“Baby-faced” billionaire Yang Zhilin recently dealt the biggest shock to Western markets since DeepSeek, wiping hundreds of billions of dollars off the valuations of AI and chip stocks.

Kimi K3, developed by Yang’s Moonshot AI, is the most advanced “open-weight” large language model to emerge from China yet, topping many benchmarks with its capabilities “at a third of the cost”.

At a stroke, notions of Silicon Valley's technical dominance have been swept away, with its developer, Moonshot AI, challenging the likes of Anthropic and OpenAI at the frontier – prompting questions about their mega-valuations.

Moonshot's founder has a good story to tell too, says The Telegraph. Yang Zhilin is a prog-rock devotee who named his firm in honour of Pink Floyd's The Dark Side of the Moon, seemingly in tune with Western ideas and culture.

The 34-year-old has built a “mythology” that has “helped distinguish Moonshot from China's otherwise austere AI industry”, says the Financial Times. Employees describe an intense culture of long hours in Moonshot's headquarters in Beijing's Haidian district. “But Yang has also infused the company with his own... obsession with rock music... A white piano stands prominently in the office.”

Yang Zhilin heads to China's MIT

Yang Zhilin was born in 1992 and grew up in Shantou in the southern state of Guangdong – China's industrial heartland. Former classmates recall that he was always “unusually gifted”. Having started coding in high school, he won first prize in the National Olympiad in Informatics, earning him direct admission to Tsinghua University, often dubbed “China's MIT”.

Even in that specialised atmosphere, he was known as “Yang the genius” because of the way he managed to balance elite academic performance with his musical interests. He was a drummer in a campus band called Splay, organised music competitions and gained a reputation for being “romantic and idealistic”. Some reports suggest that he switched his undergraduate degree from thermal engineering to computer science, having been inspired by a Haruki Murakami novel.

In 2015, Yang Zhilin completed his PhD at Carnegie Mellon University, where he studied under AI gurus Ruslan Salakhutdinov and William Cohen, worked at Google Brain and Meta, and founded a retailer-focused start-up, Recurrent AI, before returning to China in 2019.

In 2023, he co-founded Moonshot AI with Tsinghua University classmates. “Recurrent AI taught him how to woo investors and scale a business,” says The Telegraph. “But he learned painful lessons too.” Moonshot's early years, when he attempted to build a “Chinese-first version of ChatGPT”, were marred by a lawsuit from investors in Recurrent AI that saw him hauled before the Hong Kong International Arbitration Centre before a settlement was reached.

Moonshot's chatbot Kimi was an instant hit, but also “plagued by outages and... overtaken by larger rivals”, says the FT. Rival DeepSeek's successful R1 model was another “existential test”. Yang Zhilin returned to the laboratory to focus on model training. He also made the pivotal decision to make Moonshot's AI models available to developers globally.

Moonshot's open approach has enabled China to “cast itself as a champion of low-cost, open-source AI”, says The New York Times. But that openness has raised concerns in Beijing about “the potential threats the technology might pose” to Communist Party rule. “[He] may be wise to moderate his views,” says The Telegraph. “Other tech billionaires in China have found... that the Party likes its economic champions on a short leash.”

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Investors have struggled to understand Funding Circle (LSE: FCH) since its initial public offering (IPO) in 2018. The City had been looking for a valuation of £1.75 billion, but the fintech could only get away with £1.5 billion – even though half the offer was taken up by one single “whale” investor. The shares then fell 23% in the first week of trading, and they have never recovered to trade above the offer price of 440p.

However, after a long spell marred by poor returns, losses and uncertainty, the outlook may now be improving. To see why, we should first look at what the business does and how the model has changed.

Funding Circle's business model and change of direction

Funding Circle was founded to help improve access to finance for the UK's small and medium-sized enterprises (SMEs) by connecting investors and borrowers. In its first few years, the company spent heavily on technology to build its platform and marketing to reach to potential customers. These efforts consumed all of its profits and more. In 2018, 2019 and 2020, the business lost a total of £230 million.

Initially, it started off as a peer-to-peer (P2P) lending platform connecting retail investors with SMEs that wanted to borrow. This was designed to disrupt the traditional lending market where a lender uses its own balance sheet to fund loans.

Instead, Funding Circle provided the technology that sat in the middle connecting the two parties. However, this proved to be too costly to be effective. So the group suspended access to its P2P platform to new investors in April 2020 at the start of the pandemic and permanently closed the platform in 2022.

The pandemic enabled Funding Circle to make the most of government lending schemes, allowing the business to drastically reduce costs. This is the model it still uses today. A combination of government financing and institutional-backed lending meets the group's funding needs.

The company reaped the benefits of this shift almost immediately. For the 2021 financial year, it booked a profit of £64 million, a sharp turnaround from the prior year's loss of £108 million. Most of this growth was driven by the government's Bounce Back Loan scheme during the pandemic. In the following two years, Funding Circle slumped back to a loss. Then, after two years of losses (totalling £40 million), it returned to profitability in 2024. This time it looks as if the lender has cracked the code.

Funding Circle is at inflection point

Funding Circle has now reached “escape velocity” after reaching a “key earnings inflection point”, say brokers Canaccord Genuity. For 2025, the group reported sales of £204 million and adjusted profit before tax of £26 million. In the first six months of the current financial year, management has outlined revenue growth of 50%, with £23 million of profit before tax at a 17% margin.

The firm tends to see more borrowing activity in the first half of the year. Even so, based on activity in the second half of 2025 and first half of 2026, Canaccord Genuity estimates a run-rate of more than £250 million of revenue and £37 million of profit before tax. These numbers are all the more impressive considering the funding environment. The last time the company was this profitable was during the pandemic, when demand was high and money was cheap. Today, rates are still elevated and economic activity is mixed, to say the least.

Funding Circle has always had a technological edge. This allows it to assess borrowers quickly and efficiently before making a lending decision. The group also now runs servicing, reporting and performance history at a scale that is difficult for newer entrants to replicate. That's why it's become good at attracting institutional capital. Its well-honed, home-grown tech does the hard work, giving capital providers the returns they require with low risk.

In the first half of the year, the company inked £900 million of forward flow agreements – commitments from funders to purchase a regular stream of newly created loans – with lenders such as Deutsche Bank. A total of 93% of assets under management now relate to this off-balance sheet funding.

Funding Circle has an edge in information

Meanwhile, Funding Circle has branched out into new products, including short-term lending. In doing so, it has evolved from a term loan provider into a broader SME finance platform built around three customer propositions: long and short-term loans, FlexiPay (buy now pay later) and credit cards.

These increase the platform's appeal to borrowers, while also helping Funding Circle enhance its information edge. A borrower that uses all of these products generates a huge amount of data to feed back into Funding Circle's lending models. Those models now have 15 years of proprietary data across credit cycles to underpin lending decisions.

As Funding Circle builds on the foundations that it has created, profit growth should accelerate over the next few years. Canaccord Genuity has pencilled in top-line growth of 50% to nearly £300 million by 2028. As the group scales its tech platform, its adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) margin will expand from 15.3% to 27.6% according to the broker. Ebitda is forecast at £82.2 million for 2028, with profit before tax rising to £72 million.

Cash balances are also expected to rise materially, from £101 million at the end of 2025 to £257 million by 2028. Based on these forecasts and at a share price of 226p, Funding Circle is trading at eight times pre-tax profits for 2028 after adjusting for cash, with a projected free cash flow yield of 15%. That's far too cheap for a business that's set to grow its top line at a compound annual rate of more than 20% for the foreseeable future.

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Maynards, Little Sampford, Essex

A 1670s, Grade II-listed former farmhouse with a moat that runs around three quarters of the grounds. It has exposed wall and ceiling timbers, oak floors, open fireplaces with wood-burning stoves and a bespoke kitchen. 4 bedrooms, 2 bathrooms, 2 receptions, 2-bed annexe, 5 acres.

Price: £1.5m Cheffins 01799 -23656

Pond Cottage, Wilton, Marlborough

This 17th-century thatched cottage is situated in an idyllic position overlooking the village pond. It is accessed by a private bridge and surrounded by gardens that include well-stocked borders and a vegetable garden. The cottage has beamed ceilings, inglenook fireplaces and a large dining kitchen. 4 bedrooms, 2 bathrooms, office/bedroom 5, 2 receptions, utility, garage.

