob-smacking ticket prices.

How expensive is a World Cup ticket?

The official prices, not those charged by touts (or “scalpers”), are astronomical. For the final at the MetLife stadium in New Jersey on 19 July, official prices are around $2,030-$6,730, but later sales phases and “dynamic pricing” surges pushed some final tickets as high as $10,990 – with secondary markets offering tickets at multiples of that. Even quite ordinary seats have sold for between $3,000 and $7,000, and the least attractive seats for more than $2,000. For the more attractive group games (featuring the big European and South American teams, or host nations), a rough typical price is $1,000, and as high as $2,700. Even the “bargain” prices, for a non-prestige group-stage match, are typically several hundred dollars.

Why are World Cup tickets priced so high?

“The fans are being squeezed like never before because this is a very different tournament economic model to what has gone before,” says Faisal Islam. In previous World Cups, part of the economic rationale for hosting was to help catalyse spending on new infrastructure, including on transport links and stadiums. This time, most of the games are taking place in rented American football (NFL) stadiums and FIFA has essentially adopted NFL economics, meaning that “seat pricing is designed for yield management” – and “revenue maximisation is prized above the act of selling out the stadium”. Throughout the World Cup's history, organisers have tried to keep ticket prices at a level ordinary fans can afford and coped with the massive excess demand via lottery distribution. Broadcasting and sponsorship rights were a vastly more lucrative source of revenue.

Economics of the 2026 World Cup

This time, ticket sales and hospitality are projected to count for almost as much revenue. For the first time, FIFA has taken direct control of ticketing, rather than outsourcing to local organisers, and has attempted to incorporate and exploit the secondary market by – in effect – acting as its own tout. This time, ticket holders are free to sell their tickets on an officially sanctioned marketplace, but FIFA takes a 30% cut (15% each from seller and buyer; a nice model). They have also embraced so-called “dynamic pricing”, where ticket prices rise (and fall) in line with demand, and where many customers complain they don't know how much they are paying, and for precisely what, until the deal is confirmed.

Is all this legit?

Not everyone is convinced. “FIFA has turned buying a ticket to the World Cup into a gauntlet of confusion, fake scarcity and impossibly high prices – all at the expense of consumers,” says Jennifer Davenport, the attorney-general of New Jersey. Both New Jersey, where the final takes place, and neighbouring New York, have launched formal investigations into potential skulduggery. Yet the model is certainly lucrative. Richard Sheehan, economics professor and sports finance expert at the University of Notre Dame, writing in The Conversation, predicts the total ticket and hospitality revenue for this year's tournament could top $14 billion, more than double the amount from the Qatar World Cup in 2022, which hit $6.6 billion. There are more games this time (48 teams rather than 32), but Sheehan projects revenue per game will rise from $14.5 million to at least $30 million.

What are the economic benefits of the 2026 World Cup?

FIFA projects the US economy will be among the winners from the event with a $17 billion boost in US GDP and 185,000 jobs created. But most analysts reckon any macroeconomic impacts will be marginal. That $17 billion is a short-term 0.05% boost to US GDP and it's likely that the World Cup will crowd out other kinds of tourism, with ordinary visitors eager to avoid price hikes on everything from hotel rooms to transport. Even the benefits for host cities are far from clear-cut, says Marni Rose McFall in Newsweek. City authorities are on the hook for logistics, transport, sanitation, security and policing, and other costs involved in staging multiple games across several weeks – hence the giant price hikes on transport to and from stadiums. But research, including a new report from insurance company Atradius, shows that most World Cups cost host cities more than they bring in. “FIFA collects most of the revenue, host cities absorb much of the risk.” The beautiful game is more bountiful than ever.

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Historically, gold has been regarded as a safe store of value against the potential for fiat currency to depreciate in value – in other words, as a hedge against inflation.

But for much of 2026 so far, higher inflation has coincided with lower gold prices.

“Gold was still up 6% over the year to the end of May,” said Joseph Greif, investment director at wealth manager Evelyn Partners, “but its recent behaviour has been uncomfortable for investors who expected it to protect portfolios immediately.”

Inflation has run hotter since the Iran war broke out, especially in the US. The US is a critical market for gold; the metal is priced in dollars, so its usefulness as an inflation hedge is implicitly measured against US inflation.

But while the Iran conflict pushed inflation higher, the price of gold fell. Between 27 February – the day before the war broke out – and 10 June, the price of gold fell 23%. Annualised US CPI inflation rose from 2.7% in February to 4.2% in May.

Why the gold price fell during the Iran conflict

Inflation is not the only dynamic that gold prices interact with. One of the key ones is interest rates, particularly in the US.

Gold pays no interest. That matters less to investors when interest rates are low, because alternative assets like bonds aren’t offering much interest themselves.

But once interest rates increase – or when markets expect them to – then gold loses appeal relative to interest-paying investments.

This is the main reason gold prices fell, both before and during the conflict in Iran. The price of gold peaked on 29 January at $5,595, around a month before the war broke out. The catalyst for prices to start falling from then was Donald Trump’s nomination of Kevin Warsh as the new chairman of the Federal Reserve (Fed).

Until then, markets had assumed Trump would nominate a ‘dovish’ chair for the central bank and that this would result in relatively loose US monetary policy (i.e. lower interest rates) – a positive for gold.

By the time the Iran war broke out, markets had already spent weeks pricing in higher interest rate expectations. And the inflationary shock that the Strait of Hormuz’s closure prompted only amplified those expectations.

“The prolonged conflict sparked severe inflationary risks, pushing US inflation to 4.2% in May,” Benoît Harger, portfolio manager at private bank J. Safra Sarasin, told MoneyWeek. “This data forced markets to price in potential interest rate hikes instead of cuts. It boosted the appeal of yielding assets and triggered a 30% gold correction from its January high.”

This isn’t necessarily out of character with how gold has behaved in the past.

“What lots of people don’t realise about gold is it sells off in a crisis, often because of liquidity,” Cosmo Sturge, director of market strategy at metals fund manager Baker Steel, told MoneyWeek. “You had a lot of investors who had made a lot of money in the run-up to the [Iran] war, and suddenly that change in the outlook for inflation and the knock-on effect for interest rates [prompted them to] sell gold.”

Could gold still help hedge against inflation?

Despite the selloff, most experts agree that gold still has a role to play in portfolios, particularly as a hedge against inflation.

Central bankers are currently more constrained in how high they can push interest rates than they have been in the past.

The Fed hiked interest rates to as high as 19% in the early 1980s to combat rising inflation. This coincided with a steep decline in the gold price, from around $650 in January 1980 to around $320 in June 1982. But these high interest rates damaged the global economy and would be unworkable today.

“Rates clearly can rise, but could they rise to those levels again? Could the Fed really have the firepower to be able to fight true inflationary crises through monetary policy?” asks Sturge. “I'm not sure. Debt to GDP is four times higher than in 1980. You've had a huge increase in the money supply in the US, which has obviously been fueling inflation.”

If it reached a point where the Fed couldn’t control inflation through monetary policy, then financial repression – government policies that keep rates artificially low, at the expense of savers and private businesses – would result.

“That is a very positive environment for gold,” says Sturge.

Similarly, Harger believes that gold remains an effective inflation hedge because it protects against long-term structural fragility. He argues that interest rates will eventually have to fall: “The global economy cannot sustain permanently high financing costs without triggering a recession. Furthermore, under-pressure growth and massive public deficits… limit long-term rate hikes.”

Gold, he says, will likely be a beneficiary of this eventual reduction in interest rates. “A strategic allocation may provide protection against sovereign risk and currency devaluation as rising debts force loose monetary policies.”

“Over the long term, gold being an inflation protection, I think, has held very well, but it tends to be more in terms of protecting your purchasing power rather than necessarily shooting sky high every time there's inflationary scare,” said Sturge. “It's driven by persistent debt growth: the fiscal deficits of the world, long-term currency debasement – these are the reasons why people hold gold.”

There is no shortage of popular places to visit in the UK — whether you’re after a coastal holiday or an idyllic countryside retreat.

And thanks to warmer temperatures, the case for a staycation is stronger than ever.

According to Expedia, interest in holidays within the UK has risen by 77% year-on-year globally, while more than half of Britons are now more interested in taking a UK break than they were last summer.

We round up the best UK hotspots to visit this summer, whether you’re travelling solo, planning a family getaway or organising a trip with friends.

Planning a trip further afield? We look at where to travel around the world and when to visit them in a separate guide.

10 most popular places to visit in the UK

Britain is home to many memorable destinations with many of the most popular places outside of the bigger cities.

Quaint villages in England and islands in Wales are gaining popularity among those seeking a staycation, data from Sykes Holiday Cottages shows.

The data is taken from internal booking insights over the last three years, and the top destinations are selected from towns with the most bookings.

Source: Sykes Holiday Cottages

1. Anglesey

Anglesey in North Wales is the most popular region to visit in the UK, thanks to sweeping coastal views, ancient historic sites and impressive beaches. You can walk around the 140 miles of the Anglesey Coastal Path, visit Llanddwyn Island, home to rare red squirrels and associated with the Welsh patron saint of lovers, visit the Beaumaris Castle or have a fun-filled family day out at the Anglesey Sea Zoo or Pili Palas Nature World.

2. Weymouth

Weymouth is a classic English seaside town ideal for a relaxing retreat. Head to Weymouth Beach, take a stroll along Weymouth Stone Pier or opt for a laid-back picnic at Nothe Gardens. There’s plenty to do for history buffs, whether you visit the ruins of Sandsfoot Castle, explore the underground tunnels at Nothe Fort or walk around the town to see historic objects and the town’s role in the D-Day landings.

3. Bowness-on-Windermere

The Lake District is a haven for literature lovers — both Beatrix Potter and William Wordsworth drew inspiration from this rugged, charming landscape. Get out on the water at Bowness Bay in Bowness-on-Windermere, where you can drive a motorboat or hop on a lake cruise, or visit The World of Beatrix Potter attraction to see different literary characters come to life. You can also go for hikes, visit historic museums or try your hand at archery at Brockhole-on-Windermere.

4. Beadnell

Beadnell is the perfect spot for a quiet beach retreat for those who want to simply relax on the golden sand while enjoying spectacular views. At the same time, it’s a watersports paradise. Take advantage of the Beadnell Bay, where you can try kitesurfing or wakeboarding — you can even give dune sledging a go if you’re feeling adventurous. Other than that, you can take a boat trip to the Farne Islands to spot puffins, visit the Longstone Lighthouse or see the iconic Bamburgh Castle, which was originally the location of a Celtic Brittonic fort dating back thousands of years.

5. Tenby

The most popular place to see puffins is Skomer Island, which you can visit by taking a boat trip from Tenby. Steeped in history, the Welsh harbour town is known for its 13th-century medieval town walls, the Five Arches barbican gatehouse and a 15th-century church. You can even take boat trips to Caldey Island, which is one of Britain’s holy islands, and St Catherine’s Island, which you can access during a low tide.

6. Buxton

This historic spa town in Derbyshire sits on the fringe of the Peak District and is famous for its ‘healing’ thermal waters and 18th-century Georgian and Victorian architecture. Some top places to visit are the Devonshire Dome, the Buxton Opera House and the two-million-year-old natural limestone cave, Poole’s Cavern, which has been designated a Site of Special Scientific Interest.

7. Skipton

Skipton is a charming market town in North Yorkshire packed with history, scenic walks and family-friendly attractions. At the heart of the town is Skipton Castle, a Grade I-listed medieval castle built in 1090, which withstood a three-year siege during the English Civil War. You can also take canal boat trips, and use Skipton as a base for exploring the Yorkshire Dales National Park.

8. Bourton-on-the-Water

Bourton-on-the-Water is a popular village in the heart of the Cotswolds, straddling the River Windrush. You can wander through quaint streets lined with honey-stone cottages and charming low bridges, enjoy browsing independent shops and try a traditional cream tea. Some iconic landmarks include the Model Village, which is a one-ninth scale replica of the Cotswold village, or visit Britain’s only breeding colony of King Penguins in the nine acres of Birdland Park and Gardens.

9. Burnham-on-Sea

Situated on the Somerset coast, Burnham-on-Sea is a traditional seaside town known for its sandy beaches and relaxed atmosphere. It used to be a tiny fishing village until the late 18th century, and is home to the famous Low Lighthouse. An ideal location for seaside activities, you can enjoy amusement park rides and fish and chips by the sea, or choose to explore the Apex Leisure and Wildlife Park, where you can spot a wide range of plants and birds.

10. Inverness

The only Scottish city on the list will certainly not disappoint. The de facto capital of the Scottish Highlands sits on the banks of the River Ness, where you can enjoy lochside views and the nearby Inverness Castle. It’s famous for its rich history combined with spectacular natural scenery — you can visit the prehistoric Clava Cairns or Culloden Battlefield, the historic site of the final Jacobite Rising. The surrounding Highlands are ideal for hikes, wildlife spotting and scenic road trips, and you can even go island hopping without leaving the city.

There’s an age-old investment adage that promotes the value of spending time in the market as opposed to trying to time the market.

Unless you’ve got a crystal ball that tells you exactly when certain markets or asset classes are going to rise or fall, you’re probably better off investing smaller amounts on a regular basis, referred to as pound cost averaging. This smooths out any highs and lows, allows you to pay less for your investments on average and can make the journey less volatile, if indeed that’s your desired experience – some investors may enjoy the thrill of trying to time market highs and lows with a lump sum.

Behavioural finance experts often suggest that as humans, we’re predisposed to certain biases, including selling our investments when performance starts to drop off, despite all the expert evidence telling us not to do that; it just crystallises any losses instead of giving your investments a chance to recover.

That said, investor confidence is at its highest in seven years despite a year defined by geopolitical instability, global trade tensions and market uncertainty.

An annual study of investor behaviour and sentiment from research and communications businesses AML Group and The Nursery Research & Planning, The Investor Index 2026, showed investor confidence reaching a new high.

The index – a composite measure of investors’ confidence, sense of control and how informed they feel about their financial decisions – is back well above pre-pandemic levels, surpassing the previous high of the AI boom in 2024.

“What’s particularly interesting is how normalised uncertainty appears to have become for investors,” said Nicola Wright, insights director at The Nursery Research & Planning.

“Confidence is no longer closely tied to calm market conditions. Investors seem increasingly comfortable making decisions in a world where disruption and volatility are seen as part of the backdrop rather than temporary events.”

Several reasons are likely feeding that confidence, according to Jason Hollands, managing director at investment platform Bestinvest.

These include overplayed concerns that the US was facing a recession (which has not materialised) and markets (being forward-looking) appearing to discount the risk of the Middle East conflict as temporary, despite it lasting longer than many had first expected. He believes the over-riding reason behind many investors’ optimism is around AI and the exceptional levels of capital expenditure being ploughed into the sector.

Investing during uncertain times

Confidence is informed by several factors, including attitude to risk, life stage and level of experience and the amount of money you have.

The survey found 84% of investors (defined as having £10,000 or more invested) near or in retirement feel confident their savings and investments will be sufficient. Confidence is also higher among those already retired, as opposed to those in planning stages, and among those with more than £250,000 invested.

While the index showed UK investors were putting their money where their mouths were – 50% increased their investment amounts compared with last year while 40% maintained the same levels despite an uncertain backdrop.

That faith in the market is supported by a willingness to pay a premium for more likelihood of returns, a priority alongside decent track records and user-friendly products.

The choices UK investors are making also indicate optimism, favouring equity funds on the whole, with a rising demand for exchange-traded funds (ETFs). In keeping with regular savings strategies, considering a diversified, long-term approach – such as looking at reliable large caps, high-quality fixed income and some uncorrelated real asset exposure – should help many investors, whatever their time horizon, weather any storms.