Price: £995,000. Hamptons 01672-837178

The Mill, Arnesby, Leicester, Leicestershire

A converted, Grade II-listed 19th-century windmill with a two-bedroom cottage and a range of outbuildings set in grounds that include a wildlife pond and a paddock. The mill has a double-height entrance hall, a bespoke staircase and a glass walkway on the first floor that connects the main accommodation with the former windmill. 4 bedrooms, 4 bathrooms, 2 receptions, 2 studies, balcony, motor house, 4.44 acres.

Price: £2.75m Fisher German 01858-410200

Bulkeley Grange, Malpas, Cheshire

A restored, Grade II-listed Victorian country house with a terrace with stone steps leading down to a sunken garden, wildflower meadow and a pond. It has oak floors and period fireplaces. 7 bedrooms, 5 bathrooms, 3 receptions, kitchen, library, stables, 9.7 acres.

Price: £2.25m Savills 01244-323232

Tinley Lodge, Shipbourne, Tonbridge, Kent

A country house surrounded by gardens that include a large pond with a pontoon, a Japanese garden with a wildlife pond, decking, multiple seating areas and an outdoor kitchen. It has an open-plan dining kitchen and living area with an Aga and French doors leading onto a courtyard garden. 5 bedrooms, 4 bathrooms, 2 receptions, study, 1-bed annexe, 2 studios, stables, paddocks, 8.01 acres.

Price: £4.95m Knight Frank 020-3967 7176

Barley Hill Farm, Combe St. Nicholas, Chard, Somerset

A Victorian former farmhouse with earlier origins set in large gardens that include two walled gardens, a wildlife garden with ponds, a wooden footbridge and wooded area adjoining a paddock and an orchard. 5 bedrooms, 3 bathrooms, 3 receptions, kitchen, 2-bed annexe, conservatory, office, dairy, 2-bed cottage, 1-bed coach house.

Price: £1.65m Knight Frank 01935-812236

Loughbrow House, Hexham, Northumberland

This late Victorian house is now in need of some renovation. The house is surrounded by landscaped gardens and set on a small estate that includes two cottages, a gate lodge, a pond, a sequence of small streams crossed by stone bridges, a walled garden with a greenhouse, woodland and a former quarry. 7 bedrooms, 5 bathrooms, 3 receptions, kitchen, reception hall, library, stables, grazing land, 31.4 acres.

Price: £2.1m+ Galbraith Group 01434-693693

Puddledock, Norden, Corfe, Dorset

Puddledock comprises a 200-year-old building incorporated into a contemporary state-of-the-art house with a deck running the length of the property that overlooks the wildlife ponds. It has vaulted, beamed ceilings and a modern wood-burning stove. 4 bedrooms, 4 bathrooms, reception, 7.06 acres.

Price: £2.25m Savills 01202-856873

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The writer Bret Easton Ellis once said that his advice to young artists was simple – marry someone rich. The line holds true because, well, it's true. Ellis may be biased towards seeing the uglier logic of money – the way it quietly shapes outcomes while pretending not to – but in this case, the bleak diagnosis is backed up by the numbers.

The art market does not reliably sort by talent. It sorts by who can keep going, stay visible, absorb unpaid years, access the right rooms, and remain legible to collectors and institutions long enough for momentum to build. A striking statistic from the most recent Frieze London art fair is that just 7% of exhibiting artists came from working-class families.

This statistic is not saying “talented working-class artists are being excluded” (which would be bad enough). It is saying something harder – the conditions for becoming an artist are already filtered by class before the market even gets to pretend it is judging talent. Talent is not the organising force. Survival is.

Making the market see emerging art

I founded New Blood Art, a gallery, in 2004, because I could see a gap the market had not built a mechanism for – the gap between serious artists leaving art school and buyers who wanted thoughtful original work by credible emerging artists, but who had no reliable way of finding it and needed a trusted filter.

New Blood Art did not simply spot artists before the market noticed them. Rather, it created visibility, credibility and access for collectors at the point when a market around them did not yet exist.

Take artist Georgia Dymock. We introduced her at New Blood Art in 2020, just after her graduate diploma in fine art at University of the Arts London. We listed her painting Purple Pinch at £1,700. In April 2022, it sold on the secondary market at Phillips' “New Now” auction for £23,940 – a fourteen-fold increase in under two years. The fourteen-fold increase is exceptional. The pattern is not.

Across 22 years, New Blood Art has had many examples of artists first shown or supported early on, who later gained serious market traction. Without that initial platform, credibility, access for collectors and market context, would the later traction have happened in the same way, or at the same speed?

We can't say for certain that those artists wouldn't have garnered attention without New Blood Art. But the pattern across 22 years makes the question legitimate, and it becomes reasonable to argue that early visibility, credibility and access for collectors materially affected the speed or likelihood of later traction, alongside my ability to identify serious artists early.

What 22 years at New Blood Art taught me

The artists who survive long enough to build meaningful careers are usually those with some form of material protection – financial stability, housing security, helpful geography and, above all, the capacity to absorb years of low or unpaid work. Most art students leave college with debt, need to earn, and cannot afford the years that an art career takes to build. And when only a small group can afford to keep going, only a small group get to tell the story of the world. Whose stories have we lost from the history of art?

The economics of early-stage work

The second realisation is commercial, and perhaps it has taken me this long to see it clearly because New Blood Art arose out of idealism as much as being a business interest. Consider where Dymock's £22,000 uplift went. A modest resale royalty may have returned to the artist under Artist's Resale Right, but the larger gain went to the auction house and the early seller. Nothing returned to the platform that showcased and launched her.

That is the economics of early-stage work – the identification, advocacy and development that actually forms careers carries sustained cost, while the rewards concentrate later, elsewhere in the market. Yet if nobody does this work of launching serious artists, then these artists don't gain visibility. The work is essential, while structurally unpaid. My gallery has, in effect, carried a public-interest function that the economics of the sector never reflected.

Splitting New Blood Art in two

There have been personal costs, too. Sustaining an independent gallery for 22 years without venture capital, while also carrying early-stage artists' development work the emerging art market does not properly pay for, had become unsustainable. Professionally and personally, I needed to step back. I downsized, spent time in a Cornish fishing village, and began asking myself a stark question: was it possible to operate profitably in the emerging art market, while holding on to the values that made the business worth building in the first place?

What has come back from this reflective 18-month period is clarity. New Blood Art had been carrying too much inside one structure and I decided to separate the two kinds of work so both can function properly. The gallery has now become smaller, sharper and more commercially focused, with a tighter roster of contemporary artists, many of whom we first came across years ago at their degree shows. The New Blood Art Foundation is now in formation and it will carry the public-interest and outreach work, including the Emerging Art Prize in collaboration with Fine Art departments across the UK, artists' development, mentoring and, I hope, studios and residencies.

The cost of independence

The route to charitable status has been thought-provoking and demanding. It has forced me to separate mission, governance, money and power. A foundation growing out of New Blood Art cannot simply be a more worthy arm of the gallery; it has to be able to protect its own public-interest purpose, especially where the commercial gallery and the Foundation sit close together. That raises an uncomfortable question. The Foundation is being created to support artists without financial cushioning, inherited networks, or easy access to the art world. But serious governance also requires time, confidence, independence and security. An unpaid independent chair is not just structurally complicated, it is also difficult to find.

The chair needs to be competent in a specialist field, independent, available, committed, financially secure enough to work unpaid, and not personally or financially entangled with me or with New Blood Art. That is a very narrow pool.

A foundation built to address the fact that only the financially cushioned can sustain an art career finds that only the financially cushioned can afford to govern it. Unpaid governance, like unpaid studio years, is a filter.

Artists as infrastructure

The Foundation's long-term vision of permanent bases across the UK rests on a pattern MoneyWeek readers will recognise from the property sector. Developers have long used artists to warm up cold districts – King's Cross, Peckham, Hackney Wick, Deptford. Artists arrive. Creative presence generates cultural heat, footfall, interest from buyers and rising values. Then the studios close and the artists are priced out of the value they helped create.

That cycle is not only unfair; it is economically short-sighted. Artists are not decorative add-ons to regeneration. They are often the source of the atmosphere, identity and desirability that later becomes financial value – value which can dissipate once they are removed. Anchoring artists permanently, as cultural infrastructure, is the enlightened version of that trade – it holds the value where it was made. Housing artists is not philanthropy. It is investment.

This is the opportunity I want the Foundation to build towards – a structure where artists are held as part of the long-term cultural and economic life of a place. For philanthropists, developers, institutions and collectors, this is a chance to support practising emerging artists and bring live cultural energy into buildings and districts.

Artists shouldn't just be used to revive the discarded edges of cities. They should be embedded in places of existing power and value – Knightsbridge, the Square Mile, major corporate buildings, prime developments – because their presence is not remedial, but is inspiring and generative.

In an AI-shaped world, original human creation will become more valuable, not less. This is an invitation to philanthropists, developers and corporations to build with us the conditions where cultural life is visibly happening inside your buildings.

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Bond markets have a habit of reminding governments that they, not politicians, determine the price at which the state can borrow. Despite Andy Burnham’s message to the New Statesman last September that we've got to “get beyond this thing of being in hock to the bond market”, ten-year gilt yields remain around levels not seen since the aftermath of the Truss-Kwarteng mini-Budget.

There is no doubt that Andy Burnham's affable persona and savvy TikTok game are a refreshing contrast to his predecessor's stiffness. But while politicians trade in popularity, investors are interested in profits.

The rising stock of a prime minister is not necessarily reflected in the stock market. Indeed, external shocks have undone the plans of every occupant of Downing Street over the past decade. And each, whether Conservative or Labour, has reached for much the same economic playbook: more borrowing, higher spending, a larger state and, ultimately, higher taxes. With public debt already elevated and fiscal room increasingly scarce, Burnham may become the first prime minister forced to discover whether that playbook has finally reached its limits.

The public-sector finances data for June were marginally stronger than expected, with borrowing £300 million below the Office for Budget Responsibility's (OBR) forecast. The cost of inflation-linked debt interest fell as the ceasefire in the Iran conflict pushed down energy prices. It was a timely reminder that governments do not control the most important variables in their own fiscal forecasts. With hostilities resuming, inflation is unlikely to remain so well-behaved, leaving Burnham's fiscal headroom squeezed.

As one official reportedly told the new prime minister on arriving in Downing Street: you might not be interested in foreign policy, but it's interested in you. Events overseas can force an indebted government into making unpopular decisions. The National Institute of Economic and Social Research (NIESR) estimates that higher energy prices and weaker growth have eroded most of the government's fiscal headroom of £24 billion.

Higher inflation creates a double squeeze for the Treasury, raising debt-interest costs while reducing what departmental budgets can deliver. The director of the NIESR, David Aikman, says that “Commitments must be funded through taxation or savings elsewhere – not through more borrowing. That is the minimum needed just to hold the debt level where it is”.

Burnham vs the bond market

Burnham might want to get beyond bond markets, but unless he can unwind the relentlessly vicious circle of higher debt, higher deficits and stagnant growth, he will be doomed to repeat it. In her first act as chancellor, Rachel Reeves tried to pay for higher public-sector pay by removing the winter fuel allowance, sowing the seeds of her own demise. Taxing jobs through higher national insurance while raising the minimum wage made employment more costly, bearing down on growth. She then assembled a smorgasbord of wealth taxes owing to Labour's manifesto commitment not to raise the three main taxes. Although Reeves reduced gilt issuance, it remains historically high. The Debt Management Office plans to issue around 50% more gilts this year than in 2022-2023. Burnham inherits the same fiscal constraints, but with Labour polling around ten points below the level that delivered its 2024 landslide, reducing his political as well as economic room for manoeuvre.

There is a more fundamental problem if he attempts revolutionary change. He was not even part of Labour's 2024 election victory and, like all unelected prime ministers before him, will face complaints that he lacks a mandate to make difficult decisions. He has repeatedly stressed that Britain is a parliamentary democracy where parties choose their leaders. It is not unusual: 12 of the 19 people to serve as prime minister since 1945 first entered Downing Street between general elections. But that has never made governing easy. Only four went on to win a majority at the subsequent election.

With a fragmented electorate split at least four ways, Burnham may need little more than 25% plus one vote for a majority. Yet volatile voters are unpredictable. His strategy will be to unite the left by invoking his favourite bogeyman, the “Thatcher tribute act” Nigel Farage. Failing that, his programme itself has a distinctly left-wing flavour: capping household bills, re-industrialisation, stronger public control of utilities and a National Care Service. Politically, it is an attempt to rebuild Labour's coalition. Economically, however, it assumes global events remain reasonably benign.

But the more he talks left, the more the bond markets will push him to the right. His priorities are expensive, and his options for paying for them are shrinking. The Laffer Curve is already alive and well in the disappointing revenues generated by a tax burden that has reached its highest level in decades.

Gilt issuance remains elevated, inflation an ever-present threat and he cannot afford to lose credibility by breaching the fiscal rules. “Events, dear boy, events,” as Harold Macmillan put it, still have a habit of overwhelming even the best-laid plans. Burnham's greatest opponents may not reside in the House of Commons, but in the bond market.

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Over the past five years, the Japanese yen has lost 30% of its value against the US dollar and nearly as much against the pound. The currency recently hit a 40-year low against the greenback. Now, powerful figures in global finance are drawing a line in the sand.

Over the weekend, Japan's Ministry of Finance and the US Treasury confirmed they had jointly intervened in currency markets to support the yen. Japan is thought to have sold $59 billion to buy yen, with Washington staging a smaller intervention – its first in Japan since 2011 – in support.

The move sent the Japanese yen up 3.5% against the US dollar, a significant rise in foreign-exchange terms that reversed months of depreciation. Japan's own interventions had become increasingly ineffective. America brings much more potential firepower to the table.

Why is the US buying Japanese yen?

US Treasury secretary Scott Bessent has shown markets there is “a new sheriff in town”, says Katie Martin in the Financial Times. The real mystery is why Washington is getting involved at all. One explanation is simply that Donald Trump likes Japan, telling reporters “Japan's been very good to us, with the exception, of course, of Pearl Harbor”.

Self-interest, too, may be motivating Bessent. Japan's “massive sales” of dollar assets (mainly US Treasuries) are raising US borrowing costs at a time when government yields are already under pressure. His solution? “Stand behind Japan like a scary big brother” to “scare off the yen sellers.” The Japanese yen stabilised at around 157 to the dollar this week, stronger than the 163 level prior to the intervention.

The operation is likely to halt, at least temporarily, a “disruptive further depreciation” of the yen, says Brad Setser of the Council on Foreign Relations. A weak yen tends to pressure other Asian currencies lower. By making the region's exports cheaper, weak Asian currencies cut against the White House's desire for US re-industrialisation. The administration of a short, sharp shock to speculators betting against the Japanese yen might cause them to re-evaluate the trade.

Recent market “negativity” towards Japan has been overdone. The country has several important strengths, including a big current account surplus and ownership of huge tranches of overseas assets.

The one missing piece is higher interest rates. At 1%, Japanese rates are far below those in America, which causes steady selling pressure as local investors seek better yields overseas. Therein lies the rub, says Robin Brooks on Substack. Japan cannot afford to raise interest rates because of its mammoth government debt, which is equivalent to 248% of GDP. But without the support of rate hikes, this currency intervention will ultimately “fail like all previous ones”. Despite its slide, the Japanese yen is probably still overvalued. Its rout is “a symptom of a debt crisis that's getting papered over”.

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Mastercard and Visa are the dominant global payment networks. Their systems allow you to tap your card to buy a coffee virtually anywhere in the world, and two seconds later you are walking away. It feels effortless, but behind that two-second transaction lies a complex global relay. Your bank confirms funds, the merchant's bank requests authorisation and fraud systems assess the risk.

To most people, Mastercard (NYSE: MA) and Visa (NYSE: V) are little more than logos on cards. In reality, they represent a global system that allows a payment in Birmingham to work just as easily as one in Bangkok. The infrastructure is so seamless that we never need to think about it, yet it is why these two companies have proved so difficult to disrupt.

The question now is whether this lucrative duopoly, which has fended off challengers for decades, is finally facing a genuine threat. For years, critics have seen rival technologies emerge, only to watch Mastercard and Visa absorb the innovation and become stronger. Yet as we look towards a future of sovereign payment systems, digital currencies and autonomous machine commerce, investors need to consider whether today's threats are fundamentally different from those of the past. Will new technologies merely change how we pay, or will they replace the invisible pipes through which every transaction flows?