Hollands said the danger of buoyant markets is the risk of overconfidence or being swayed by casual conversations with people ‘down the pub’.

“A lot of DIY investors start off enthusiastically but over time their interest wanes and they tend to forget about their portfolio,” he said.

Asset allocation – checking if any position sizes need rebalancing to bring the overall investments in line with your intended risk profile and preferences – is something many self-directed investors tend to overlook. Many get excited about fund or stock ideas rather than looking at the bigger picture, he added.

“Try not to over-react to the last thing someone told you but also make sure you’re reviewing your portfolio at least a couple of times a year, at the same cadence. Having a well thought-through asset allocation is really important, which can then anchor you to making better decisions.”

Are you thinking about investing but not convinced yet?

Intenders, perhaps unsurprisingly, are more cautious. The Nursery and AML define this cohort as those with over £10,000 in savings or over £2,000 in savings and an income over £40,000 but also likely to invest in the next two years. These people are keen to invest but still waiting for a ‘trigger’ event.

Tending to listen to banks, family and friends rather than professional advisers, they are more anxious across the board compared to investors. They see property and savings as safer bets than stocks and shares, with fear of loss and risk aversion their main barriers to getting started.

Of this group, 41% worry they will lose money and 37% say it feels too risky. Yet 44% say low-risk options or better knowledge would get them over the line.

“One of the main reasons that a lot of people who’d like to invest don’t do it is they’re nervous about putting their money in at the wrong time, and then suddenly seeing a significant drawdown in the value of their investment. That can stop them investing full stop,” explained Hollands.

He said the way to overcome that was to take the pound cost averaging approach.

“By just investing a little often regularly, it takes the emotion out of it and also means that across a year, you can expect to smooth out some of the ups and downs that you see in the short term.”

He also urges even experienced investors to consider the benefits of this approach – it’s not just for beginners.

How to start investing during uncertain times

Bestinvest is seeing novice investors increasingly choose readymade portfolios rather than trying to build their own from scratch, selecting funds themselves.

Readymade portfolios are essentially multi-asset funds designed to cater to a range of risk profiles, which have become common across most DIY investment platforms, which have evolved their offerings to serve customers of all levels of experience.

“Readymade portfolios provide inexperienced investors with effectively a ‘one-stop shop’ managed investment solution, through a diversified selection of underlying funds selected by a portfolio manager and an asset allocation approach that is periodically rebalanced to stay in line with the risk profile,” said Hollands.

He also said that passive funds had become more popular, with novice investors increasingly putting relatively small amounts via regular savings into global tracker funds.

Did you miss out on the SpaceX initial public offering (IPO)? Perhaps you missed the cutoff altogether or failed to get your desired allocation of shares, given its fourfold oversubscription? In either case, you can still look forward to subsequent opportunities to get involved in the investment story du jour.

While most IPOs trigger a period of volatility the expectation with this one is that it will be sharper and more protracted. Given the huge level of attention, limited allocation available to UK retail investors and the staggered timeline for expected trading (selling as lockups expire and buying as the underlying indices of various tracker funds bring the stock onto their benchmarks), investors can expect swings in SpaceX’s share price to continue through the second half of the year, at least.

Lynn Hutchinson, head of ETF and index solutions at Charles Stanley, said: “It’s [not only] one of the most talked about stocks of the last few months but retail investors quite like a new stock becoming available. Plus it’s got the ‘Elon Musk factor’ – who has a huge retail fanbase as well, albeit not across the board. Many investors have wanted access to this company for years.”

Multiple buying opportunities as shares are released

Funds tracking the Nasdaq-100 will be among the first index funds to include SpaceX, in line with newly amended rules.

These include fast-tracked entry, allowing inclusion to Nasdaq’s flagship index fund 15 days after an IPO instead of the previous window of three months, and removal of its minimum float requirements. A three times multiplier will be introduced; rather than the currently tradable market cap – or free-float – of $75 billion, the stock will be weighted based on a market cap of $225 billion, which could force passive investors to chase the stock, further fuelling volatility across the index as a whole.

Index providers MSCI and FTSE Russell will include SpaceX after 10 and five trading days, respectively.

S&P 500 index funds will include SpaceX later after S&P Dow Jones Indices confirmed it won’t fast-track the company’s inclusion in the index.

“There will be an initial dash for the shares because of the limited availability but after that, the next release will likely be after Q2 earnings, so more shares will likely come on between July and September, if indeed the holders (employees and early investors) decide to sell them,” said Hutchinson.

Early investors, staff and other insiders are subject to staged lockups to manage supply and demand, she added.

“It looks like it will be staged, with some released earlier, and the full lockup expiration after 180 days. We expect it will be staggered and therefore volatile for several months yet.”

She said clients had been in touch asking whether they should sell the Nasdaq in favour of something else. But she warned investors not to get carried away, reminding that the allocations within many of these funds would be tiny, given the 5% expected free-float stock being made available.

“Perhaps as it gets further along and if the stock’s still really volatile, it might make more of a difference. But at the moment we’re looking at, in some cases, 0.2% to 1% depending on which index it’s going into because there’s not enough free-float available.”

Hutchinson urged investors to think about the underlying inclusion criteria, whether they’re looking at a broader index fund or a specialist thematic exchange-traded fund (ETF).

“The VanEck Space Innovators ETF (LON: JEDG) is the largest space ETF by assets under management, which you’d expect [SpaceX] to go in, but it’s unlikely to go into that until September because it’s got a 10% requirement of free-float, and there won’t be 10%. It will go in at some stage, and I guess they’ll look at it around September again.”

Speaking to MoneyWeek, Moritz Henkel, product manager at VanEck EU, concurred; the company said it will wait until the September review before deciding if SpaceX will be added to the ETF, subject to it meeting the criteria at that time.

“There will be no pre-IPO or super fast-track inclusion, nor rule change,” he said.

From a governance perspective, his team believes any new company should be assessed against the full set of index rules, not on an ad hoc basis, especially because increased volatility makes it more difficult to find a fair price in the beginning.

“For us, it’s more important to stick to defined rules and have a consistent rules-based exposure than to chase this early onboarding of SpaceX.”

Elon Musk and his team have blazed the trail, bringing a government industry into the private sphere as a commercially viable ecosystem. Henkel said the reusable Falcon boosters were a turning point, dramatically lowering launch costs and enabling new space companies, seen in the proliferation of IPOs and special purpose acquisition companies (also known as SPACs) coming to market.

Yet much still depends on launch execution, R&D and mission reliability. As SpaceX transitions to public markets it will essentially rerate the whole sector, bringing greater transparency, investor scrutiny and pressure to meet deadlines, amplifying its successes and failures.

“We’ve seen much hype and the current growth estimates are obviously very ambitious. But we’re talking about decades, not months for their business strategies.”

He said the focus on risk is a real point of difference, which was highlighted in the IPO prospectus.

“A couple of failed missions may only have a small impact to the balance sheet – even though they are very costly – but they’re potentially having a much larger effect on the actual stock price. Failed missions lead to decreased investor confidence in the technical abilities, which can cause you to lose trust.

“When we’re looking at SpaceX in the coming months and years, and capabilities of meeting deadlines, and commitments they’ve communicated to the open market, these are now more pressured because they are in the public market.”

Where will the money come from for this massive IPO?

Several reports cite JPMorgan’s estimates that roughly $95 billion worth of holdings – likely in the big tech names – will be sold off to accommodate new positions in SpaceX.

In her blog last week, Boring Money’s Holly Mackay makes a similar point: “If large investors want to buy in, they will need to free up cash by selling other holdings. They might take some profits from high-performing shares like Nvidia, so I’d expect some knock-on volatility in other shares which have had strong gains so far this year.”

What other IPOs have shown parallels to SpaceX?

While the hype may be comparable to Google’s IPO back in 2014, the reality for those trying to participate in a hugely popular public listing may more closely mirror that seen when Royal Mail floated in October 2013, with a seven times oversubscription.

Jeremy Fawcett, head of Platforum – a retail investment consultancy – said Royal Mail was the last big one in the UK, comparable to the government sell-offs during the move to privatisation in the 1980s.

If the amount you actually buy is significantly lower than what you’d hoped for, by the time you come to sell, taking into account trading fees and foreign exchange, you have to really think about how much you end up with.

“There’s a huge amount of uncertainty… if you remember the 2012 Olympics, we all applied for hundreds of tickets. And most people got nothing. So you get excited because you think, ‘I put my money on the line’, and then you get very little out of it.”

Small-cap stocks have been abandoned by investors. That is bad news not only for the companies themselves, but for the wider UK economy. In the past, the smallest businesses listed on the London stock market have played an important role in Britain's economy. Ambitious young companies could raise money, expand their operations and, if successful, grow into much larger businesses. Investors who backed them early often enjoyed excellent returns along the way.

Today, that system is breaking down. A series of regulatory changes and industry shifts has steadily diverted money away from smaller companies and towards the largest firms in the market. The result is a funding drought for many promising businesses and fewer opportunities for savers seeking long-term growth. Because these changes are now deeply embedded, a reversal looks unlikely anytime soon.

That does not mean investors should ignore small caps. In fact, the current environment may offer some of the best opportunities seen for years. But investors need to adapt. Simply buying cheap shares and waiting for the market to recognise their value is no longer enough. Many small-cap stocks remain overlooked for years. The most attractive opportunities are often companies that can grow rapidly, recover from temporary setbacks, or unlock value through corporate activity. In other words, investors should be looking for tomorrow's mid-caps rather than today's statistically cheap shares.

Finding bargains in small-cap stocks isn't enough

The UK stock market is shrinking as listed companies disappear through takeovers, private-equity bids and delistings. At the same time, fewer investors are directing money towards small caps. As a result, prices at the lower end of the market often fail to reflect the underlying performance of a business. In theory, that should make stockpicking easier. If markets become less efficient, bargains should become more common. The problem is that cheap shares can now remain cheap for a long time. Buying undervalued stocks only works if someone eventually notices that they are undervalued.

To understand why this is happening, it helps to look at how the wealth-management industry has changed. Not long ago, stockbrokers and fund managers devoted considerable resources to researching smaller companies and allocating clients' capital across the market. That process helped ensure that money flowed to promising businesses and that share prices broadly reflected reality. Things have changed. Building bespoke portfolios has become increasingly expensive and administratively burdensome. Faced with rising compliance requirements and growing scrutiny over fees, many advisers have stopped making investment decisions themselves. Clumsy rules from the regulator triggered this shift. To eliminate compliance risks and operational costs, advisers stopped managing money altogether. Instead, they outsourced the process entirely to mass-market model-portfolio services (MPS).

That trend has concentrated massive wealth into a handful of firms. Four dominant discretionary managers now control the bulk of the UK MPS market. Quilter WealthSelect, Tatton Investment Management, Timeline Portfolios and AJ Bell Investments manage more than £70 billion combined and are growing rapidly. Today, the MPS marketplace relies almost entirely on passive tracking funds. Driven by regulatory pressure to keep fees low, providers invest in cheap index funds that replicate the wider market. Human judgment has been replaced by algorithms. Instead of analysing whether a business is worth buying, a passive fund allocates cash based purely on how large a company it already is.

The big four allocate a combined £9 billion to the UK stock market. Yet tracing the money down to the underlying holdings reveals that almost none of it reaches smaller companies. When investment committees use passive UK equity trackers, index rules determine where the money goes. These index rules explain why the largest wealth managers hold next to nothing in smaller companies. In the past, a balanced portfolio routinely allocated several percent to small caps. Today, that support has vanished. Quilter WealthSelect and Tatton Investment

Management control around £50 billion between them, yet their reliance on broad market benchmarks dilutes actual small-cap exposure to around 0.3% of total assets. AJ Bell relies on trackers that systematically lop off the bottom 3% of the investable market, so its allocation to pure small caps sits at virtually nothing.

This starvation of capital has triggered a destructive feedback loop, worsened by past regulatory mistakes. New rules permanently damaged the stock market by forcing brokers to charge separately for research and trading. When active funds dominated the market, brokers employed armies of researchers to write detailed reports, helping fund managers choose where to invest. In the past, brokers spent time analysing small companies to drum up interest among investors and find buyers for their shares, funding the work through trading in large companies. This research gave smaller firms visibility and kept their share prices accurate. Once the regulator banned this so-called bundling, the commercial model for small-cap broking collapsed because passive tracking funds do not buy research.

Analysts' coverage for companies valued under £250 million has all but vanished. Today, hundreds of listed British businesses are completely ignored by the market. With no regular broker reports, private investors have to work much harder, using specialised resources to find out how well these businesses are performing. Institutional investors will not buy shares in a company that nobody covers and brokers will not spend money writing about companies that the big wealth platforms are blocked from buying. Investing is becoming a purely automated exercise driven by index size, leaving high-quality small companies completely cut off.

How to find the right small-cap stocks

Yet all is not lost. For savvy investors who understand this breakdown, the dysfunction creates a lucrative hunting ground. To succeed, investors must leave behind old-style value investing. Buying a stock simply because it looks cheap on paper is a mistake, as passive investing means that value stocks may remain cheap forever. Instead, investors must look through these three specific lenses to find the stocks that can entice money from investors.

The first lens focuses attention on structural growth – that is, high-quality businesses expanding their operations and becoming more valuable in the process, generating high levels of real growth by deploying a proven commercial formula. This could make them the mid-caps of the future. When a company grows its earnings consistently, the compounding effect eventually overwhelms the lack of market interest. Even if the valuation multiple stays depressed, the sheer scale of the underlying profit expansion forces the share price higher, dragging the business out of the small-cap index to where there are far more investors.

The second lens reveals recovery plays that have hit cyclical lows. The turbulent economy of the last few years has battered corporate earnings, causing share prices to collapse and pushing formerly substantial businesses down into the small-cap sector. But this is often a temporary condition driven by external cyclical factors rather than permanent structural decline. The goal is to identify businesses that have survived the worst of the downturn and have the strength to capitalise on the inevitable rebound. When the cycle turns, these companies will enjoy a dramatic recovery, delivering an explosive bounce in earnings.

The third lens focuses on corporate activity – revealing under-the-radar businesses where an activist investor has built a stake to force operational change, unlock shareholder value or streamline the group. The activity can take many forms – from cost-cutting programmes to selling off non-core assets, or shrinking the share count using excess cash – and create prime targets for full takeovers by external corporate buyers. Private-equity firms and larger international corporations routinely scan the UK small-cap market for high-quality assets trading at steep discounts to their private market value. When a corporate buyer launches a full cash takeover bid, the market reaction can deliver value for shareholders. The following companies are examples that meet some of these three criteria.

Nine of the best UK small-cap stocks

Fintel (LSE: FNTL) is a structurally growing business that is priced as if it is not. It provides critical compliance data and fintech software to thousands of British financial advisers through its dominant SimplyBiz and Defaqto brands. The result is a highly predictable stream of recurring subscription income, with demand likely to increase as regulation across the retail wealth sector becomes more stringent. Yet the market prices the combined entity at a steep discount to the price that other similar businesses have been acquired for. This allows investors to buy a highly scalable fintech at a bargain valuation, long before the compounding earnings force a market rerating.

Software Circle (LSE: SFT) aims to generate structural growth via a disciplined consolidation strategy. It is actively buying up niche software businesses within highly fragmented sectors across the UK. Operations are at an early stage, but management is progressing sensibly, securing acquisitions at very attractive multiples while maintaining a lean head office and a decentralised operational structure. This playbook closely mirrors the model of other firms that have generated immense long-term wealth. Though tiny today, this firm has all the traits necessary to deliver exceptional multi-year shareholder returns.