Why Mastercard and Visa's duopoly is so durable

Understanding why this duopoly has proved so durable starts with one misconception. Mastercard and Visa do not lend money, issue most cards, or sign up merchants. They simply provide the trusted communications network linking cardholders, merchants and their banks.

When a payment is made, the merchant's bank sends an authorisation request through Mastercard or Visa. The network identifies the correct issuing bank and securely routes the request. That bank checks whether the card is valid, confirms that funds or credit are available and carries out fraud checks before approving or declining the transaction.

The decision then travels back through the network to the merchant. Later, Mastercard and Visa coordinate settlement, ensuring that money moves correctly between the financial institutions involved.

The networks do not lend money, take deposits or bear the risk if a customer fails to repay a credit-card balance. Those responsibilities sit with the issuing banks. Mastercard and Visa simply provide the rules, technology and communications network that allow thousands of financial institutions to work together.

This is very different from the model used by firms such as American Express. Amex combines the roles of card issuer, payments network and merchant acquirer within a single business. This gives it greater control over the relationship with the customer, but also means taking on more risk and investing more capital. That integrated model also helps explain why some smaller businesses still refuse American Express. Historically, its merchant fees have often been higher than those charged on Mastercard and Visa transactions.

Mastercard and Visa took the opposite approach. By leaving lending, underwriting and merchant relationships to partner banks, they created an asset-light model that could expand globally without requiring the same balance sheet.

The result is a network that becomes more valuable as more participants join. Any bank can connect its customers to the system. Any merchant can accept payments through it. That structure has allowed Mastercard and Visa to expand into more than 200 countries and territories while avoiding many of the risks carried by traditional financial institutions.

Alternatives exist. American Express has built a successful premium franchise. UnionPay dominates China. JCB is strong in Japan. Discover is well-established in North America. Yet none has matched Mastercard and Visa's mix of global acceptance, bank partnerships and asset-light economics.

Uniform standards for Mastercard and Visa

This position has made Mastercard and Visa into two of the world's most valuable technology companies: both are worth over half a trillion dollars. Yet their origins were far more modest.

In the 1950s and 1960s, consumer payments were fragmented. Shoppers often carried multiple store cards, while banks struggled to process payments between different institutions. Master Charge and Bank Americard, the predecessors of Mastercard and Visa respectively, were established to create a common standard that allowed different banks and merchants to participate in the same payment system.

For decades, the networks operated as cooperatives owned by the banks that used them. This worked while electronic payments were still developing, but it became difficult as the industry matured. The member banks were also competitors, fighting for market share in card issuance and lending. Disputes over fees, governance and access became increasingly common. The solution was to separate the infrastructure from the banks. Between 2006 and 2008, Mastercard and Visa demutualised and listed in New York. Freed from competing shareholder interests, they could focus on expanding the network itself. They stopped operating primarily as industry utilities and became technology companies, investing heavily in fraud detection, cybersecurity, data analytics and international expansion.

Although Mastercard and Visa are often discussed together, they are not identical businesses. Visa has historically maintained the larger share of global payments volume, particularly in the US, while Mastercard has often positioned itself as the more international challenger. However, their investment cases are remarkably similar. Both benefit from the same long-term trend: the shift from cash towards digital payments. Neither needs to eliminate the other to succeed. The global payments market has been large enough for both companies to compound alongside one another for decades.

Their role today is often misunderstood. Mastercard and Visa do not need to replace every domestic payment system. Instead, they increasingly act as the common language that allows different systems to work together.

France provides a useful illustration. Many French payment cards carry both the logo of the domestic Cartes Bancaires (CB) network and either Mastercard or Visa. When that card is used in France, the transaction may be processed through the local CB network. Use the same card abroad and the payment is likely to travel across the Mastercard or Visa network instead. The customer rarely notices the difference because the systems work together seamlessly.

This helps explain why local payment networks are not necessarily threats. Countries can build efficient domestic payment systems, but international commerce is a much harder problem. Cross-border payments require common technical standards, fraud protection, dispute-resolution rules and the trust of thousands of banks and millions of merchants. Mastercard and Visa have spent more than half a century building those connections.

That does not mean they are invulnerable. Domestic schemes such as India's Unified Payments Interface (UPI), Brazil's Pix and China's UnionPay have demonstrated that governments and local providers can build highly successful alternatives for domestic payments. But they also highlight where Mastercard and Visa's greatest strength lies. Their advantage is not that they process every payment. It is that they remain the network connecting different payment systems across borders.

That distinction will become crucial as new payment technologies emerge. The question is not whether other systems will exist alongside Mastercard and Visa. They already do. Rather, it's whether anything can replace their global infrastructure.

Mastercard and Visa's business model

Mastercard and Visa have one of the most attractive business models in the global economy. They do not need to earn pounds from every transaction. They only need to capture a fraction of the value flowing through their networks.

The economics of a payment are split between several participants. When a merchant accepts a card payment, it pays a fee known as the merchant service charge. A portion compensates the issuing bank for providing the card and taking on lending or fraud risk. And Mastercard and Visa receive fees for operating the network, processing transactions and providing the rules and technology that let the system function.

Think of it like a toll road. While a transaction may involve hundreds or thousands of pounds changing hands, Mastercard and Visa earn only a minuscule fee for letting the payment through. Yet multiplied across hundreds of billions of payments each year, the tolls create a vast and highly profitable revenue stream.

Note that once the network is built, processing additional transactions costs very little and therefore carries exceptional incremental margins. As payment volumes grow, revenues can rise much faster than operating costs. This is why both companies consistently generate some of the highest operating margins in global equity markets.

Nobody wants to leave Mastercard and Visa's payments network

Mastercard and Visa's dominance rests on several reinforcing advantages: trusted brands, acceptance at millions of merchants, deep relationships with banks, vast amounts of transaction data, established operating rules and unrivalled global scale.

Together, these create a network effect that has taken decades to build, and explain why so few companies attempt to compete with them directly. Most new payment businesses choose to work with Mastercard and Visa rather than replace them.

A typical financial technology company can build a better app, offer lower fees, or create a more attractive customer experience. Yet when a customer taps their card or phone to pay using Apple Pay or Google Pay, the transaction will often still rely on Mastercard's and Visa's underlying infrastructure. In the payments industry, this is known as riding the rails.

Building a rival system would require far more than better technology. A competitor would need to persuade thousands of banks, millions of merchants and regulators around the world to adopt an entirely new standard. This is what makes Mastercard's and Visa's position so difficult to attack. Their advantage is not simply the technology itself, it is the system surrounding it: the banks, merchants, rules, data and trust that have accumulated over decades.

Every few years, a new technology arrives that promises to make Mastercard and Visa irrelevant. So far, none has succeeded. Digital wallets such as Apple Pay and PayPal improved the customers' experience without replacing the underlying networks.

Account-to-account payment systems and QR-code payments can be cheaper for merchants because they bypass traditional card networks. However, they tend to work best within individual markets. They solve the problem of cost, but not the challenge of creating a trusted global network for international payments.

A longer-term uncertainty is whether AI-driven commerce creates an entirely new payments architecture. If machines begin executing transactions on behalf of consumers and businesses, the winners will need secure digital identities and trusted authorisation systems. Whether that creates an opportunity for Mastercard and Visa or opens the door to a new competitor remains uncertain.

The geopolitics of payments

Still, the nature of the competitive threat may be changing in other ways. For decades, global payments operated under the assumption that financial networks would remain politically neutral. That assumption has weakened. The increasing use of financial sanctions and restrictions on cross-border payments has reminded governments that whoever controls critical financial infrastructure also holds significant influence.

The response has been a push towards greater financial independence. More countries have already been building their own domestic payment networks, such as Brazil's Pix and India's UPI, which allow consumers to transfer money directly between bank accounts, often at little or no cost. If more governments come to view payments as a matter of national security as well as cost and efficiency, they will have the ability to build domestic alternatives.

Mastercard and Visa still have a major advantage in international commerce, where global acceptance matters far more than simply moving money from one account to another. However, even if the expansion of domestic networks is unlikely to displace them from this role, they can gradually reduce payment volumes – and hence revenues – from national markets that have historically been an important source of activity.

Mastercard and Visa are adapting rather than resisting. Instead of insisting that every payment runs through their networks, they increasingly provide the layer of technology that allows different systems to operate securely. More broadly, both companies have long been expanding beyond their traditional business of moving payments from one bank to another.

Regulation has constrained traditional payment fees – particularly interchange fees earned by banks, which are capped in many countries. Meanwhile, competition has encouraged financial institutions and merchants to demand more sophisticated services.

So Mastercard and Visa have focused on value-added services. They now provide technology that helps banks and businesses prevent fraud, verify identities, secure digital payments and analyse transactions. Just recently, Visa announced a new deal to buy BioCatch, a fraud intelligence firm, for $2.4 billion.

This shift has strengthened an already attractive business model. In effect, the duopoly are moving from simply operating payment networks to providing the software that helps many different payment networks function, and keeping payments safe and reliable.

Mastercard and Visa's trust layer

Whether this strategy is enough to offset future threats remains one of the biggest questions facing the industry. Mastercard and Visa have survived previous attempts to bypass them because most innovations have changed how we pay, not how payments are trusted and settled.

Sovereign payment systems, account-to-account transfers and blockchain-based settlement all represent more meaningful challenges. Yet history suggests that the duopoly are highly effective at adapting to new payment rails rather than being displaced by them.

Tomorrow morning, millions of people will buy a coffee with a tap of a card, phone or smartwatch without giving the process a second thought. Behind that simple action, a global network will verify their identity, assess fraud risk and connect two financial institutions in a fraction of a second.

That reliability has helped make Mastercard and Visa two of the world's most valuable companies. They are an essential part of the global economy. The technology that wins is often the technology people stop thinking about because it simply works, and that may be their greatest competitive advantage.

Their asset-light models, powerful network effects and trusted brands have produced two decades of exceptional returns for investors. There are still clear opportunities for growth as cash continues to decline, cross-border commerce expands and value-added services become a larger part of the business.

Still, none of that guarantees attractive investment returns from this level. The market already recognises their quality and values both companies accordingly (both are on a trailing price/earnings ratio of around 31 at time of writing). The real question is not whether these remain exceptional businesses, but whether future growth will be sufficient to justify the premium investors already pay for them. Disruption need not destroy the networks to disappoint shareholders. It only needs to erode the ambitious expectations embedded in today's valuations.

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Marcel Stötzel, lead manager of the Fidelity European Trust (LSE: FEV), isn’t deterred by claims that Europe’s economic record and outlook are just as dismal as the UK’s.

“Europe is plagued by poor demographics, low productivity and high government debt, none of which are getting any better,” he agrees. Economic output per capita is half the level of the US. But European stocks are not proxies for their economies, as they derive only a third of their turnover from Europe. “We are more bullish than ever.”

Meanwhile, on the macro front, he sees five reasons to be positive. “Germany's fiscal brake has been lifted, Mario Draghi's report on EU competitiveness promises to cut red tape, there is a large savings rate to be mobilised, Europe is spending more on defence and European integration is tightening.” As a result, “the GDP growth gap will not continue to widen” and “we are overweight domestic Europe for the first time.”

A disappointing year for Fidelity European Trust

Following its merger with Henderson European Trust nearly a year ago, Fidelity European Trust has become a £2.2 billion investment trust. It trades at a modest 5% discount to net asset value (NAV) and yields 2.3%. However, while performance has been excellent since its 1991 launch (13.2% per year against 9.5% for the FTSE Europe ex-UK index), it has lagged the index by 10% over one year, 13% over three, and 12% over five. This puts it 11%, 31% and 33% respectively behind JP Morgan European Growth & Income (LSE: JEGI).

In the latest annual report, Sam Morse, fellow portfolio manager, attributed last year's disappointing performance to “limited exposure to defence stocks, holdings in Novo Nordisk, chemical producer Symrise and software company SAP”. Novo Nordisk soared on the back of its weight-loss drug Wegovy, but then crashed 75% from its mid 2024 high before a slight recent recovery. SAP has suffered from concerns that AI will disrupt the businesses of established software companies. JP Morgan European Growth & Income had been more nimble, selling SAP early last year and Novo Nordisk the year before.

Still, every manager has a bad year, and Stötzel will surely get performance back on the rails again, maintaining the long-term record. He focuses on “companies with the ability to grow dividends sustainably for three-five years.” Examples include Inditex, owner of the Zara chain, which kept manufacturing at home and in North America instead of outsourcing it to China. This has enabled better quality control, less wastage, faster delivery and more flexibility.

Other top holdings include ASML, with a virtual global monopoly in the supply of machines for manufacturing semi-conductor chips, pharmaceutical company Roche, cosmetics giant L'Oréal and oil and gas producer TotalEnergies.

Should you invest in Fidelity European Trust?

Stötzel says the portfolio has a higher return on capital and better dividend growth than the market, while trading at no more than the historic valuation of 18 times earnings. Overall, European equities are no better than fair value, but if Stötzel is right and economic growth picks up, earnings growth should accelerate and investment returns continue to be strong. There would be a further boost if the historic aversion of Europeans to investing in equities abates.

Stötzel's thesis about the improving economic outlook for Europe relative to the US may prove optimistic, but it is more plausible than any thesis for the UK, to whose market investors continue to be patriotically attached. Europe is a much larger and broader market than the UK with many more growth stocks, offering managers a better choice for long-term investment. Fidelity European Trust may have tripped up last year, but it has a great long-term record, while investors in JP Morgan European Growth & Income must hope that pride doesn't come before a fall.

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Do you dream of giving up the day job and enjoying the freedom that would bring? You’re not alone. But many don’t want to wait until retirement age winter years to kick back. Can the FIRE movement help?

FIRE - financial independence, retire early – is a personal finance strategy that involves extreme investing and frugality during your working life in order to enable early retirement and financial freedom. In theory.

The concept was first established in the US in the 1990s, and encourages a series of tactics that have the potential to allow someone to give up work in their 40s.

So, how does FIRE work and can it really help you stop work sooner and 'retire' comfortably?

What types of FIRE strategy are there?

There are number if ways you can approach a FIRE strategy. These include:

• ‘LeanFIRE’ requires strict frugality and living on a bare minimum budget to achieve your goals faster;
• ‘FatFIRE’ means putting significantly larger amounts away in the hope of a more luxurious retirement;
• ‘BaristaFIRE’ strives for an early retirement funded by a healthy income-generating investment pot, topped up with a part-time or low-stress job.

Katharine Photiou, managing director, workplace savings at Legal & General (L&G) says the approach that appeals to most people is likely the third, because it offers maximum choice for less sacrifice.

“We go from birth to nursery, into primary school, then secondary school, university or further education, then work... there’s all this structure and process. There’s no sense of freedom.”

She says the true benefit of FIRE-related movements is raising awareness of money matters.

“They shift the conversation from being one of ‘when can I retire’ to one of financial freedom. And anything that gets people thinking about their finances – especially encouraging youngsters to engage with their finances sooner – is positive.”

If FIRE taken to the letter feels extreme, she says thinking about the kind of life you want to live, what makes you happy or how much is enough are healthier conversations.

“At its heart, FIRE is about control, flexibility, choice and having options. Having a career break, reducing your hours, starting your own business or taking a sabbatical, these are all positive.”

What can the FIRE movement teach you?

Louise Matthews is an advertising copywriter who lives in North London. She stumbled upon the Rebel Finance School – which runs courses to help people better manage their money (and advocates the FIRE movement) – on Facebook.

“At first the group felt quite aspirational, and at times annoying,” she says. “People were talking about having a lot of money and it didn’t feel aligned to my situation. I almost left a couple of times. But since participating in the course, I’m finding it more helpful – plus a lot more people have joined who are just starting out and have debt questions.”

Matthews was self-employed for over a decade before taking a full-time job two years ago, seeking financial security as freelance life was looking more precarious.

“My partner started his own business about five years ago and hasn’t been able to contribute much to the household bills, so it’s pretty much all on my shoulders.

The couple doesn’t have a mortgage (they rent from a private landlord), nor any real savings besides a £3,000 nest egg set aside for their daughter. Matthews has around £50,000 saved into a pension.