Amcomri Group (LSE: AMCO) operates a strict buy, improve, build strategy across the fragmented UK engineering and manufacturing sectors. The business targets high-quality industrial firms facing the owner's retirement, acquiring them at low single-digit multiples before driving organic margin improvements. This roll-up model generates highly predictable structural growth completely independent of the wider macroeconomic backdrop. Recent final results confirm this operational formula is working, with pre-tax profits significantly ahead of market expectations.

Vanquis Banking Group (LSE: VANQ) is a cyclical recovery play. Formerly a FTSE 100 stock called Provident Financial, the lender shrank into a micro-cap minnow after major operational disasters. Management has finished cleaning up the wreckage, yet the market still prices the shares as if collapse is certain. Vanquis provides credit cards and vehicle finance to millions of sub-prime borrowers that mainstream banks ignore. Management targets mid-teens returns on tangible equity by 2027. If they deliver, the shares will be unbelievably cheap and a sharp market rerating should drive the share price up to reward investors who timed the recovery correctly. The bank operates as a far better business than its depressed price reflects.

Focusrite (LSE: TUNE) is a clear case of a former stockmarket darling caught at a cyclical low. The audio-products group enjoyed an unprecedented sales boom during the pandemic. However, as global demand normalised, the business wrestled with severe inventory overstocking and costly distribution headaches that clouded performance for several years. Recent trading updates indicate that these operational problems are finally clearing. Trading on a low multiple of its current depressed earnings, Focusrite offers massive upside. As underlying profits recover toward historic levels, this corporate recovery could trigger a rise to a much higher share price.

Marshalls (LSE: MSLH) serves as another example of a business hitting a cyclical low, operating as a highly respected supplier to the struggling UK building industry. High interest rates, inflation and uncertainty about policy have brought domestic construction to its knees, dragging the business down with it. This company once commanded a premium valuation as a well-known mid-cap, but it has now fallen into obscurity. The shares historically traded at a multiple to book value, yet they currently languish at a clear discount. When building activity inevitably recovers, Marshalls will benefit immensely, potentially driving a sharp recovery in its share price.

Capita (LSE: CPI) is another cyclical recovery play, a fallen angel offering massive potential for recovery. The outsourcing giant once sat in the FTSE 100 before a collapse dragged it down to micro-cap levels. New management has aggressively cleaned up the balance sheet, selling non-core software assets to eliminate debt. The business still generates more than £2.4 billion in annual revenues, yet trades at a deeply depressed valuation. This turnaround relies entirely on internal cost-cutting rather than macroeconomic growth. As administrative cost-cutting leaves more free cash in the bank, the shares could enjoy a substantial and justified market rerating.

Funding Circle (LSE: FCH) is an underappreciated growth story driven by massive operational gearing. The digital platform matches small business borrowers with institutional lenders. This matching model requires very few incremental cost rises to service new volume. This structural efficiency allows expanding revenues to drop straight to the bottom line. Pre-tax profits recently surged from £3.4 billion to £20.3 billion and are on track almost to double again to £35 million this year. The wider market remains blind to this compounding scaleability, mispricing a high-margin financial matchmaker as just another lender.

SDI Group (LSE: SDI) offers a double whammy by combining structural growth with a cyclical margin recovery. The company runs a highly disciplined buy-and-build strategy, acquiring niche scientific-instrument businesses that specialise in optics and photonics for laboratories. This consolidation model delivered excellent long-term returns until a recent downturn in its core scientific end markets depressed the group's earnings. This temporary pain leaves the shares trading at a very cheap valuation. As laboratory budgets normalise and operating margins recover, investors could capture the combination of compounding growth and an explosive rebound.

The best specialist funds in the sector

Picking individual micro-cap stocks requires patience and knowledge, and is certainly not for everyone. For investors who prefer to delegate the task, backing a specialist fund manager with a proven record is sensible. Two specific investment trusts have proved their ability to navigate these markets with skill. The lead manager of Rockwood Strategic (LSE: RKW), Richard Staveley, has more than 25 years of experience and runs a concentrated portfolio of undervalued businesses. He engages directly with boards to unlock value, a strategy that has delivered a stellar record. Staveley targets unloved, mispriced assets and drags them through a turnaround process until the wider market is forced to pay attention.

For those looking even further down the market scale, Onward Opportunities (LSE: ONWD) provides exposure to some of the smallest companies listed in the UK. Lead manager Laurence Hulse launched the trust in March 2023 on the Aim junior market and took it to the main market in April 2026. He deliberately operates in the smallest, most illiquid territory and his execution has been outstanding, delivering a very good performance since the trust's inception.

For those selecting individual stocks today, three of the stocks mentioned above look particularly interesting. Focusrite is a cyclical recovery play that has finally cleared some post-pandemic hurdles and positioned its manufacturing operations for a strong earnings recovery. Vanquis Banking Group remains absurdly mispriced, trading at a steep discount to its underlying net asset value while the market completely ignores its mid-teens profitability targets. And Software Circle provides an underappreciated growth story with a disciplined, decentralised model for integrating niche acquisitions efficiently. Investors who back these stocks will gain direct exposure to tangibly improving businesses.

For investors who prefer to delegate the stockpicking, Rockwood Strategic is the ideal vehicle. It has a long record of active engagement by the board and offers instant diversification across a concentrated basket of deeply undervalued turnaround plays.

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RentGuarantor Holdings (Aim: RGG) has been given a boost by the Renters' Rights Act, one of the most significant pieces of legislation to hit the UK rental market in decades. It's only been in force since the beginning of May, but the Act is already driving a complete rewriting of the market.

Under the new law, fixed-term tenancies have been abolished, “no fault” evictions are no longer allowed, rents can only be raised once a year, and during the first 12 months of the tenancy, the landlord cannot serve notice to move back into the property or sell it. These changes, far from protecting tenants, have forced landlords to become more defensive.

The changes have made it much harder for landlords to evict tenants who can't or won't pay their rent, piling pressure on a system that's already on the verge of collapse. According to professional body Propertymark, due to lengthy court backlogs, the average time from claim to repossession has risen to more than 68 weeks, compared with just over 20 weeks in 2019. At the point of eviction, average unpaid rent stands at £12,708 across England and Wales and £19,223 in London.

Landlords have responded by demanding that tenants provide a guarantor before they agree deals. According to multiple reports, around 40% of landlords now require guarantors for both new and existing tenants. This is where RentGuarantor comes into play.

How RentGuarantor works

The firm is a rare example of how effective London's capital markets can be for early-stage growth businesses. Founded in 2016 by Paul Foy, a property investor since the mid-1980s, RentGuarantor does what it says on the tin – guarantees rents. Tenants pay a fee (£20) for an initial background check and the firm uses tools such as Open Banking and AI to calculate how much the tenant can afford and if they're able to maintain payments. If the tenant passes the check, which should be completed the same day, RentGuarantor can offer the guarantee.

This incurs a further fee, usually around three to five weeks' rent, depending on the underlying risk profile. When the tenant has paid and signed, RentGuarantor provides a legally binding guarantee of rental payments to the landlord or letting agent. Unlike traditional guarantors, such as parents or grandparents, this provides an extra layer of protection for the landlord. RentGuarantor passes the risk to a panel of insurers while collecting the origination fee and remaining the key point of contact for customers.

Five years of RentGuarantor Holdings on the London market

After spending five years building the foundations, Foy and his team took the company public in 2021. It listed on the Aquis exchange in 2021 with hardly any revenue and moved to the Aim junior market in the second half of 2025. The new listing raised £4 million in 2025 to support its growth efforts and it ended the year with revenue of £2.4 million, up 87% year-on-year. The founder has remained a key shareholder with a 30% stake.

RentGuarantor hasn't charged into the market seeking break-neck growth and drawing down shareholders' goodwill to fund spending. There's a very tight grip on marketing spending, which totalled just £200,000 in 2024 and £500,000 in 2025 against revenue of £2.4 million, or around £165 per contract (based on the year-end figure of 3,123 contracts). The focus over the past five years has been on getting the offering right and putting in place the right technology and team to scale up effectively.

The firm has now reached the point where this hard work is beginning to pay off. In May, the month the Renters' Rights Act came into force, RentGuarantor recorded a 115% increase in unaudited revenue compared with the average for the first four months of the year. Moreover, revenue per contract was up 24%. The group also recorded its first positive monthly Ebitda earnings since its admission to trading – well ahead of the board's expectations.

The challenges facing RentGuarantor Holdings

The key risk for the group here will be scaling up without falling flat on its face, as so many firms do when they encounter a sudden surge in demand. The Act is driving demand for guarantees, but it'll also lead to a surge in disputes.

To help, RentGuarantor is looking to AI and has an expert on the matter in its orbit. The AI strategy is being led by Dave Cliff, a non-executive director and professor of computer science at the University of Bristol. He previously worked at MIT's artificial intelligence laboratory, so unlike many other businesses, which seem to be turning to AI with little actual understanding of the benefits, drawbacks and costs, RentGuarantor looks well-placed to exploit the benefits of the technology fully. Management estimates the group can process 20,000 contracts per year, but that will rise to 100,000 with AI's help.

According to house broker Shore Capital, RentGuarantor could agree 7,000 contracts this year, 13,000 in 2027 and 62,000 by 2030. Revenue could hit £6 million in 2026, rising to £19 million by 2028 and £54 million by 2030. Even if it achieves this lofty growth, it would still leave the group at only 3.4% of the potential total market.

Now that the firm is essentially self-funding, there's scope for marketing spending to rise. Shore Capital expects a ten times rise by 2030, easily covered by the firm's 79% gross margin. The broker has pencilled in adjusted earnings per share of 3.6p by 2028. As with all early-stage firms, these forecasts are likely to be wrong, but they illustrate the growth potential if the firm manages to scale up over the next 12 months. This is a high-risk play, but one with a huge and growing market to support it.

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Archer Aviation (Nasdaq: ACHR) is a company that focuses on advanced aircraft, particularly a category described as eVTOL (electrical vertical take-off and landing). These light aircraft offer the promise of being able to take off and land without a runway, but in a much more efficient, cost-effective and environmentally friendly manner than helicopters. This would enable them to overcome two major problems with helicopters: expense and noise.

Other technology companies ranging from SpaceX to Anthropic have floated on the stock market at valuations of hundreds of billions – or even trillions – of dollars. Excitement over technology stocks is at fever pitch. However, the ascendancy of these high-profile names shouldn't obscure the fact that the market has already started to sour on some technology firms with bold visions of the future. Archer Aviation is a case in point.

Archer Aviation wants to make flying taxis

Archer's idea is that eVTOL aircraft could allow people to avoid congested urban streets and motorways, particularly in the US, for trips that are too short for planes. Some argue that using these “flying cars” could even become the equivalent of calling a taxi for those who want a greater degree of speed and convenience, but can't afford to charter a conventional aircraft. However, as with any eye-catching technology, bridging the gap between hype and reality is proving to be a major challenge.

For example, even though the US government has tried to accelerate the regulatory process, getting the aircraft approved for use in US airspace will still take several years. Next, Archer Aviation needs to find a way to manufacture them at scale and at a reasonable cost, and then convince people to buy them. All the evidence suggests that despite some limited successful test flights, Archer Aviation is a long way from completing any of those steps, especially compared with rival firms in the area such as Beta Technologies. There are also wider concerns around how eVTOLs will be able to fit safely into airspace used by planes, helicopters and drones.

With no profits in sight, here's how to short Archer Aviation

Perhaps the most compelling argument against Archer Aviation is the fact that it burning through large sums of money. It lost $618 million last year. The board admits that it expects to lose up to $200 million next quarter alone. The company has enough cash to sustain these losses in the short run, but analysts expect steep losses to continue throughout the next few years, with no route to profitability in sight. The stock's valuation is nonetheless so high that even if Archer's revenue takes off, it will still be valued at around 30 times expected 2027 sales.

Investors also seem to have soured on Archer. Despite a brief resurgence in the spring, the stock is on a downward trajectory. It has lost almost two-thirds from its 52-week peak, and trades well below its 50-day and 200-day moving averages. I would therefore suggest shorting it at the current price of $5.73 at £300 per $1. I would cover the position if it hit $8.73, which gives you a total downside of £900.

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The 2020s have swung investors between exuberance and despair. What this decade has reminded us is that markets are driven by forces that are nearly impossible to predict and that genuine diversification, not just across firms or geographies but also asset classes, styles and valuation, is the most reliable basis for long-term returns.

Diversification is famously the only free lunch in finance and its value goes beyond performance: portfolios built to withstand drawdowns also protect investors from the emotion-driven decisions that volatile markets so often provoke.

With a wave of mega-cap initial public offerings expected to deepen the S&P 500's already significant concentration in AI and technology, now is the time to ask: how truly diversified are you? Our VT Chelsea Managed Funds range is built on exactly this principle, blending active and passive strategies across asset classes and geographies with a valuation-conscious approach and no obligation to follow benchmarks. Here are three holdings that show how we stay diversified across all market conditions.

Three funds to consider

Despite its global remit, the Ranmore Global Equity fund holds just 5% in technology and 25% in North America, vastly underweight compared with the index on both counts. Manager Sean Peche, who has more than 25 years of experience, tilts towards businesses with pricing power and recurring demand.

The fund has higher exposure to sectors such as consumer discretionary, consumer staples and communication services. The fund trades on 8.8 times forward earnings against 19.3 times for the index, and offers a yield of 4% compared with the index's 1.7%. In 2022, when growth and technology stocks sold off sharply, Ranmore delivered positive returns.

Ironically, it is the so-called “Jurassic Park” industries such as mining that may be among the best positioned to benefit from the AI revolution rather than be disrupted by it. You cannot commoditise what has already been commoditised and you cannot conjure a copper mine out of thin air. Meanwhile, the build-out of AI infrastructure, from data centres to robotics, is driving an explosion in demand for the very materials the BlackRock World Mining Trust (LSE: BRWM) holds.

Copper, one of its largest exposures, is essential to electronics, data centres and electrification, and AI-driven growth in global GDP is only expected to accelerate that demand further. Managed by one of the most experienced teams in the sector, the trust spans everything from explorers and developers to major diversified producers across gold, copper, iron-ore and platinum-group metals, with an attractive dividend on top. Natural resources and mining equities have a historically low correlation to technology stocks and real assets often outperform when stretched tech valuations come under pressure.

UK smaller companies are currently experiencing their longest period of underperformance in years, yet over most long-term timeframes, small caps have outperformed their larger counterparts. UK small caps are where some of the best value available in global equity markets is right now and overseas investors have been quicker to recognise it than many at home. Philip Rodrigs, a decorated UK small-cap manager with sector-leading returns dating back to 2006, runs WS Raynar UK Smaller Companies with a high-conviction, bottom-up approach targeting firms with strong growth potential, improving margins and share prices trading well below intrinsic value.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

At the annual meeting of Edinburgh Worldwide (LSE: EWI) at the end of April, Saba Capital was at last successful in ousting the trust's directors and replacing them with their own nominees. The US activist had a 30% shareholding in EWI and gained the support of a couple of other sizable investors, and the board was unable to summon a high-enough turnout from the rest of the shareholders to win.

Saba objected to an ill-conceived proposal to merge Edinburgh Worldwide with its sister trust Baillie Gifford US Growth (LSE: USA), which also has Saba as a 29% shareholder. More importantly, it was furious that EWI cut its stake in SpaceX by 35% in October, shortly before the rocket and satellite firm's valuation doubled to $800 billion. Saba demanded to know whether this decision was made by the board or Baillie Gifford.