“Finances-wise, we’re in quite a bit of debt, which was my impetus for doing the course. I have a personal loan with around £11,000 still outstanding (it was £25,000 so I’ve paid quite a bit off over the past two years), and another £14,000 on interest free credit cards.”

One lesson the course teaches is to try and put away £1,000 into an emergency fund before proactively paying off any debt.

Like many Brits, even though she’s only 42, she’s feeling the consequences of not starting sooner.

“I grew up with a mentality that money is fun money – ‘you only live once’ – that has made it hard to get out of debt. I used to say ‘yes’ to everything and worry about it later, hence having lots of interest-free credit cards,” she says.

Financial independence, or freedom, for Matthews isn’t about giving everything up to retire in her 40s, but about building better habits for a financially ‘freer’ future.

“What I’ve learnt is that [my lifestyle] isn’t sustainable. I don’t want to be in debt anymore. So my priority is to work hard to get out of it.”

Why investing earlier is so important

L&G’s Decades Ahead research estimates around nine million people aged 25-54 are currently not on track for an adequate retirement, taking into account basic needs, current income and housing costs.

Starting early and taking small steps beyond the bare minimum (like the 8% auto-enrolment through a workplace pension) has such a greater impact than thinking about saving huge amounts, says Photiou.

“A 27-year-old putting in just an extra £30 a month, at state pension age would have an additional £100,000. Just invest as early as you can, and stay invested.”

Alex King, founder of personal finance education platform Generation Money says it’s worth bearing in mind that, traditionally, the FIRE movement came from the US, so to beware guidance may be aimed at different audiences.

Done well, he says FIRE can deliver real freedom, but it relies on strong earnings, careful planning and navigating risks like inflation, market volatility and longevity.

Is FIRE for you?

There are limitations to such strategies.

Having a reliable income is a basic starting point. Being employed obviously helps, because of the employer contributions on offer.

It’s more challenging if you have dependants, be they children or elderly parents, says Photiou.

Anyone renting or paying off a mortgage has further outlay – especially high if they live in London or another major city.

“FIRE has clear appeal but works best for a specific group,” says King.

“In the UK, it favours higher earners who can save aggressively and benefit from higher pension tax relief, while keeping spending in check. At its core, it’s a simple mix of disciplined saving and smart use of tax wrappers like ISAs and pensions.”

So while the dream may be to kick back and relax for the next 40 years, the reality of ever achieving that looks quite different.

Recent years have thrown a series of cost-of-living challenges, with the majority of people undersaving and underinvesting.

Rules of thumb around optimal savings rates vary but assuming 8%-12% for a moderate retirement – based on a ‘normal’ retirement age, anyone hoping to retire sooner needs to do some serious budgeting.

In Australia, they suggest a 15% contribution rate, while in the US many suggest a ‘half your age’ savings rate (if you’re starting age 20, save 10% of your salary; if you’re starting at 30, 15%; those starting at 40 should save 20% and so on).

But these frameworks or ‘rules’ are blunt instruments, overlooking a multitude of factors.

Traditional retirement plans talk about a U-shaped expenditure path, with more outlay at the beginning, followed by a period of lower outgoings, which may pick up again if long-term care has to be factored in.

Photiou says: “The Australians call them the go-go years, the slow-go years and the no-go years.”

But if you’re looking at FIRE, you’ll likely be wanting more go-go, and less slow-go. So Photiou suggests a higher proportion of working life salary will be required.

Like the sound of FIRE?

L&G have kindly crunched some numbers for MoneyWeek using certain assumptions such as starting work age 22 and using the minimum, moderate and comfortable lifestyle costs as estimated by Pensions UK in its Retirement Living Standards.

Market reactions were mixed off the back of latest quarterly earnings for the US tech giants, raising a big question – when will these companies’ huge expenditures start to bear fruit?

It’s becoming clearer that the companies once thought of as a collective, the Magnificent 7 – Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Meta (NASDAQ:META), Microsoft (NASDAQ:MSFT), Nvidia (NASDAQ:NVDA) and Tesla (NASDAQ:TSLA) – are no longer running on the same track at quite the same pace, but they’re not entirely divorced from each other either.

In recent weeks, Alphabet (22 July), Tesla (22 July), Microsoft (29 July), Meta (29 July), Apple (30 July) and Amazon (30 July) all reported quarterly updates. Nvidia is due to publish its comparable financial statement later this month (26 August).

While Microsoft and Amazon’s share prices surged by roughly 15% on their respective next trading days after the results (30 and 31 July), Alphabet, Meta and Apple suffered respective declines of roughly 7%, 8% and 7%, largely due to high capital expenditure (capex) and supply chain concerns. Alphabet, for example, raised its spending forecast to as high as $205 billion this year.

Tesla, meanwhile, saw its share price fall by more than 14% the day after its results. CEO Elon Musk called this a “massive capex year”, adding that Tesla “should be spending on capex as fast as we can – spend as fast as we can without it being too wasteful.”

Apple’s share price fell by 7% following a supply chain warning from outgoing chief executive Tim Cook, who said: “We’re seeing some very significant constraints currently with limited flexibility in the supply chain to remedy it.”

When will investors see a return on artificial intelligence spending?

Rather than blindly supporting companies based on promises (which burnt many when the dotcom bubble burst), today’s investors – conscious of those past mistakes – are more demanding.

Goldman Sachs has estimated that artificial intelligence (AI) capex is around $765 billion currently but is expected to grow to around $1.2 trillion next year. And the market is becoming concerned that it’s not yet seeing conversion – or hearing explanations why it’s not seeing conversions – into near-term cash flow.

So while the Mag 7 aren’t entirely running in tandem, there are links. While Alphabet and Tesla were first to publish and therefore first to spook the market, an index of all seven companies, the Bloomberg Magnificent 7 Total Return Index, fell 4.8% the next day, wiping off $797 billion in collective value.

Free cash flow, or lack of it, was a central theme from all these results – specifically, the impact from the level of capex. Alphabet reported its first ever negative cash flow, while Meta posted a 91% year-on-year drop in free cash flow. Amazon also reported a negative free cash flow of $7.6 billion.

Chris Elliott, portfolio manager of the Evenlode Global Equity fund, which lists Amazon as a top 10 holding, said Amazon’s CEO Andy Jassey was under no illusion over timeframes.

“Andy Jassey was clear-eyed on the break-even point for investment – it takes a little less than three years for the company to recoup the initial investment of buildings and chips,” he said. “Each data centre can then host four or five further generations of servers, which have higher returns.”

He praised the business’s ability to manage costs and drive efficiencies, which have been proven during multiple growth phases over the company’s lifecycle.

“Amazon has an excellent track record of investing in projects that require huge economies of scale to succeed. This was true with both its ecommerce and logistics network and the initial investment into cloud computing.

“In both cases, its cash flow declined substantially during the investment phase, and the company was careful to manage costs and drive efficiencies. This ‘muscle memory’ positions the company best out of all the hyperscalers to withstand the costs of scaling.”

Big tech paths are diverging

The companies that look more challenged appear to have a less clear path forward.

Nick Saunders, chief executive of online investment platform Webull UK, said where Amazon and Microsoft appear to already be monetising their AI capex, questions were being raised over Meta and Alphabet’s ability to continue to invest at current levels.

“How long can they justify these increased valuations, especially when many people think all they’re doing is using AI for advertising?” he said.

The other headwind to note is a looming profitability squeeze.

Saunders added: “If the hyperscalers are massively increasing their AI capex to the levels we’re hearing – $1.2 trillion or so next year – how long can [Meta and Alphabet] afford to stay in the race, particularly when they have reduced cash reserves?”

When all the big tech giants are investing so heavily, for those where the returns look less clear, a rational view might be to expect them to reduce capex, or focus more on core products.

“But how does the market treat any tech firm that says it’s putting less into AI? It would come across like an admission of failure, which could be dangerous from a pure optics point of view,” said Saunders.

What can investors take from these results?

While earnings are always important, the wider market sentiment around AI and the tech behemoths made this earnings season feel particularly significant.

Evenlode’s Elliott said all eyes were on the tech industry because it was facing a decision tree, with investors wanting to see which way they’d turn.

“Would the hyperscalers cross the Rubicon into negative free cash flow, or would they cut AI spend? Those with a clear, responsible plan were rewarded and those without were punished – evidence of a functioning stock market.