An obvious answer for Edinburgh Worldwide

The new board says it will now launch a review into Edinburgh Worldwide's “historic significant portfolio activity and related decision-making processes”. Yet the answer seems obvious. Two other trusts managed by Baillie Gifford made more modest reductions in their holdings – USA and Schiehallion (LSE: MNTN) – while Scottish Mortgage (LSE: SMT) made none. If this were a Baillie Gifford decision, all would have sold equally. Almost certainly, Edinburgh Worldwide directors thought their holding in SpaceX was too large and asked to sell. Baillie Gifford would then have offered other trusts the opportunity to reduce. Some did, others didn't.

A wiser board would have asked Baillie Gifford for advice, followed it, and sold none, or only a small proportion. For that mistake, the directors were rightly ousted. But dismissing Baillie Gifford, who bought the stake in the first place and were unwilling sellers of any of it, would be a terrible mistake.

In the last year, Edinburgh Worldwide shares have returned 70%. The discount to net asset value (NAV) has shrunk to 1%. The NAV return has been 60%, far ahead of market indices, and is rapidly recovering the underperformance of prior years. Strong performance is very likely to continue.

Saba's mooted alternative strategy makes no sense. It wants to take over as manager and use Edinburgh Worldwide to invest in other investment trusts that are trading at large discounts to NAV. The problem is that discounts have fallen to single digits on average and are lower for trusts invested in quoted equities. Higher discounts remain at trusts with illiquid assets, with excessive gearing or where the trust is under the thumb of a controlling shareholder. There is no easy money to be made from activist campaigns against these trusts. Saba did well to invest in the sector, but the opportunity has now gone and is unlikely to reappear for many years.

What will Edinburgh Worldwide do next?

So what will the new directors do? The message is muddled. They say they will “continue to work closely with Baillie Gifford regarding the company's holding in SpaceX and potential future liquidity initiatives”. They promise a tender offer after SpaceX's initial public offering (IPO). With the shares trading so close to NAV, this is unnecessary. In any case, Edinburgh Worldwide will be locked into its SpaceX holding for six months after the IPO, so “working closely with Baillie Gifford” implies retaining it as manager for now.

They propose appointing new directors, which will be difficult without clarity on the manager and strategy. The best solution is surely to renew the agreement with Baillie Gifford and let it get on with the job that it was doing rather well.

That would make Saba's activist campaign completely pointless. It might cause Saba to call another extraordinary general meeting to seek to replace the directors it has just appointed. But it is more likely that Saba would just sell its stake at a large profit and walk away. Let's hope the new board shows that its claim to be independent of Saba is for real.

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The Caprons, Lewes, East Sussex

This Grade II-listed Georgian house in the centre of Lewes was once home to historian Asa Briggs, who was also a Bletchley Park code breaker. The garden includes a Grade-II listed, octagonal summer house. 5 bedrooms, 4 bathrooms, 3 reception rooms, kitchen, cellars, roof terrace, walled garden.

Price: £2.1m Jackson-Stops 01444-484400

Broomshields Hall, Satley, Bishop Auckland, County Durham

A Grade II-listed Georgian house with gardens that include a one-bedroom cottage, two summer houses and a lake. The house has a carved oak staircase and a large kitchen with an Aga. 4 bedrooms, 4 bathrooms, 3 reception rooms, library, 18 acres.

Price: £1.75m Finest Properties 0330-111 2266

The Manor House, Great Harrowden, Northamptonshire

A Grade II-listed manor house in a popular village, set in south-facing gardens with a kitchen garden with a greenhouse and a circular summer house with sofas and a fridge for wine. The house has beamed ceilings, panelled walls and period fireplaces. 6 bedrooms, 4 bathrooms, 3 reception rooms, breakfast kitchen, attic, pond, 0.8 acres.

Price: £1.15m Fine & Country 01604-309030

The Court, Axbridge, Somerset

A Grade II-listed Georgian house in Axbridge with views towards Glastonbury Tor. The house is set in gardens that include a summer house and an area dedicated to archery. It has flagstone and oak floors, period fireplaces and an indoor swimming pool with a gym. 7 bedrooms, 5 bathrooms, 3 reception rooms, breakfast kitchen, garden room, cinema, courtyard, parking, walled gardens, kitchen garden, 1.15 acres.

Price: £2.395m House & Heritage 01257-441990

Orchard Cottage, Wood End, Ardeley, Hertfordshire

A Grade II-listed, 17th-century house comprising three original cottages, with a summer house with a wood-burning stove and Wi-Fi. The house has exposed wall and ceiling timbers and inglenook fireplaces. 4 bedrooms, 2 bathrooms, reception room, gardens, 0.75 acres.

Price: £1.15m Fine & Country 01920-443898

Polwarth Terrace, Merchiston, Edinburgh

A duplex apartment on the first floor of a period property in the sought-after area of Merchiston. The flat retains its period fireplaces and has a dining room with French doors opening onto a balcony and a spiral staircase leading to a garden with a summer house. 6 bedrooms, 3 bathrooms, reception room, office/bedroom 7, dining kitchen, garage, summer house, parking.

Price: £985,000+ Savills 0131-247 3770

Moreves Manor, Great Waldingfield, Sudbury, Suffolk

A Grade II-listed, 17th-century house set in large gardens that include a wildlife pond and a summer house complete with a shower, sauna and wood-burning stove. The house has exposed wall and ceiling timbers and a breakfast kitchen with an Aga. 6 bedrooms, 2 bathrooms, 2 reception rooms, office, garden room, outdoor swimming pool, 1.58 acres.

Price: £950,000+ Strutt & Parker 01473-220444

Heamoor, Penzance, Cornwall

A renovated, Grade II-listed Cornish long house set in landscaped gardens with a tree house, an orangery overlooking the kitchen garden and a summer house that is used as a pottery studio. The house has Georgian sash windows, open fireplaces and a newly fitted kitchen with French doors leading onto the gardens. 4 bedrooms, 4 bathrooms, 3 reception rooms, study, utility with en-suite shower, workshop, paddock, stable block, 2.5acres.

Price: £1.2m Savills 01872-243 200

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

ESG investing – which focuses on environmental, social and governance (ESG) metrics – is the latest iteration of ethical or sustainable investing, whereby investors aim for returns without compromising their principles. ESG considers a company's impact on the environment and society and operational matters such as transparency over leadership decisions, executives' pay, diversity, and shareholders' rights, alongside typical financial metrics.

The rise and fall of ESG investing

ESG investing peaked between 2020 and 2022 with a surge of fund launches and record asset flows driven by huge subsidies for clean energy and ultra-low interest rates, which encouraged investment in alternative assets. Covid also fostered a re-evaluation of priorities and a growing emphasis on ethics and sustainability. Investments in global ESG funds topped $645 billion in 2021.

The bubble burst when central banks began hiking interest rates to squeeze out inflation after the pandemic. Higher borrowing costs made speculative clean-energy projects more expensive and risky, exacerbating the impact of the broader flight to safety.

It was feared that ESG investing could go the way of socially responsible investing (SRI), its precursor in the 1990s. That trend saw investors focus on growth stocks as they filtered out the likes of tobacco, alcohol and defence stocks, which tended to be value and income stocks. Then the growth bubble burst and SRI withered on the vine. “What I call ESG 1.0 is really a resurrection of that [SRI] movement,” Alec Cutler, manager of the Orbis Global Balanced fund, told Citywire in 2023.

The ESG boom was also interrupted by the energy crisis after Russia invaded Ukraine in 2022, which pushed many nations to prioritise energy security – a concern reinforced by the war in Iran – and by a political and regulatory backlash in the US that has spilt over into Europe. ESG has been dismissed as “woke capitalism”.

US president Donald Trump has announced further drilling to bolster fossil-fuel production in the US. He also withdrew the US from the UN Framework Convention on Climate Change and pulled the US out of the Paris Climate Agreement for the second time. At the COP30 climate-change conference in Brazil last year, many were disappointed by the lack of agreement on moving away from fossil fuels.

Recently, former prime minister Tony Blair urged the government to drop its commitment to net-zero and focus on North Sea oil and gas exploration to generate energy for AI. Trump has also pushed back against diversity, equity and inclusion initiatives, with large US companies such as Amazon, Disney, Google, and Meta following suit.

The challenges of ESG investing

Against this backdrop, many asset managers have scaled back commitments to ESG, while funds have dropped the term from their names amid large outflows. Larry Fink, CEO of the world's largest asset manager, BlackRock, perhaps sensing the change in the mood music around ESG, announced in 2023 that he would stop using the term, despite having previously advocated the investment strategy.

Another difficulty was that ESG, like SRI, had always struggled with ambiguity. The term is subjective, as ethics are personal. ESG strategies generally back companies developing renewable energy or prioritise capital-light firms with low carbon footprints. This could mean excluding tobacco, fossil fuels and defence companies to focus on firms tackling climate change.

However, as there is no universal, legal definition, ESG relies on differing interpretations of what it means to be ethical or sustainable. For instance, defence could be taboo for one investor or ESG-focused fund, but to another it could be deemed crucial to national security and social stability, and thus perfectly acceptable. Similarly, nuclear energy is considered costly and dangerous by some, as it produces radioactive waste. But to others, it is a vital source of low-carbon electricity and critical to the energy transition.

Furthermore, factors comprising ESG can change over time. For instance, governance was once the primary focus, but now environmental and social aspects, such as diversity, are more prominent. This subjectivity has led to differences in how rating agencies score a company's ESG characteristics and there can sometimes be conflicting scores and priorities.

This has triggered concerns about companies and funds “greenwashing” their environmental credentials: using marketing or advertising to make vague, misleading or false claims about their operational impact on the environment. In 2025, Environmental law charity ClientEarth filed a complaint against BlackRock, accusing the world's largest asset manager of calling its funds sustainable despite having invested over $1 billion in fossil-fuel companies, such as Shell and BP. BlackRock has since made changes to many of its funds.

According to a survey by Hargreaves Lansdown, 75% of its clients think it important that their investments reflect their values, with cybersecurity, anti-corruption, bribery and water security key issues. Meanwhile, 47% of women agreed that responsible investing, which includes ESG measures and companies that make a “positive, measurable impact”, is important, compared with 28% of men.

Other asset managers, such as Vanguard Investments Australia and UniSuper, have also been accused of mislabelling their funds.

Since 2022, markets have shifted towards AI or capital-intensive sectors, such as banks and oil. But ESG funds still manage $3.9 trillion in assets, says investment platform Morningstar.“While it may look like responsible investment is a busted flush,” says Darius McDermott, managing director at online research centre and fund ratings agency FundCalibre, “the reality is more nuanced. The atmosphere has changed, and... responsible strategies have had a difficult run of performance. But [the] urgent need to decarbonise our economy remains.”

Despite political scepticism over renewables in the US, the private sector is pressing ahead with investments, backing the energy transition. Several US Republican lawmakers still back the Biden-era Inflation Reduction Act, which provides $369 billion in spending and tax incentives to bolster clean energy and lower greenhouse-gas emissions. “Even if it is partially repealed, this won't necessarily affect the bottom line of all decarbonisation companies,” says McDermott.

Deregulation, such as changes to the US planning framework, could accelerate investment in renewable infrastructure, as occurred during Trump's first term. But McDermott's “biggest concern” is sticky inflation and interest rates that could stay high for longer than expected, potentially deterring the large capital investment needed to decarbonise economies.

ESG investing makes a comeback

Although the hype around ESG investing has subsided, “most mainstream fund managers integrate financially material environmental, social and governance risks and opportunities into their investment processes”, says Dominic Rowles, head of ESG at retail-investment platform Hargreaves Lansdown. Global sustainable funds enjoyed a modest recovery in the first quarter of this year, with $3.5 billion in net inflows thanks to a rebound in Europe, says Morningstar. The US, however, saw its 14th straight quarter of outflows at $4.3 billion. ESG investing is “not a fad, nor do the reasons for it delivering good long-term returns fade”, says Peter Michaelis, head of Liontrust's sustainable investment team. “The broad themes of improving resource efficiency, quality of life and resilience will persist, and companies delivering them will see strong growth.”

A source of future demand

There are also generational differences. According to a survey in April 2025 by Morgan Stanley, Millennials (those born between 1981 and 1996) and Generation Z (1997-2012) were more likely to be interested in sustainable investing than Generation X (1965-1980) and baby boomers (1946-1964). “As the largest living adult cohort, [Millennials'] preferences matter – and studies show that they are willing to change their buying habits based on their views of a company's sustainability credentials,” says Rowles.

Meanwhile, regulators are tackling greenwashing. The Financial Conduct Authority's (FCA) Sustainability Disclosure Requirements require claims relating to sustainability to be “fair, clear, and not misleading”. The EU has introduced the Corporate Sustainability Reporting Directive, which obliges 50,000 European companies to disclose information on a broad range of ESG issues, and the EU Circular Economy Action Plan to encourage capital toward green infrastructure.

FundCalibre's Darius McDermott says investors should not focus on labels when picking a sustainable fund, but consider holdings, exclusions, engagement policies, proxy voting records, and ESG metrics, as well as any third-party verification and the consistency of the fund's investment approach.

He points to the £623 million Janus Henderson UK Responsible Income Fund. “For investors seeking a sustainable yield, in both senses of the word, it remains an attractive option.” The fund avoids sectors it considers environmentally and socially harmful, such as alcohol, animal testing, weapons manufacturing, fossil fuels, nuclear power, gambling, and tobacco. Its top holdings include AstraZeneca, London Stock Exchange Group, HSBC, National Grid and Smith & Nephew.

“Most ESG themes are driven by long-term structural demand,” adds McDermott. The Regnan Sustainable Water and Waste Fund targets the need for improved water supply and waste management amid growing urbanisation and global wealth. The £240 million global fund consists largely of local operators that are less exposed to tariffs and geopolitical disruption than multinationals. Top holdings include Cia Saneamento Basico Do Estado de Sao Paolo, a Brazilian water and waste management company, and Watts Water Technologies, a US manufacturer of plumbing and heating products.

Liontrust's Peter Michaelis says that the challenge over the last few years has been that market leadership has been concentrated in the AI hyperscalers, defence, mining, and oil sectors, which Liontrust's Sustainable Future funds avoid completely, or are underweight in. “We have always favoured a multi-thematic approach focused on areas such as innovation in healthcare, renewable energy infrastructure, and cybersecurity.”

Although the heady days of ESG investing inflows are unlikely to return and political headwinds remain, the market is maturing. Demonstrating greater resilience than SRI, ESG remains a key tenet of the global investment landscape.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

A new $250 bill has been proposed to celebrate America's upcoming semi-quincentennial, and Donald Trump has a plan to put his face on it. This might be easy to dismiss as yet another example of his overblown ego. But that would be a mistake. If Trump goes ahead, it could undermine faith in what remains the world's reserve currency at the worst possible time.

Trump's allies in Congress have already introduced a law that allows for an exception to the existing rules that no living president can appear on American banknotes. Designs have apparently already been commissioned from the Bureau of Engraving and Printing, which designs dollar bills. There are still plenty of obstacles in the way. The legislation still has to be passed for one, which is never easy, even with a Republican majority in Congress. But even if it doesn't happen, or is delayed beyond the main celebrations, Trump has already decided to become the first living president to add his signature to the notes. What used to be American money is steadily being turned into Trump money.

Trump's $250 bill could undermine the dollar's credibility

That may seem harmless enough. Trump loves the limelight, and what's a few pictures on the banknotes? In Britain, we have always been happy to have the monarch on notes and coins, and the same is true in many other countries. It is not as if we use cash as much anymore, and it is hard to imagine many people will be using the $250 note regularly. But in reality, this is a symptom of something far more serious – a warning sign about the underlying strength of the dollar.

There is a reason central banks have always put weighty historical motifs on their notes. The British have the likes of Winston Churchill and the Duke of Wellington. The European Central Bank has never managed to agree on any real people or buildings – since one member or another would end up taking offence – but has done the best it can with synthesised images of historic building styles. The Bank of Japan has a selection of famous scientists from the country's history. All over the world, central banks choose an image everyone can feel proud of.

There is a logic to that. Paper money is basically a conjuring trick. It is only worth something because we all accept it is worth something, and we are willing to exchange it for goods and services. Reaching into a nation's past is one way of establishing its credibility. It gives paper money an air of tradition and solidity. Without that, there is a real risk people might start thinking it is just a few brightly coloured pieces of paper.

King Dollar is under attack

This is the worst possible time to start taking risks with the US currency. The challenges to the dollar have been growing stronger all the time. The US budget deficits are out of control, running at 6% of GDP even when the economy is doing well, and eventually the rest of the world will get tired of financing those. Central banks globally now hold more of their reserves in gold than they do in dollars, and while that is partly because the price of the precious metal has risen so much over the last year, it is also an illustration of how they are diversifying away from the dollar. China has already launched a digital yuan and is starting to promote it as a serious alternative for settling payments for cross-border trade. The cryptocurrencies led by Bitcoin have had a rough year, but there is little sign they are going away and with every year that passes, they become more established within the financial system, and were always designed as an alternative to the dollar.

The list goes on. On their own, none of those factors might be enough to knock the dollar from its throne as the world's most important currency. But when they all come together at the same time, the greenback is clearly at risk. Like a Latin American strongman, Trump is intent on personalising the government of the US and boosting his own reputation. But if he goes ahead, this may well turn into the moment when the world decides the dollar was not the rock-solid reserve currency any longer and decides to switch to something new. If that happens, the results won't be pretty for the US economy, and Trump may well come to regret his vanity project.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

As Elon Musk’s SpaceX gets ready to list on the Nasdaq, investors are poised for what is expected to be the biggest initial public offering (IPO) ever.

SpaceX has targeted an IPO price of $135 per share to raise around $75 billion, with a target valuation of roughly $1.75 trillion. Shares will start trading on 12 June.

High-profile events like an IPO can serve as a ‘rising tide’ for a sector and others that are closely related; adjacent companies that might have otherwise been overlooked can benefit from a halo effect. This might include satellite technology, launch services and defence infrastructure stocks.

“A SpaceX listing could do exactly that for space,” said Darius McDermott, managing director at Chelsea Financial Services.

It’s important to remember that an IPO isn’t always a ‘one and done’ event. While there’s often (but not always) a ‘pop’ the day after a company floats, the period immediately after a listing can be volatile – and SpaceX is expected to bring more share price movement than usual, and for longer. So while these ideas present opportunities that may benefit by proxy to the main headline act, investors across the broader sector could be in for an equally bumpy ride.

Investors flocked towards space stocks and funds in the run-up to SpaceX’s initial public offering (IPO), according to data released by investing platform AJ Bell.

Analysis of the platform’s most popular stocks and funds in the three months leading up to the IPO show that investors have been eager to invest in the space economy, with funds and investment trusts like Scottish Mortgage (LON:SMT) and exchange-traded funds (ETFs) like VanEck Space Innovators ETF (LON:JEDG) rocketing in popularity.

“Investors keen to join the race to space haven’t sat on their hands waiting for the SpaceX IPO,” said Dan Coatsworth, head of markets at AJ Bell. “Space-related investments feature heavily in the most popular purchases on the AJ Bell DIY investor platform over the past three months, as excitement builds ahead of SpaceX’s stock market debut on Friday 12 June.”

How SpaceX’s IPO could lift the space sector

AJ Bell’s analysis ranked the most popular stocks and funds that tie into the space theme ahead of SpaceX’s IPO, based on net buys on its DIY investor platform.

^{Source: AJ Bell. Based on highest number of net buys 8 March to 8 June 2026 on AJ Bell DIY platform.}

It is noteworthy that many of these investments have had greater demand than otherwise staple investments.

“More people bought shares in Scottish Mortgage, Seraphim or the VanEck Space ETF during the past three months than blue chip stocks Shell, BP, AstraZeneca and National Grid, all of which regularly feature in the most popular names with UK investors,” said Coatsworth.

“That’s remarkable as these names are stalwarts of ISAs and pensions across the country, with investors often buying shares in them every month for their attractive dividends and long history of generating solid earnings.”

Not all the investments gained in value in the months running up to SpaceX’s IPO: aerospace contractor BAE Systems (LON:BA.) fell 12% over the past three months.

Some, however, have soared. SpaceX supplier Filtronic (LON:FTC) and spacecraft builder Redwire (NYSE:RDW) both more than doubled in value in the three months leading up to SpaceX’s IPO.

How can you access other upcoming IPOs?

Anthropic and OpenAI, both private AI developers, have announced plans to IPO since the start of June, and should these be a success then it could usher in a new wave of tech IPOs.

“SpaceX may be the IPO of the moment but there are plenty of other exciting private companies in the pipeline for a potential public offering,” said Chelsea Financial’s McDermott.

“Without specialist knowledge, it can be hard to know which ones to back, but investment trusts offer retail investors a ready-made route to some of the best pre-IPO opportunities”.

For a ‘pure-play’ private company focus, Chelsea favours Baillie Gifford’s Schiehallion (LON:MNTN).

“It holds eight of the 10 largest private companies in the world, with the majority of its portfolio in unlisted names, including Bending Spoons, ByteDance, Databricks, Revolut, Stripe and Anthropic.

“These managers have deep private equity networks and the expertise to value private businesses that most ordinary investors simply cannot replicate, and by getting in before a listing, investors can capture far more of the growth,” he said.

Chelsea’s Managed Funds range also holds Chrysalis (LON: CHRY) and Seraphim Space (LON: SSIC), which offers exposure to the space sector specifically with both ordinary and C-shares available.

Should you buy private or public shares?

Once a company lists, its shares become available on the secondary (or open market) and are far easier to buy.

Many of these companies are remaining private for longer (before moving into public ownership when they IPO), generating huge amounts of revenue while doing so, meaning once they list they’ve already enjoyed rapid growth.

For investors keen on space investing broadly but put off by the perceived risk or administrative burden that can be associated with an IPO, it might be worth looking for similar companies already listed; sometimes the more attractive entry points may not be the headline names but companies further along the supply chain.

McDermott said Schroder US Mid Cap Fund is one such option for indirect, diversified exposure.

“[Its] holdings include Hexcel (NYSE:HXL), which makes composite materials used in spacecraft for clients such as SpaceX, Blue Origin and Lockheed Martin; MACOM Technology Solutions (NASDAQ:MTSI), whose semiconductors are critical to satellite communications; and BWX Technologies (NYSE:BWXT), which provides nuclear propulsion and power components for NASA space programmes,” he said.

Investing in a specialist fund

You might prefer to invest in the theme with a more targeted approach. ETFs are common routes to investing in a specific theme, such as the space economy. Some broad portfolios available to UK investors include the ARK Private Innovation ELTIF (only available via a financial adviser), VanEck Space Innovators UCITS ETF, or a new vehicle from WisdomTree, whose Space Economy UCITS ETF (LON:WSPG) launched on the London Stock Exchange on 5 June.

Pierre Debru, head of research, Europe at WisdomTree, said while the SpaceX IPO could be a “defining milestone” in driving the sector’s broader appeal, the fundamentals behind the investment case look robust and durable.

As the sector matures, he believes launch systems will become more efficient, easier to access and cheaper, expanding the opportunity set across the value chain.

Earth observation and geospatial intelligence are increasingly feeding into the real economy, supporting industries from agriculture to critical infrastructure.

“Emerging applications, including in-orbit manufacturing, servicing and space-based data infrastructure, are also opening new markets and reinforcing the long-term growth potential of the theme,” added Debru.

If actively managed funds are your preference, one dedicated option is Neuberger Berman’s Next Generation Space Economy Fund. When the fund launched four years ago, the group said the space economy was so much “more than rockets and satellites”, influencing sectors as diverse as banking and precision agriculture to air traffic control and ride sharing.

SpaceX is about to hit the public markets for the first time, and when it does so it is likely to instantly transform from the world’s most valuable private company to one of the ten most valuable of any type.

The question that will always raise its head at any initial public offering (IPO) is the price at which it sells.

IPOs are often an opportunity for founders and long-term investors to cash in on the efforts they have put into its growth, and the risks they have taken along the way. Because of this, value-focused investors, including Warren Buffett, the chairman and former CEO of Berkshire Hathaway, have tended to eschew them – the logic being that these company insiders will time their exit to coincide with the moment when they will receive the highest value for their shares.

It’s overly cynical to apply this logic wholesale. The same reasoning could be applied to any purchase or sale of any asset; if you buy a stock or fund on the open market, the person you are buying it from probably knew about it before you did, and probably thinks that now is as good a time as ever to sell.

In SpaceX’s case, existing shareholders (including founder and CEO Elon Musk) will also have to hold their shares for 366 days after the listing before selling. The funds raised will go back into SpaceX, enabling it to accelerate its growth plans.

But given that SpaceX looks set to IPO with a valuation of over $1.75 trillion – likely making it the seventh or eighth most valuable company in the world – much scrutiny has been applied to whether or not the $135 per share price tag it is targeting makes sense for investors.

You shouldn’t invest in any asset without carefully considering the risks involved and deciding whether or not it matches your current position. Below, though, we explore the bull and bear cases behind the valuation of one of the most talked-about companies of the year.

SpaceX’s valuation: the bull case

In its IPO prospectus, SpaceX claimed to have identified “the largest actionable total addressable market (TAM) in human history”.

The TAM – effectively the entire economic opportunity the company believes it could eventually address – totals $28.5 trillion, which is a little below the GDP of the US in 2024 (28.8 trillion). This breaks down into three categories:

• Space, including space-enabled solutions (in other words, SpaceX’s rocket launch services): $0.37 trillion.
• Connectivity, including Starlink Broadband and Starlink Mobile: $1.6 trillion.
• Artificial intelligence (AI), which includes AI infrastructure, consumer subscriptions, digital advertising and enterprise applications: $22.7 trillion.

Last year, SpaceX generated revenue of $18.7 billion. The TAM that it has laid out implies that it has the potential to increase this number more than a thousand times over – though there is no specific timescale over which this could happen. The prospectus outlines various risks that could restrict its ability to reach this market, including the fact that many of the required initiatives “involve significant technical complexity, unproven technologies or technologies that do not exist, and such initiatives may not achieve commercial viability”.

Regardless, bulls argue, there is a huge growth opportunity at play here – perhaps even a better opportunity than that posed by any other company on the planet, given that SpaceX operates at the intersection between space and AI, two of the most groundbreaking, forward-looking themes of our age.

Dan Coatsworth, head of markets at AJ Bell, said: “There is no other company doing what SpaceX does on the same scale, which could be a key appeal to existing and potential investors.

“Space excites people because it is the great unknown and SpaceX has a blueprint to turn dreams into dollars.

“SpaceX boss Elon Musk is a visionary and despite polarised views towards him, the CEO does seem to get things done. The Starlink satellite services arm makes SpaceX interesting because it provides recurring revenue, meaning there is a constant flow of money coming into the business to keep the lights on while it works on big picture ideas like colonising Mars.”

According to people familiar with the matter cited by the Wall Street Journal, Morgan Stanley and Goldman Sachs analysts both project that SpaceX’s revenue will near $160 billion in 2028 – almost ten times its level in 2025.

“Bulls might argue SpaceX’s earnings growth potential is so great that valuing it using 2027 or 2028 forecast earnings could make the equity rating look less rich,” said Coatsworth.

SpaceX’s valuation: the bear case

Hard-nosed investors might view the arguments above with a degree of scepticism.

While SpaceX has outlined an opportunity thousands of times larger than its current revenue, there are a lot of uncertainties involved in reaching it. In the meantime, its shares are going on sale at close to 100 times the revenue it made last year. That limits the potential for upside growth, and increases the potential for the shares to fall in value, should SpaceX’s future growth not go according to plan.

Analysis from investment research firm Morningstar estimated the fair value for SpaceX shares at $63 – less than half the price tag that SpaceX is targeting at its IPO.

“Investors are naturally excited about the SpaceX IPO, but with investment bankers suggesting a $1.75 trillion valuation, we believe it's overvalued,” said Michael Field, chief equity strategist at Morningstar. “We believe the business has real strengths, particularly in Starlink, but with so many unknown and untested technologies underpinning much of the valuation price, particularly within the AI business, we think the valuation is extremely speculative.”

Morningstar was also bearish on the opportunity for Starlink. While SpaceX estimated the service’s TAM at $1.6 trillion, Morningstar estimated that $129 billion is a more reasonable figure given technical constraints and the fact that Starlink will find it harder to compete in dense urban telecom markets.

In one scenario, though, Morningstar suggested that SpaceX might be undervalued at its IPO. Its most optimistic ‘moonshot’ scenario valued SpaceX at $1.97 trillion, or $154 per share – but the company only assigns a 7% probability of this scenario playing out.

AJ Bell’s Coatsworth noted other risks that could apply to SpaceX over time, including share price dilution if its ambitious plans require further rounds of fundraising, as well as unanticipated setbacks such as launch failures or regulatory changes.

UK REITs – real estate investment trusts – have drastically underperformed the wider market over the past year. The FTSE All-Share index excluding investment trusts has produced a total return of around 22%, while industrial REITs – the largest group in the sector – has returned just 6.8%, mostly from income.

However, while investors are clearly not interested in the sector, trade buyers and private equity are. Five years ago, there were 82 listed REITs. More than half have since been acquired or liquidated. Private-equity giant Blackstone has been especially active, first taking out St. Modwen Properties and Industrials REIT. It then beat Tritax Big Box (LSE: BBOX) in a battle for Warehouse REIT, before selling assets to Tritax in exchange for a 9% stake.

The trend looks set to continue. Earlier this year, British Land (LSE: BLND) acquired Life Science REIT. More recently, LondonMetric Property (LSE: LMP) – which has completed several deals in recent years – and Schroder Reit (LSE: SREI) have teamed up on a bid for Picton Property Income (LSE: PICT), although the outcome remains unclear. Last week, some of Picton's shareholders told the Investors' Chronicle that they are unhappy with the proposed terms.

Unwarranted discounts on UK REITs

Derwent London (LSE: DLN) offers one of the best examples of value in the sector. The company owns a portfolio of high-quality offices in central London and trades at a 47% discount to net asset value (NAV), with a 4.6% yield. In an attempt to close the discount, management recently announced a £50 million share buyback, signalling it believes this is a better use of capital than buying additional assets. You can't criticise management for buying back stock – it's the equivalent of buying a new building at a 50% discount.

Yet it's clear that something has gone horribly wrong in this market, given that London is set to run out of high-quality office space within the next few years and rents are breaking records.

Grainger (LSE: GRI) offers another example. This is one of the largest residential landlords in the country and can't build new properties fast enough to meet demand. It has consistently reported an occupancy rate in the high 90s and last year recorded overall rental income growth of 7.8%. Yet the shares have fallen 29% over the past 12 months and now trade at nearly 50% discount to NAV, with a yield of 5.4%. Mike Ashley, founder of retail group Frasers, has been buying as others are selling. He owns just under 5% of the company via derivatives.

The value catalyst

Other examples include the likes of Great Portland Estates (LSE: GPE), which is trading at 60% of NAV (it focuses on development more than income, so has a lower 2.7% yield). Even relatively popular REITs such as LondonMetric and Supermarket Income (LSE: SUPR) are trading at around 90% of NAV, with yields of around 7%.