“Long-term investors must balance both the importance of the technology with the market exuberance of the past few years, and the importance of active and responsible capital allocation continues to increase.”

That responsible tone was striking from several of the hyperscalers, in relation to capex spend.

Elliott added:“[Amazon CEO Andy] Jassey was clear that ‘if the demand isn't there, we won’t spend the capital’ and the team at Microsoft went as far as to reference the US railroad buildout as a direct analogy.

“Investors are no longer simply rewarding management teams for ever-increasing AI spend – which is a good thing in our view – and management teams are adapting their message. The groundwork is being laid for a cut, if deemed necessary, in the coming quarters.”

If you’re buying an index fund or exchange-traded fund (ETF) that tracks a particular index, there are two main options you can choose.

An equal-weighted index fund is exactly that – a fund where all components (shares or bonds) are the same size.

Conversely, a market cap-weighted index fund allocates proportionately, so the larger companies’ stock or bonds make up a higher share of the index and the smaller companies’ stock or bonds comprise a smaller amount.

If the point of an index fund is to have diverse exposure to lots of different companies (100 in the flagship FTSE index, 500 if it’s the US’s S&P equivalent and so on) then some might say using market capitalisation to allocate each component of the index seems a little short-sighted.

If you’re a US index investor, buying a fund that tracks the S&P 500 index ought to give you access to 500 shares (it’s actually slightly over that – 505 at the end of July – because some companies, like Google’s parent Alphabet, list more than one share class of their stock). Yet the so-called Magnificent 7 (Mag 7) names account for around a third of the S&P’s value, with a combined market cap of around $22 trillion.

As a proxy for the wider US stock market, that concentration is reflective of the sector’s position in the market and role in the economy. But as an investment vehicle whose role is to give a one-stop shop to a diversified index, it raises the question of whether such an approach has some shortcomings.

Ultimately whether you favour one or other approach is a personal choice but there are arguments supporting both viewpoints.

Why does equal- versus market cap-weighted matter?

The main differences are about portfolio characteristics, rebalancing and performance.

When the Mag 7 were soaring, many investors might have welcomed their dominance. But now the performance of those stocks is slowing, it’s shining a light on the concentration risk they have presented.

According to ETF provider HANetf, all Mag 7 stocks have underperformed the index for the first time since 2022.

Mark Preskett, senior portfolio manager at Morningstar Wealth, said equal-weighted indices can look very different from market cap-weighted ones, with much lower tech exposure and more even allocation across the other sectors, such as healthcare, industrials, energy and financials. He added that they tilt away from megacap growth and towards a cheaper, less profitable part of the market.

The bigger a company becomes, the more of the index it comprises, inevitably attracting more money flows into it through the funds tracking the benchmark. In short, the winners keep getting bigger, because they are already the winners.

When those companies are outperforming, that makes for a strong investment case. But when things wobble, the opposite becomes true. This is referred to as concentration risk. A broad index may still contain hundreds of names but its performance depends on relatively few, large constituents.

How does performance compare?

The growth potential can vary sharply between the two strategies.

Morningstar compared its Global Target Market Exposure (TME) Equal Weighted index fund, which tracks gross returns of the top 85% largest mid- and large-cap global stocks (equal-weighted), in US dollars over 10 years (1 August 2016 to 1 August 2026). It took an initial value of $10,000, and with a cumulative return of 130.68%, turned that amount into $23,041.

The market cap-weighted peer generated a cumulative return of 224.68% over the same timeframe, turning $10,000 into $33,360.

This stark difference highlights the trade-off investors are making. Equal weighting can mean giving more exposure to mid-cap value characteristics and less to the megacap names driving the market-cap indices. But in the market cap-weighted index, its winners have generated significantly higher returns.

Rob Edwards, global head of product & research at Morningstar Indexes said this was not a new phenomenon. He pointed to long-run evidence that suggests a relatively small number of companies often drive returns.

A study by Hendrik Bessembinder from Arizona State University’s business school studied 29,754 stocks from 1926 to 2025, a time period over which $91 trillion of shareholder wealth was created. Just 46 companies accounted for half of that total wealth creation.

Yet Cameron MacDonald of HANetf said scepticism around artificial intelligence spending, a rotation into smaller companies and mixed recent results for the Mag 7 all support the case for equal weighting.

Citing FactSet data, Invesco (which also offers equal-weighted index strategies) pointed out that the equal-weight version of the S&P 500 index outperformed its market cap-weighted peer by an average of 1.05% annually between 1999 and 2023.

Benefits of equal weighting

If diversification is the point of investing in a broad index, then arguably the breadth of underlying company nuances is what you are seeking.

According to Morningstar, in the first quarter of the year, 65% of all European asset flows moved into passive funds, totalling €120 billion (£103 billion). With more money flowing into stocks via passive funds and exchange-traded funds (ETFs), there’s a risk that a market cap-weighted approach ends up rewarding the winners and inadvertently not backing the smaller companies (potentially the future winners) to the degree you might like to.

That is the argument made by proponents of equal-weighted funds. They give the smaller constituents a bigger role in the portfolio and reduce the influence of the biggest names. In practice, that often means less concentration in technology and more exposure to financials, healthcare, industrials and energy.

“You’re getting materially different outcomes and sector biases, about 10 times the market cap and almost a mid-cap value as a style rather than megacap growth”, said Preskett.

Further, those smaller stocks are cheaper; they have lower P/E multiples, lower price-to-book, but are often less profitable.

He does see how equal-weighted strategies can be used more tactically. “As markets got more concentrated [earlier this year] there seemed to be some more interest [by peers] in equally weighted portfolios. They were seen as a way of dialling down the risk, almost smoothing returns in a way as you’re bringing in a much more diversified subset.”

But beyond such tactical use, it wasn’t a long-term strategy his team would recommend for mainstream clients.

Edwards also said he disagreed with the idea that surging passive flows distorts long-term outcomes.

“I’m aware there’s been a narrative for academic summaries on this but I think in the long run, the reality is that if a company doesn’t have solid fundamentals, financials, growth characteristics, they're not going to keep growing.”

The winners are the winners because they have incredibly large moats; incredible scale, cost efficiencies, network effects of their businesses.

“Index construction plays very little part in terms of long-term share price growth. I don’t think you can point to index construction or the rise of passive investing because the reality is there's always going to be active management.”

Active management can play the role of countering the momentum when stocks get too expensive.

Ultimately the choice between equal- or market cap-weighted funds depends on what you want to achieve. They’re two very different strategies. To capture the market ‘as is’, market cap-weighting remains the default. If you’re hoping to reduce concentration and spread risk more evenly across the index, that makes a case for equal weighting.

Having smashed through the record for the largest initial public offering (IPO) in history back in June, SpaceX (NASDAQ:SPCX) announced results for the first time as a public company on 4 August.

SpaceX’s IPO saw its shares skyrocket, gaining 19% on their first day and a further 25% over the following two sessions.

But by market close on 4 August, ahead of the earnings release, they had fallen to $125.33 – 7% below the IPO price of $135 and 44% below the $225.64 peak they reached on 16 June.

And the reaction following results exacerbated this crash-landing. The stock opened more than 10% lower on 5 August, the day after the results, despite some impressive headline figures. Increased spending seems to have spooked many investors.

“Part of a SpaceX rocket crashing into the moon this morning is probably a good metaphor for the share price performance so far,” said Chris Beauchamp, chief market analyst at investing and trading platform IG.

Revenue was encouraging, increasing 92% year-on-year to $7.8 billion. Analysts polled by LSEG had yielded a consensus forecast of $6.9 billion, so this represented a healthy beat – at least in theory.

“It’s so early in [SpaceX’s] life as a public company, that beating consensus carries little real weight,” said Matt Britzman, senior equity analyst at investment platform Hargreaves Lansdown. “Analysts are still trying to work out what the business should look like.”

Rather than these estimates, investors appear to have focused on the negatives, including rising costs across all segments – particularly artificial intelligence, where spending rose by $1.6 billion.

Across the business, losses narrowed to $541 million from $1 billion, and Elon Musk moved the company’s target date to achieve $1 trillion in annual revenue forward by a year, from 2031 to 2030.