In general, UK REITs are changing hands at some of the lowest valuations in recent memory. Yes, they could get cheaper, but sooner or later they are just going to be too good for trade buyers and private equity to pass up. This should be compelling for value investors, since value investing works best if there is a clear potential catalyst to realise that value. Given the continued liquidation of the London equity market, it could only be a matter of time before every remaining deeply discounted REIT gets taken out.

If and when that occurs, investors who buy at today's valuations could see attractive capital gains. In the meantime, while they wait they can pick up dividend yields of 5%-7% – in many cases derived from long-term contracts with high-quality tenants.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

With a focus on British small-cap stocks, the Henderson Smaller Companies investment trust seeks to deliver long-term capital and income growth by investing in UK-listed companies at their most exciting stage of development. Our stock-picking approach is designed to identify this growth before others do, capturing the small-cap premium through disciplined valuation, ensuring we invest only where prices do not yet fully reflect a company's strong fundamentals in terms of growth and cash generation.

A tumultuous decade for British small-cap stocks, beginning with nerves around the EU referendum and culminating in an energy crisis and a sharp rise in interest rates, has left this part of the market unloved, overlooked and, most importantly, awash with value. We highlight three British small-cap stocks that are cheap compared with international peers, with precedent transactions (the price that peers have recently been purchased for in merger and acquisition deals) and with their own history.

Promising British small-cap stocks for your portfolio

Oxford Biomedica (LSE: OXB) is a contract development and manufacturing organisation (CDMO) specialising in manufacturing viral vectors for cell and gene therapy, treatments used to combat cancer and rare genetic diseases and used in a growing range of new applications. It is one of only a handful of players globally capable of developing these technologies at a commercial scale. The market is growing at more than 20% a year, and the firm has set ambitious targets to more than double revenues by 2028, underpinned by increased capacity coming online at its Oxford (UK) and Durham (US) facilities. The shares trade at about a 30% discount to internationally listed peers despite faster forecast sales and earnings growth. Meaningful consolidation across the CDMO sector in recent years and interest from private-equity firm EQT make the stock look even more attractive.

In a world where financial-services firms are fighting to get closer to their clients, Rathbones (LSE: RAT), which provides financial planning and investment advice, is well-positioned. Ageing populations and rising personal and wealth taxes are driving demand. The shares trade on a steep discount to multiples recently paid by NatWest for smaller competitor Evelyn Partners and offer an attractive dividend yield.

Everplay (LSE: EVPL) is an independent video-game developer and publisher with a resilient business model, operating in a structurally growing part of an already large market. In the premium “AA” and “AAA” segment of the market, firms sink large sums into individual titles and need big hits to drive returns. The smaller, independent players are different. Everplay spends on average £1 million-£1.5 million per game, releasing about ten new titles a year, meaning risk is diversified and earnings are not dependent on any single release. About 75% of earnings are underpinned by a strong back catalogue of well-known titles that continue to generate revenue – Worms, for example, is more than 20 years old and still makes money.

It also owns simulation-gaming business Astragon, with its niche customer base, and StoryToys, a mobile “edutainment” division targeting younger players and recurring revenues. Everplay is a leading scaled player in its sector and, despite resilient growth and strong cash generation, a robust pipeline for this year and significant firepower to pursue mergers and acquisitions to drive incremental growth, the shares trade at just over seven times EV/Ebitda – a significant discount to peers, precedent transactions and its own history.

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Software Circle (Aim: SFT) is a particularly interesting company at the out-of-favour smaller end of the UK stock market, where years of outflows from small-cap funds have left hundreds of the smallest companies largely ignored – thus creating opportunities for investors. It is listed on the junior market and is attempting to build long-term shareholder value by acquiring a collection of niche software businesses. It's early days, but the firm has many attractions.

Software Circle buys mature software businesses operating in niche corners of the economy, such as care homes. These are typically firms with loyal customers, recurring revenues and founders nearing retirement. The software itself is often dull – and that is precisely the attraction.

Software Circle started out as a printing business that struggled with costs and operational headaches. Buried inside the group, however, was a profitable software platform called Nettl Systems. The management decided to abandon the old printing model and sold manufacturing operations. The balance sheet was cleaned up and the remaining cash redirected into a new strategy focused entirely on software acquisitions.

Software firms generally require far less investment than manufacturers. Once developed, software can often be sold repeatedly at very high margins. Better still, customers tend to stick around for years. Software Circle now focuses on the vertical market software – specialist products designed for narrow industries or professions. These markets are rarely exciting, but they can be extremely profitable.

Many small businesses rely on highly specialised software to run everyday operations. Replacing them can be disruptive and expensive. As a result, customers rarely switch providers. The software they use represents only a tiny proportion of overall costs, which gives providers pricing power. Even steady annual price increases are unlikely to cause many complaints.

This combination of recurring revenue, low customer turnover and pricing power has created some exceptionally successful software businesses. Software Circle is buying lots of these businesses across the fragmented UK and Irish market for software companies.

Software Circle's acquisition strategy

The company's acquisition strategy is refreshingly conservative and management maintains an internal database of potential acquisition targets across the UK and Ireland that numbers more than 4,000. Importantly, management is disciplined on price and generally refuses to pay more than seven times adjusted earnings for acquisitions. Across the software businesses acquired so far, the average purchase multiple has been closer to six times. That matters because buy-and-build strategies often fail when acquirers become too aggressive.

The latest interim results suggest the strategy is beginning to gain traction. Revenue rose 15% to £10.2 million, while subscription income now accounts for roughly three-quarters of group sales. That recurring revenue mix is important because subscription software businesses tend to be more predictable and resilient than project-based technology firms. Underlying profitability also improved while central overheads remained tightly controlled. The education-software segment performed particularly well, delivering organic growth of 17%.

The statutory accounts still show an operating loss, but this largely reflects accounting charges linked to acquisitions rather than weak underlying trading. Cash generation gives a clearer picture of the business. Operating cash flow continued to improve and management says its portfolio of software assets is generating returns on invested capital of roughly 25%. For a serial acquirer, that is a highly encouraging figure.

Software Circle is also now large enough to access bank financing. This will give the firm greater flexibility to continue acquiring businesses without returning to shareholders. Management ultimately hopes the business will become self-funding, with recurring cash flows supporting future acquisitions. If achieved, that could create a powerful long-term compounding effect.

Another encouraging feature is strong alignment with shareholders. The executive team is unusually lean, with only a handful of senior staff operating from a modest office in Manchester. Long-term incentives are tied to shareholder returns and management options encourage a longer-term mindset.

The shareholder register is similarly supportive. German investors connected to Chapters Group (another European software acquirer) hold a large stake in the business. Around 10% is owned by Sun Mountain, the investment vehicle associated with Will Thorndike, an investor with a famously long-time horizon.

None of this removes the risks. Software Circle remains a very small firm operating in an illiquid part of the market. Acquisition strategies can go wrong if management overpays, struggles with integration, or takes on too much debt. The shares are also unlikely to suit investors seeking quick returns or dependable income.

Even so, the ingredients for an attractive long-term compounder are there. The firm operates in a fragmented market, focuses on sticky recurring revenues, appears disciplined on valuation and is building access to cheaper acquisition financing. Software Circle is attempting to build a UK-listed version of the niche software compounders that have worked extraordinarily well in North America.

The business is still small and far from proven. However, in a neglected corner of the UK market, it may be one of the more interesting stories developing.

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The latest government data on business rate appeals contains good news and bad news. On the downside, there has been a surge in the number of businesses launching cases: almost 130,000 business owners began the process during the first three months of the year, five times more than in the fourth quarter of 2025; that will probably lead to delays in processing claims. More positively, the data also shows that 57% of firms challenging their business rates bills eventually secured a reduction; in other words, your chances of winning are pretty good.

The statistics, published by the Valuation Office Agency (VOA) at the end of May, underline the importance of checking your business rates assessment quickly. New assessments of the rateable value of more than two million business properties in England and Wales came into force on 1 April; this rateable value, based on the VOA's estimate of the commercial rent potentially chargeable on each property, is what determines your business rates bill.

It's now too late to appeal business rates set following the previous VOA revaluation, which took place in 2023; the deadline was 31 March, which is part of the reason for the spike in claims in the first quarter. But you can challenge the rateable value that came into force in April. If you can show the VOA is overestimating how much rent your business property could secure – either what you are paying to rent it, or if you own the property how much you could rent it out for – you could get a reduction.

Check, challenge and appeal your business rates

Such cases involve three stages. Step one is known as a “Check”. Effectively, you're just asking the VOA to confirm the factual details it holds about your property, so you can check you're not being overcharged because of inaccurate data. Relatively few Checks result in a reduction, so most businesses then move on to stage two, known as “Challenge”.

Following a Check, you have four months to submit a Challenge. This is your opportunity to present evidence suggesting your rateable value has been wrongly estimated. That could include, for example, details of the open-market rent agreed on the property, or details of other leases on similar properties nearby. Alternatively, there may have been a material change to your property – you're using it for a different purpose, say, or there have been developments in the area that could affect its value.

Cases that don't succeed at the Challenge stage can be appealed at the independent Valuation Tribunal Service. There's a fee of up to £300 to launch an Appeal – stage three of the process – and you must file your claim within four months of receiving the Challenge decision. You'll get your fee back if you win.

In theory, you can handle each stage of a business rates case yourself, but many businesses appoint a professional agent to manage the process on your behalf – particularly if they proceed to Appeal. Agents can give you advice on whether it's worth bringing your case and handle the work for you, using their experience to maximise your chances of success.

Make sure you appoint a reputable agent. The Royal Institution of Chartered Surveyors can provide details of firms that abide by their professional standards and code of best practice.

Finally, it's important to note these processes can result in your business rates bill rising rather than falling. This is relatively unusual, but certainly not unheard of. Make sure you're not presenting evidence that gives the VOA reason to think it has underestimated your rateable value.

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Few remember the pre-privatisation state of the water industry in 1989, after decades of underinvestment. The 1976 drought and consequent water restrictions exposed a shortage of water supply as reservoirs and rivers ran dry. The government's response was to build a reservoir – in the one part of Britain that did not have a shortage.

But, if a bad idea is repeated often enough, it can lead people to mistake repetition for accuracy. They subconsciously adjust their own beliefs to avoid the mental stress of questioning or disagreeing with the proposal. Creating the illusion of truth is a prime objective of modern politics. This explains the growing clamour for the renationalisation of the water companies.

The leakage of water was, unsurprisingly, a problem; much of the pipework had been laid in Victorian times and was poorly maintained. The treatment of sewage was variable; inland, with outflows into rivers, it was reasonable, although swimming in rivers was unthinkable owing to regular storm overflows. On the coast, much of the sewage was untreated; it was merely screened and then flowed into the sea through short pipelines. This meant that beaches failed to meet the quality threshold of the EU or of anyone else. This remained the practice in Scotland long after privatisation in England and Wales.

The industry badly needed investment, but couldn't compete with the demands for capital spending elsewhere in more visible areas such as schools, roads and hospitals. Privatisation would ring-fence the sector from all the other demands on government and delegate the supervision of it to an independent regulator, Ofwat, introducing the accountability the sector had previously lacked. Investment would be debt-financed, serviced from cash flows. Charges would increase at the rate of 1% over inflation each year while additional cash flow would be provided through efficiency gains.

The post-privatisation investment boom

For about ten years, it all went according to plan. Investment, which had already risen 20% in the run-up to privatisation, quickly rose from £3 billion a year to more than £5 billion. Leakage rates fell 40%, river quality improved, short sea outflows were stopped and beaches became cleaner. Then progress slowed or stopped. Ofwat decided that keeping water bills down was the top priority. This meant restricting the capital expenditure they allowed; contrary to popular misconception, companies want to invest because that entitles them to a return on capital, achieved through higher bills. Ofwat also strong-armed the companies to reduce their cost of capital as that would lower the return on capital companies would need.

The mechanism for this was the substitution of debt for equity, achieved largely through leveraged buy-outs by private equity, taken to an extreme in the case of Thames Water. Such financially dangerous restructuring was encouraged by Ofwat and seemed justified while interest rates were low. When rates rose and the refinancing of the fixed-rate borrowing of the past came into view, the leveraged companies such as Thames Water came under extreme pressure.

The improvement in productivity continued – by an estimated 64% between privatisation and 2017 compared with zero in the public sector – but price rises in real terms stopped. According to Water UK, prices fell sharply in 2000 and remained broadly the same until 2024. Unsurprisingly, investment in nominal terms stagnated, at between £4 billion and £5 billion a year. The lack of additional investment meant a failure to deal with the continuing problem of storm overflows whereby untreated sewage was discharged into the river and sea when heavy rainfall overwhelmed the treatment works. Planning authorities refused permission for new reservoirs and sewage treatment plants and local authorities wouldn't give companies access to the roads they needed to repair leaking pipes properly.

Still, publicity given to bad news shouldn't result in good news being ignored. Leakage has continued to fall and pollution performance is below or close to target in most areas; in 2020, Southern Water and South West Water were major outliers, resulting in heavy fines. Nine companies are at, or near, their government-set targets. Severn Trent' Water's 2025-2026 results show a continued fall in leakage (to 17.6%, down from 23% in five years), water quality is above the regulatory target and significant investment has been made in waste water. For all its financial problems, Thames Water also reports a steady reduction in leakage and incidences of pollution.

It is possible, although there is no evidence for it, that Ofwat's disastrous change of direction in 2000 was due to pressure from the Blair government. They certainly castigated the managements of all privatised utility companies, encouraging them to sell out to private equity. Veteran City editor Neil Collins argues, rightly, that the government should have retained a golden share in each to prevent takeovers and maintain public accountability.

Ofwat has now been abolished, water bills are to be raised sharply in real terms for the next five years and the restructuring of Thames Water's debts is awaiting government approval. Investment is being accelerated and progress is already clearly visible. The River Thames in London has just got its first designated bathing spot. The problem now is the clamour that has built up from the “progressives” for the hugely expensive folly of renationalisation.

The objective of this is neither financial nor operational, but ideological; a drive to reverse every aspect of “Thatcherism”. If the advocates succeed, the proponents have every intention of working their way down a very long list of businesses and services once in the public sector, hoping it will take a long time for the water sector to return to its pre-1989 state.

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US corporate raider Castlelake thinks it can snap up a bargain in easyJet. The soaring cost of fuel has hammered the budget airline's shares over the last few months, which have fallen from 520p at the start of the year to less than 340p a fortnight ago, before news of a potential bid emerged. But if the oil price comes back down again, as it almost certainly will when the war in Iran comes to a close, easyJet will bounce back.

We will see what happens over the next few weeks. But the bigger story is that a pattern is starting to emerge. A whole series of British companies are being targeted by corporate raiders. It is only a few weeks since it emerged that activist investor Corvex is demanding that the Premier Inn owner Whitbread find a buyer or break itself up. The car sales platform Autotrader is under attack from its investors, as is the rather larger trading platform, the London Stock Exchange. Investment company Hargreaves Lansdown has agreed to be taken over by a private equity consortium led by CV Capital. The list goes on and on. Hardly a week goes by without a well-known British company being either sold off or coming under pressure to break itself up.

Companies change hands all the time, of course. There is nothing wrong with bids and deals. It is one of the ways that companies are forced to keep delivering for shareholders and a way for assets to be reshuffled. Without them, management would become very complacent. But in the British market it is getting out of hand.

These targets not terrible companies. EasyJet may have had a difficult few months, but as anyone who has flown with the airline will know, it offers a pretty good service at fair prices. It is hard to see anything that needs to be radically fixed. Likewise, staying at a Premier Inn is hardly a deluxe experience, but it doesn't pretend otherwise. It is a reliably good-value hotel chain for anyone who happens to be travelling around the UK. Much the same could be said for Hargreaves or Autotrader. They are all reasonably well-run businesses.

Why corporate raiders may struggle

The real problem is that it has become incredibly difficult for even the best-run companies to make any money in Britain. There are three big issues. To start with, growth has stagnated. Far from turning Britain into one of the fastest-growing economies in the world, as she promised, chancellor Rachel Reeves has presided over stagnant growth, rising unemployment, a collapse in start-ups and business investment, and soaring real interest rates as the country's debt grows relentlessly less and less affordable.

Second, taxes have risen to the highest peacetime levels since World War II, with most of the burden falling on businesses. There has been a huge rise in the national insurance that companies have to pay on any staff; big rises in business rates; rising air travel duty (which has especially hit easyJet), and a rise in green levies such as the “packaging tax”. All of those have to be paid out of flat sales, regardless of whether the company is actually profitable or not. Companies have to get more and more efficient every year just to pay all the extra taxes they owe.

Finally, the government has crushed confidence. On coming into office, Reeves talked down the economy by constantly droning on about a “black hole” in the public finances that did not really exist. Ever since, there has been constant speculation about which taxes will have to go up next. And now there is a slow-motion leadership contest, fuelling yet more uncertainty about who will be in charge in a few months, and what policies might change. It is a mess. Against that backdrop, it is hard for companies to expand. Most are just hunkering down and trying to survive.

In zero-growth, high-tax Britain, it is very hard to make any money. The result? Raiders, typically based in the far richer, more dynamic US, look at the figures from a major British company and conclude that they should be doing far better. Perhaps in a country that was more pro-business, and pro-enterprise, they would do. But in Britain that has become very hard. There is very little growth, consumers don't have much spare cash to spend and rising taxes are squeezing profit margins. A whole series of companies are coming under attack and may well be broken up or sold off. But the real problem is the state of the economy. The US corporate raiders and buy-out funds will very quickly find there is not very much they can do to fix that.

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Helium is a commodity that is key to every major growth theme in the global economy – space, AI, and healthcare. But almost nobody talks about it – and the helium supply picture has just become dramatically more complicated.

The launch of a single Falcon 9 rocket consumes roughly 14%-18% of the world's daily helium production in a single ignition sequence. SpaceX launches Falcon 9 rockets dozens of times a year, with ambitions that stretch well beyond that frequency. The satellite industry is preparing for annual launch volumes of between 3,700 and 5,000 by 2030, as mega-constellations reach full deployment. Goldman Sachs anticipates 70,000 low Earth orbit (the region between 160 and 2,000 kilometres into space) satellite launches globally between 2025 and 2031. Every single one of them needs helium. There is no alternative.

So surely someone is producing more of it? They are not, at least not at anything close to the rate the market requires. Helium is not manufactured. It is extracted as a by-product of natural-gas processing in a small number of locations where underground concentrations happen to be commercially viable. The US and Qatar together account for more than 75% of global supply. Russia produces a significant share, but that supply is unavailable to Western markets. Algeria contributes a modest fraction. Everyone else is a rounding error.

Qatar's share, 30% of global supply, flows out of a single industrial complex at Ras Laffan. In March 2026, Iranian strikes forced QatarEnergy to cease production of liquefied natural gas (LNG) and associated products, including helium. Almost one-third of the world's helium supply was removed from the market overnight. Spot prices doubled. The south site at Ras Laffan took direct hits and will not restart before late summer 2026. Permanent capacity reductions, analysts say, will take years to recover fully.

The Strait of Hormuz is a trigger, not the underlying problem. Even before the first missile flew, this market had endured four recognised major shortages over the past two decades, each lasting two to three years before any equilibrium was restored. The conflict simply made the market's structural deficit visible. Compounding the supply picture is the nature of helium itself. It is the second-lightest gas on Earth. It escapes containment at a rate that makes strategic stockpiling impossible. You cannot build a meaningful reserve. When supply breaks, the market has no buffer.

Now consider who is competing for that inelastic pool of supply. Semiconductor makers use helium at nearly every stage of wafer production, and there is no substitute for its role in extreme ultraviolet (EUV) lithography, the process that makes the most advanced AI chips. The AI-driven chip market is set to double by 2030 at a compound annual growth rate above 11%. MRI machines make up 20% of the global demand for helium, each requiring an initial fill of 2,000 litres of liquid helium and continuous top-ups throughout their operational life.

As India and other large emerging markets rapidly expand healthcare infrastructure, that demand grows structurally. And then there is the quantum-computing sector, scaling fast and entirely dependent on liquid helium cooling to reach the cryogenic temperatures that make quantum processors function at all.

Rocketry, AI chips, medical imaging, and quantum computing. The three or four fastest-growing sectors in the global economy all compete for the same gas from the same small group of producers, and one of those producers has just been taken off the board for an indeterminate period.

The best helium stocks to buy now

Investors should note that SpaceX's S-1 registration statement, filed ahead of what promises to be one of the most significant listings in a generation, conspicuously omits any reference to risk associated with helium – even though the company has already acknowledged, through its own CEO, that helium supply represents a binding operational constraint on its ambitions to grow. Elon Musk stated plainly that there is not enough helium produced on Earth to sustain a high-flight-rate Starship programme, a constraint significant enough that the vehicle had to be redesigned around it. That is not a footnote. That is a material operational risk.

Consider instead the industrial gas companies Linde (Nasdaq: LIN), Air Products & Chemicals (NYSE: APD) and Air Liquide (Paris: AI), the obvious primary beneficiaries of tighter supply and rising prices, with pricing power that will compound through long-term supply contracts. The UK angle deserves particular attention. Britain has no domestic helium production, no strategic reserve, and no formal critical-minerals designation for helium by the government. The NHS scanner estate, the National Quantum Computing Centre at Harwell and the defence-electronics supply chain are all exposed to a commodity that receives no policy attention in Whitehall. That is a gap waiting to be filled, and investors who identify it before policymakers do will have done so at the right time.

Helium has been treated as background infrastructure for too long, considered too cheap, too abundant, too boring to warrant serious analysis. That era is over. The commodity no one talks about is the one underpinning the launches everyone is watching, the chips powering the AI everyone is funding, and the scanners keeping hospitals operational. The question for investors is not whether helium matters. The question is how long the rest of the market takes to realise it.

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Why is minimum wage in the news?

Many people are raising fears the UK's minimum wage may now be too high. Worsening youth unemployment and Alan Milburn's landmark report on “Neets” (young people who are not in employment, education or training) have sharpened concerns that the UK's relatively generous minimum wage and the gradual levelling up of lower youth rates to match the prevailing adult rates, are damaging overall employment – particularly among young workers.

Tony Blair – whose government established the minimum wage – has argued that recent rises have created headwinds for businesses. And within Labour, according to The Guardian, a split has opened up between those who want to slow the pace and those eager to press ahead with rises and age-convergence.

How much is the minimum wage?

In April the minimum wage for all workers aged 21 and over rose 4.1% to £12.71 an hour. This rate is known as the “national living wage”. It only applies to that adult age group and its level tracks two-thirds of median earnings. The rate for 18- to 20-year-olds is lower, but jumped 8.5% to £10.85. And the rate for 16- to 17-year-olds, or for apprentices, rose 6% to £8.00. These bigger increases for younger workers are due to the government's aim of gradually levelling up the youth rates to a single adult tier – a continuation of Conservative policies. In 2016, the Tories created the new premium national living wage tier for those aged 25 and over at the rate of £7.20 per hour. Subsequent governments then cut the age requirement for that top tier, to 23 years in 2021 and then down to the current age of 21 in 2024 – all the while increasing the headline rate.

About 1.7 million people get the national living wage, or about 6% of the workforce aged 21 and over – about twice as many as when the national minimum was introduced in 1999. Among workers under 21, the proportion is far higher – at about a fifth. Since its creation under the first New Labour government, the UK's minimum wage has got dramatically higher in real (inflation-adjusted) as well as cash terms.

Isn't that a good thing?

MoneyWeek has long been in favour on the grounds that taxpayers should not subsidise corporate profits in the form of tax credits for the working poor. The higher the wages, the fewer the benefits that have to be paid out. The other main arguments in favour are ones of social justice. Income distribution has become more skewed towards the rich in recent years, increasing inequality and potentially undermining the social solidarity that makes capitalism sustainable in the long run. Proponents argue that a minimum wage can help to arrest this trend. Some economists also argue that minimum wages boost productivity, especially in the service sector, though the evidence is contested.

Does a minimum wage destroy jobs?

Above a certain point, for sure. The question is where that point lies. Orthodox economic wisdom suggests that compulsory high pay levels will destroy jobs by disincentivising firms to take on workers. But the history of minimum wages since the 1990s has been far more encouraging than that. Landmark US research on fast-food pay rates (by economists David Card and Alan Krueger in 1994) shifted the dial in terms of the academic debate: it found that a minimum wage did little to dampen employment. A raft of further studies came to similar conclusions, and by the early 2000s the literature indicated that a 1% increase in wages due to a higher minimum wage would lead to a 0.5% decline in employment. “By the late 2010s the effect had fallen to around zero,” says The Economist. The politics changed, too. As the UK's national minimum was gradually increased without causing unemployment to grow, the Conservatives dropped their initial opposition and backed the policy.

What's the issue with minimum wage now?

The core issue is that the rate has now jumped so high. The UK has leapt from being relatively cautious – in terms of the minimum-wage level as a proportion of median wage – to being the most generous of all the big economies (from 45% in 1999 to 67% now). Most of the UK's historical experience and evidence relates to a period of low interest rates, low inflation and low unemployment – and involved a minimum wage at around 45%–55% of median earnings, not 67%, the target introduced by the Tories in 2019. That jump, and today's worsening macroeconomic picture, makes it far harder to be sanguine about the wage's effect on job creation in future. At the same time, there's been a counter-revolution among economists. Several influential US studies from 2022 onwards found that higher minimum wages – a phenomenon seen across many developed economies over the past 25 years – have indeed hit job levels, and damage the employment, income and overall welfare of precisely the low-income workers they are meant to help.

What can be done?

A sensible start would be to freeze the rates for the rest of this parliament and take back control of setting the rates from the Low Pay Commission quango, says Rishi Sunak in The Times. In addition, future rises should be linked to gains in productivity – the national living wage is up by almost a third in real terms over the past decade, while productivity has only increased by 6%. That's obviously unsustainable and the latest unemployment numbers show the effect – the fall in both vacancies and payroll numbers is concentrated in retail and hospitality, which is where a third of all minimum-wage jobs are, and which account for almost half of all jobs held by the under-25s. “Shamefully, and in a reversal of the historical norm, we now have higher youth unemployment than the EU average.” And at least in part, that's because we are knowingly pricing young workers out of the labour market. Let's stop.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

London is being eclipsed by excited talk of “Manchesterism”, as the UK's political commentators obsess over the imminent biggest by-election in history. But whatever the outcome of this freakish British electoral event, the country's centre of gravity will pull back to London; Manchesterism will go the way of Levelling Up and all other attempts at post-war regional policy. As far as the administrative class is concerned, it's only London that matters.

And from an investor's perspective, there are two very distinct Londons. One is in Westminster, in the headlines every day: a government running on fumes, a prime minister with over 90 of his own MPs calling for his head, and a chancellor whose every announcement sends gilt yields twitching.

The other London barely gets mentioned. Five stops and one line change north of SW1 at King's Cross, the atmosphere couldn't be more different. If you are an investor trying to work out where British prosperity is going to come from in the next 20 years, this is where you should be looking. As bond investors keep Westminster on a necessarily tight leash, venture capital is beating a path to King's Cross.

The data is remarkable. AI firms' office leasing in London rose roughly tenfold year-on-year in April 2026. In the past year, OpenAI signed a lease for 88,500 square feet at Regent Quarter, its first permanent London office; Anthropic took 158,000 square feet at Regent's Place, quadrupling its UK headcount from 200 to 800; and Databricks pre-let 136,000 square feet in Fitzrovia. Microsoft took 100,000 square feet in Soho.

UK-wide, start-ups raised $7.8 billion in the first quarter of 2026, a 60% annual increase, with AI accounting for 74% of the sum raised. The UK comprised 41% of all European venture capital, outpacing France, Germany, and the Netherlands combined. London now hosts more AI firms with 50 or more employees than San Francisco.

London's AI flywheel is turning

This is not a blip, but the formation of a cluster, in the economist Enrico Moretti's sense of the term. Skilled workers attract capital; capital attracts more skilled workers; infrastructure builds around them. Once formed, clusters become self-reinforcing regardless of prevailing politics. London has 20,000 AI engineers, more than double the figure of any other European city. London's AI flywheel is turning. Global capital might restrain Westminster, but it is writing the cheques for Anthropic to hire engineers in Regent's Place.

Former hedge-fund manager Eric Renander, known online as Erik@YWR, said the Seattle technology cluster started mainly because Bill Gates wanted to go home in 1975. More recently, in 2014, Demis Hassabis did the same for London, making it a condition of Google's acquisition of DeepMind that it remain in London forever. His passionate sense of place, as documented in the biography The Infinity Machine and the documentary The Thinking Game, has rotated London's AI flywheel, and quietly, the UK is starting to benefit.

Hassabis's personal journey maps perfectly onto what American author Robert Greene described as the path to mastery. Hassabis's primal inclination was an early fascination with chess, becoming a prodigy by the age of four. He later served multiple apprenticeships in adjacent disciplines. At 17, he led the development of the cult simulation game Theme Park, then earned a double first in computer science from Cambridge, and founded Elixir Studios. While most ambitious technologists would have stopped at “successful games entrepreneur”, Hassabis then pursued a PhD in cognitive neuroscience – a classic mastery move, stepping sideways into a deeper layer of the problem rather than chasing the linear path.

Greene argues that masters eventually produce work that reshapes their field. And in 2020, DeepMind's AlphaFold project solved biology's protein-folding prediction challenge at a scale previously considered impossible. For this, Hassabis and his colleague, John Jumper, were awarded the 2024 Nobel Prize in Chemistry. This was a defining moment in lateral thinking: a computer scientist was awarded chemistry's highest honour for solving one of biology's biggest problems.

Meanwhile, in Westminster, Keir Starmer, whose constituency ironically includes King's Cross, is living on borrowed time. Andy Burnham, the PM-in-waiting, spent his first week of the unofficial leadership campaign performing several U-turns, including abandoning previous borrowing commitments, acknowledging that he, too, is in hock to bond markets.

However, the Ming vase issue for Burnham is Europe, and the question of whether Britain should rejoin the EU. The main way he navigated this delicate subject in a hugely pro-Brexit constituency was instead to rewind four decades. His attack on Thatcherism is reminiscent of Japan's imperial soldiers found on remote Pacific islands a decade after Tokyo's surrender, unaware their war was over, and the world had moved on.

Today, King's Cross is witness to growth and dynamism, driven by mastery of lateral thinking and risk-taking, largely the result of one man setting the flywheel of self-sustaining success in motion. And London has become a magnet for global risk capital. A short tube ride away is a backwards-looking, linear-thinking Westminster increasingly governed by its capital providers. Yet in decades to come, the shape and prosperity of London, and by extension the UK, will owe more to Hassabis' mastery of his domain in N1 than anything that comes out of SW1, let alone Manchester.

Ramshaw Mill, Wark, Hexham, Northumberland

A Grade II-listed, 12th-century former watermill with gardens arranged in a series of “rooms” that include an orchard. It has exposed beams and wood-burning stoves. 8 bedrooms, 3 bathrooms, 4 reception rooms, 2 kitchens, outbuildings, courtyard, barn, 1 acre.

Price: £1.2m Finest Properties 0330-111 2266

The Old Vicarage, Castle Hedingham, Halstead, Essex

A Grade II-listed, early 18th-century house overlooking a castle and a church, with gardens that include a heated swimming pool and an orchard. It has grand fireplaces and vaulted cellars. 9 bedrooms, 5 bathrooms, 3 reception rooms, gym, 1-bedroom cottage, 1 acre.

Price: £1.75m Knight Frank 01394-334570

Bretforton Hall, Bretforton, Evesham, Worcestershire

A Grade II-listed late 18th-century house with a crenellated tower and two acres of gardens that include a swimming pool and an orchard. The house has a drawing room with Gothic arched windows, a vaulted ceiling and period fireplaces. 6 bedrooms, 5 bathrooms, 4 reception rooms, study, studio, breakfast kitchen, garage, 2 acres.

Price: £2.3m Morgan Aps 01905-384848

Hawksfield, Clifford, Herefordshire

A modern Passivhaus situated close to Hay-on-Wye. It has an A-grade energy performance certificate, gardens that include a dining terrace on the edge of an ornamental pond and a small orchard. The house is largely open-plan with an open-tread oak staircase and French doors leading onto a balcony. 3 bedrooms, 2 bathrooms, reception room, open-plan kitchen/dining/living room, en-suite studio outbuilding, 0.5 acres.

Price: £895,000 The Modern House 020-3795 5920

Copplestone House, Tiverton, Devon

A house set in mature gardens with outdoor entertaining areas, a covered outdoor kitchen, a walled kitchen garden and an orchard. It has exposed beams, open fireplaces, and a drawing room with French doors opening onto a terrace. 6 bedrooms, 4 bathrooms, 2 reception rooms, 1-bedroom annexe, barn, 2.5 acres.

Price: £1.65m Strutt & Parker 01392-215631

Woolgarston, Corfe Castle, Wareham, Dorset

A period cottage in a sought-after village within the Isle of Purbeck, an Area of Outstanding Natural Beauty. The large gardens include stone terraces and an orchard enclosed by a mature beech hedge. The house has exposed beams, a large inglenook fireplace and a kitchen with an Aga. 3 bedrooms, 2 bathrooms, reception room, outbuilding with utility and store, 0.62 acres.

Price: £1.13m Savills 01202-856800.

The Green, Nun Monkton, York, North Yorkshire

A Grade II-listed Georgian house overlooking the village green. It is set in large gardens with terraces and an orchard. It has exposed beams, panelled walls, open fireplaces and a dining kitchen leading onto a courtyard. 5 bedrooms, 3 bathrooms, 3 reception rooms, study, outbuilding with garage and games room, greenhouse, summerhouse, 0.7 acres.

Price: £1.695m Savills 01904-617820.

The Orchards, Bedham, Fittleworth, West Sussex

A picturesque Grade II-listed cottage dating back to the 1600s with landscaped cottage gardens that include topiary, winding paved paths, a swimming pool, two ponds, a stream and a wildflower meadow, along with an established orchard planted with apple, quince, cherry and plum trees. The house has exposed wall and ceiling timbers and inglenook fireplaces. 3 bedrooms, bathroom, reception room, barn, 1.56 acres.

Price: £1.43m Knight Frank 01428-770562.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Small defence stocks can often be overlooked. Back in January 2024, few, if any, investors had heard of the micro-cap Filtronic. The company, which designs and produces components for communication systems, had muddled along for the best part of 15 years, barely breaking even and relying on shareholders' cash infusions to keep the lights on. That all changed in April 2024 when Filtronic signed a strategic partnership with SpaceX. Over the following two years it secured a series of game-changing contracts with Elon Musk's space group, transforming its fortunes. Revenue nearly quadrupled and the share price is up nearly 1,800% since the beginning of 2024. Filtronic is just one of a host of small, publicly traded companies that have been transformed by the influx of cash into the global defence market over the past two years. Most of these small businesses fly under the radar of large institutional investors, who are unable or unwilling to invest in small or mid-caps. That means there's a fantastic opportunity out there for investors who are willing to put in the extra legwork.

Small defence stocks: looking beyond the global giants

The global defence industry is dominated by the so-called “primes”, the giants of the industry that manage multi-billion-pound or multi-billion-dollar contracts awarded by government bodies. These major players, such as BAE Systems, Lockheed Martin and Northrop Grumman, coordinate complex supply chains, manage hundreds of subcontractors and are ultimately held responsible when things go wrong. In some respects, these primes also act as banks and lenders to the subcontractors that make up the vital supply chains for the industry. The majority of defence contracts are multi-year projects that take years to design and deploy, with tens or hundreds of suppliers for each long-term project. It falls to the primes to manage the project cash flows and individual payments to suppliers – something government bodies would struggle to oversee.

For most institutional investors, primes are the only way into the defence industry. Despite its blistering rally over the past two years, Filtronic's market capitalisation still sits below £1 billion; that's far too small for a large fund manager to take a meaningful position without affecting the share price. By comparison, Lockheed Martin, Boeing, and Northrop Grumman's market capitalisations range from $70 billion-$180 billion. But the primes don't have as much control as they might think.

A recent study by the Bruegel think tank found that in Europe the ten largest military contractors capture between 67% and 90% of total public military-procurement spending across key countries such as Germany, Poland and the UK. In the UK, 39% of procurement expenditure in the 2024-2025 financial year went to just ten strategic suppliers, with BAE Systems alone representing 16.3% of all core Ministry of Defence expenditure for the year. This is the highest recorded share going to a single supplier since records began in 2008. But this figure is a bit misleading. Take the company's current contract to produce eight Type 26 Global Combat Ships for the Royal Navy, which, when agreed in 2017, cost £3.6 billion. The firm estimates around 40% of the total cost of manufacturing the vessels will flow through to some of the 3,000 small and medium-sized enterprises (SMEs) in its supply chain.

It's the same for the other Type 26 agreements signed with Canada and Norway. According to BAE's own estimates, it has a total of 5,800 suppliers across the UK and it spent £5.8bn with these SMEs in 2024, supporting 61,000 jobs – almost 20% more than the group's direct employee base. A similar structural dependence is visible in Germany, where the defence Mittelstand (the SMEs that form the backbone of the German economy) supports the giant global primes, such as Rheinmetall.

Boosting small defence stocks

When it comes to supporting small defence stocks, the US is undoubtedly the world leader. It has for many years been making a concerted effort to increase contract awards to small businesses. The Department of War regularly publishes statistics on its efforts to award contracts to small businesses and breaks down the targets set for primes and subcontractors. In the federal fiscal year 2024, the department raised prime contract awards to small businesses by $4.9 billion.

The US also has a world-leading network for scaling businesses and integrating them into supply chains. In recent years, its Accelerate the Procurement and Fielding of Innovative Technologies (APFIT) programme has helped SMEs move from the venture capital to growth stage, offering as much as $50 million directly to SMEs or non-traditional defence contractors to broaden the US military's supply chain and increase resilience. In one example, towards the end of last year, Gremlin Low-Cost Munition received $35 million in funding to provide affordable, precision-strike capabilities for the US Marine Corps, part of an overall push to design and mass-produce cheap missiles.

The UK and its European allies are working to develop similar programmes, although due to funding constraints and the existing concentration of the sector progress is slow. The UK's Ministry of Defence (MoD) spending directly with SMEs last year accounted for just 4% of the department's total budget, which was flat year-on-year. However, there are plans to raise the current £2.5 billion of annual spending to £7.5 billion by May 2028, assuming all of the MoD's funding plans are signed off by the government. The government has pledged to raise defence spending to 2.7% of GDP from next year, rising to 5% by 2035, but reports suggest a funding gap of around £28 billion in the existing plans and the Treasury is yet to sign off on the ten-year Defence Investment Plan. Still, in January 2026 the government established the Defence Office for Small Business Growth to act as a “single front door” for engagement with SMEs. It's also put together a £140 million drone and counter-drone technology programme that directly involves 20 British SMEs and 11 smaller so-called micro-enterprises.

Hunting for diamonds in the rough

As capital flows into global defence primes, it is becoming increasingly hard to find the diamonds in the rough. However, there's a growing opportunity with these small defence stocks, companies on the edge of the industry, in the early stages of growth. The problem is, there are only a handful of actively managed investment funds on the market that specialise in defence. The market is largely dominated by exchange-traded funds (ETFs), which must track the largest, most liquid companies in the sector. What's more, most of the active funds don't have the deep technical and industry-specific knowledge required to understand how the future of warfare is developing and where governments are prioritising spending.

The Finserve Global Security Fund is different. This Swedish, actively managed equity fund focuses on defence, cybersecurity and the space industry, with an experienced advisory board. The fund is not available to UK investors, but it's full of interesting ideas, built on the manager's strategy of “capturing structural, long-term mega-trends” with the potential for “above-market growth”. One such idea is Nordrest (Stockholm: NREST), which is capitalising on increased defence spending through its meals-ready-to-eat (MRE) division. As the saying goes, an army marches on its stomach and Nordrest is one of the five members of the MRE programme for Nato. These five firms provide the meal kits issued to soldiers on patrol or exercise, which can quickly be heated up to provide a nutritious meal. Shares in the company have risen by around 180% since the beginning of 2025, driven by its involvement in Nato contracts.

Although the company has a large catering division attached, around 60% of its bottom line comes from the key MRE contracts (even though this division accounts for just 24% of revenue). With a market capitalisation of $410 million, Nordrest is still a minnow in the defence world, but it's a key player in a market that's not going away anytime soon. The management has outlined plans to double Nordrest's MRE capacity over the coming years to deal with increased demand from Nato members. The stock trades at roughly 11 times EV/Ebita on 2026 estimates, adjusted for minority interest: modest for a company growing organically at around 15% annually and compounding further through bolt-on acquisitions bought at cheaper multiples.

Finserve's team also likes Hanwha Ocean (Seoul: 042660), formerly known as Daewoo Shipbuilding & Marine Engineering and one of the “big three” shipbuilders of South Korea, along with Hyundai and Samsung. Shares in the company have jumped more than 230% since the end of 2024, when it made an audacious bet to take on the US primes in their home market. In December 2024, Hanwha Ocean (40%) and Hanwha Systems (60%) jointly acquired Philadelphia Shipyard, catapulting the company into the near-$1 trillion-a-year US Navy procurement system. The shipyard is currently incurring losses, but the firm has earmarked $5 billion to turn it around.

The investment will help Hanwha capitalise on a Korea-US pact as part of the US government's Make American Shipbuilding Great Again initiative. In May 2026, Korea's trade minister and the US commerce secretary formally agreed on a $350 billion investment framework, with $150 billion earmarked for cooperation in shipbuilding. Hanwha's investment will go some way towards improving the efficiency of the American shipyard. In its home market, the group turns out one ship a week from each yard, while the US manages just one a year. This will add to what is an already robust order book for the group, with an overall backlog equivalent to three and a half years of revenue.

A play on the rise of drones

Also featured in Finserve's portfolio is Exail Technologies (Paris: EXA). One of the most interesting trends over the past five years has been the solidification of drone warfare in defence systems. The war in Ukraine has illustrated how a relatively small player on the international scene can fight back against a large superpower by investing heavily in unmanned warfare – this company is a play on that trend. Exail is a French defence-technology company that has carved out a position as the global leader in unmanned mine countermeasures, with a 95% win rate on naval and mine-hunting tenders since 2019. As the impact of drone and unmanned-weapons platforms has become apparent, the company's shares have risen by more than 700% since the beginning of 2025 and its market capitalisation has jumped to around €3 billion. Its flagship product is the UMIS drone system. It is the only product of its kind in a market where competitors usually rely on multiple suppliers to build systems.

The Royal Navy has a huge lead here. As part of the UK's efforts to lead a global mission to reopen and defend the Strait of Hormuz, the Royal Navy is deploying a ship with technologies designed to spot and destroy sea mines remotely without exposing people to danger. It will be one of the first of its kind operating in a war zone. The publicity surrounding this mission could be a boon for Exail. It's already formed a collaborative partnership to support the Royal Navy's next-generation autonomous mine countermeasures, and this could open up other markets. Navies worldwide are retiring Cold War-era minesweepers and replacing them with autonomous drone systems (a €3 billion opportunity by 2030), a shift accelerated by the historic jump in defence spending. Exail is well-positioned to capitalise on this trend. Last year, the company recorded an 87% increase in revenue and has an order backlog equivalent to around a year and a half of sales. It is targeting further double-digit revenue growth in 2026.

Providing the nuts and bolts

When you start to trace the supply chains that support the world's armies, it's clear just how deep their roots spread into the economy and how many options there are for investors. Scanfil (Helsinki: SCANFL), for example, manufactures printed circuit boards, electromechanical assemblies and complete defence electronics units for European defence primes under long-term production agreements. Invisio (Stockholm: IVSO), a Swedish company, makes tactical communication headsets designed to protect the hearing of infantry and integrate with standard military radios. The kit is sold to Nato armed forces across about 50 countries. A similar play is Bittium (Helsinki: BITTI), which develops and manufactures encrypted tactical radios for several Nato militaries.

In the UK, it's worth taking a look at Chemring Grorup (LSE: CHG). This company produces kit such as infrared flares and decoy systems that protect military aircraft and naval vessels from missile attack, as well as energetic materials for munitions. Chemring has only one major competitor in advanced plastic explosives in Europe: France's Eurenco Group, which is owned by the French state.

Last year, overall revenue at Chemring expanded by just 2%, marred by delays to UK government spending commitments at the group's sensors and information arm. However, on the countermeasures and energetics side (explosives), revenue rose by a reported 17% and underlying profit by 37%. The firm's order book jumped 35% and is now equivalent to three to four years of revenue in this division.

Chemring is targeting £1 billion in revenue by 2030, up from a reported £500 million today. If the company can hit this target (and analysts believe it can), group earnings before interest and tax could rise to £170 million, according to Panmure Liberum, up from £74 million today, at a 17.2% margin, up from 14.2%. That's if private equity doesn't snap up the business first. There have been rumours circulating for some time about the company's future, with analysts speculating it could only be a matter of time before the group is acquired.

Porvair (LSE: PRV), worth £391 million, supplies specialist filtration systems for military aerospace applications, including hydraulic filtration for fast jets (such as the F-35) and helicopter gearboxes, and fuel filtration for forward operating bases. The company doesn't provide too much detailed information on its contracts with defence customers, but it has said that aerospace-related demand is stronger than expected. It is also seeing a slight uptick in demand for its equipment from the nuclear industry.

Boots on the ground

Avon Technologies (LSE: AVON) is one of the best ways in the world to invest in the niche business of protective equipment. The company manufactures head protection and respiratory units, such as gas masks, for military and first responders globally. Like all of its peers, it is benefiting from increased demand from Nato as countries upgrade their equipment, much of which dates from the Cold War. Revenue in the first half of Avon Technologies' financial year was hurt by its exposure to US government agencies. The government shutdown exposed contract awards and led to double-digit declines in demand for head-protection gear. But there should only be a temporary headwind. Interest in respiratory products drove a 19% increase in the company's order book in this division, adding two additional countries to its customer base and bringing the total to 16 Nato countries now buying from Avon.

As a marker of demand, Avon agreed a 50% increase in the revenue ceiling on a major contract with Nato to supply chemical, biological, radiological and nuclear defence boots and gloves. This kit has a fixed lifespan after which it is no longer effective, giving the company a recurring revenue stream. Around 50% of group revenue is exposed to US spending, which is a headache, but management is making strong efforts to diversify the base. As this continues and growth flows through, Avon's stock is poised for a rerating. Over the next four years, analysts at Zeus have pencilled in 60% profit growth, with revenue expanding by around a third. A cash-rich, debt-free balance sheet also provides scope for mergers and acquisitions to expand the portfolio and capitalise on rising defence spending globally.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.