The initial success of SpaceX’s IPO made Musk a trillionaire, though the subsequent share price declines have brought his nominal wealth back below the threshold.

But could there be complications when Musk, and other long-standing investors, try to realise this wealth?

How might lock-up expiries impact SpaceX shares?

On 6 August, the first of a series of lock-up periods for longstanding SpaceX shareholders expired.

Investment research firm Morningstar predicted these lock-up expiries could lead to waves of selling.

Lock-up periods are a period of time following an IPO during which pre-existing shareholders cannot sell their shares (for the most part, these are company insiders and any investment trusts or other institutional investors that invested in the company when it was private).

In theory this protects new investors from a sharp sell-off once the company goes public – because these pre-existing shareholders are, in theory, heavily incentivised to realise some of the value or profits from their shareholdings when a company lists. Staggering the periods at which they can sell gives the share price a chance to stabilise on the public market.

SpaceX’s lock-up periods expire in multiple tranches between 6 August and the one-year anniversary of the IPO.

Each lock-up window expiry provides an opportunity for longstanding shareholders to bank profits, and the expectation is that many of them will.

This usually sees a dip in a company’s share price as there is a sudden influx of sellers.

The 911 million SpaceX shares that became available for trading on 6 August is more than the amount that were sold in the IPO.

Musk himself won’t be able to sell his shares until June 2027, though he has previously said that he won’t sell his shares even then.

Matthew Kennedy, senior strategist at investment bank Renaissance Capital, told Morningstar that “SpaceX has the longest series of lock-up releases we’ve ever seen”.

In the event, there was no sudden deluge of selling when the first expiry hit. SpaceX shares actually rose more than 6% on 6 August.

But with more unlocks approaching in August, September and October, SpaceX’s share price could continue to fluctuate over coming weeks.

“[In the near term] lock-up expiries, a growing public float and upcoming Starship launches are likely to keep the shares volatile,” said Britzman.

There’s a huge growth story going on in Vietnam that investors would be well-advised to pay heed to.

Its economy grew by 8% last year, making it the 13th-fastest growing in the world according to World Bank.

While much of the rest of Southeast Asia’s stock markets are heavily dominated by artificial intelligence (AI) hardware makers, Vietnam’s has a much more broad-based composition, including a relatively high weighting towards more ‘traditional’ industries, meaning it can offer genuine diversification.

“The combination of economic growth, reform and attractive valuations creates a compelling long-term environment for active investors,” said Tung Dang, chief economist at Dragon Capital – an asset manager that specialises in investing in Vietnam.

It isn’t yet an emerging market – but its reclassification has been confirmed, and is only weeks away. The redesignation will immediately add substantial amounts of passive fund flows into the country’s stock market, and over the following years this could be followed by billions of additional capital from active managers, adding to the many reasons why, of all the regions to invest in, Vietnam is well worth consideration at the present time.

Government reforms are driving growth

Strong growth is one of the most compelling reasons to invest in Vietnam, and government policies are underpinning the story.

Craig Martin, co-chairman of Dynam Capital, says that Vietnam is one of the few markets in the world that offers investors the combination of structural economic growth, political stability and attractive valuations.

“Over the past three decades, Vietnam has transformed itself into one of Asia's most dynamic manufacturing and export economies,” he said. “Today it is moving into a new phase of development, driven not only by exports but increasingly by domestic consumption, rising household wealth, financial deepening and technology adoption. This is being driven by government reforms.”

These reforms are explicitly focused on empowering Vietnam’s private sector, for example by boosting R&D spending and foreign investment. Entrepreneurship is also at the core, with Resolution 68 describing entrepreneurs as “new warriors on the economic front”.

“The government has now set an ambitious target of 10% annual growth over the next decade and has rolled out a new wave of domestic reforms – dubbed Doi Moi 2.0 – to help get there,” said Khanh Vu, lead portfolio manager of Vinacapital Vietnam Opportunity Fund.

“The original Doi Moi reforms in the late 1980s lifted Vietnam from poverty to middle-income status,” Vu added. “This second wave aims for a similar step-change to a high-income economy, similar in the path to what we have seen in other developed Asian economies.”

As with many emerging markets, there is also a strong demographic trend underpinning this – including a young, expanding and consumption-driven middle class, alongside rapid urbanisation and rising productivity.

Vietnam’s stock market

The Vietnamese market, as characterised by the MSCI Vietnam Index, is dominated by the real estate and financials sectors, which account for 44.4% and 24.6% of the market respectively (as of 30 June).

This is slightly skewed because two real estate stocks – Vingroup and its former subsidiary Vinhomes – account for more than 38% of the index between them.

But this dominance of real estate and finance is to be expected in an emerging economy, says Vu.

“Banks remain the primary source of funding and the backbone of economic growth, while real estate developers play a key role in driving urbanisation — a rate that stands at only ~40% in Vietnam, compared to 67% in China, 63% in Thailand, and 75% in Malaysia,” he said.

Vu also highlighted the importance of hard asset-linked sectors (industrials, construction materials, energy and utilities) within the Vietnam market and picked out Hoa Phat, the country’s largest steel producer, as a key beneficiary of urbanisation and infrastructure spending.

“Consumer businesses are another important theme, benefiting from rising incomes, urbanisation and an expanding middle class,” said Martin. “Retailers, food producers and consumer services continue to enjoy long-term structural growth.”

Vietnam is also conspicuous among emerging markets for the relative lack of state-owned enterprises in its largest stocks. “Many of the leading companies were started by entrepreneurs,” Martin points out. There is some state investment in the financial sector, but this tends to happen alongside specialist foreign investors.

Vietnam’s emerging market status confirmed

In April 2026, FTSE Russell confirmed that it will reclassify Vietnam from a frontier market to an emerging market, a process that will begin on 21 September and be implemented in four tranches over the following 12 months.

This could potentially mark a step-change from recent years during which, as Vu points out, foreign investors have been net sellers of Vietnamese stocks.

“The higher interest rate environment in the US and the AI-related frenzy [have been] pulling capital elsewhere,” he said.

Emerging market classification could reverse this trend, because the market will be accessible to a wider pool of institutional investors and passive funds whose mandates currently prevent them from investing in Vietnam.

“The most immediate effect will be passive investment from funds that track emerging-market indices,” said Dragon Capital’s Dang.

But the impact is unlikely to happen overnight – especially as most of the anticipated new capital is likely to come from active investors.

“While passive inflows receive most of the attention, I think the bigger story is that an upgrade raises Vietnam's visibility among global investors,” said Martin. “Once institutions begin researching the market, many active managers also become interested, creating more durable sources of capital.”

Dang quantifies the potential passive tracker inflows at around $1.5-2 billion once inclusion completes (expected to be September 2027). Active allocations following after this are expected to raise total foreign inflows to $5-10 billion.

Finding value in Vietnam

For one reason or another, Vietnam’s market – despite impressive growth rates – is often overlooked, and this means that it offers remarkable value.

“Currently, the market trades at around 13x forward P/E — and if we exclude some anomalies, closer to below 10x,” said Vinacapital’s Vu. “That's a valuation typically associated with a period of economic stress, not an economy growing at one of the fastest rates in Asia.”

Dang argues that valuations for Vietnamese stocks remain attractive compared to historical levels despite rising earnings and the country’s strong economic growth.

“We expect profit growth across the larger companies to remain robust, yet the market continues to trade at a discount to many regional peers and below its own historical valuation ranges,” he said. “Earnings expectations have also held up well despite geopolitical uncertainty, higher oil prices and tighter global financial conditions.”

Vietnam can also offer diversification for the typical portfolio, which is frequently dominated by a handful of large-cap US technology companies.

“Investing in Vietnam means investing in the ‘traditional’ sectors but experiencing tremendous growth potentials, following the same pattern as developed markets experienced 20-30 years ago,” said Vu.

How to invest in Vietnam

Given its small size, lack of investment coverage and the outsize weighting of the index’s two largest stocks, passive investment isn’t generally seen as the best way to invest in Vietnam.

“Vietnam is not simply an index story,” said Martin. “There are very significant differences in quality, governance and capital allocation between companies. Stock selection remains critical.”

There aren’t many passive funds available to UK-based investors tracking Vietnam’s market either. It is also difficult to buy the country’s stocks directly, but fortunately there are a handful of investment trusts focusing on the country.

The largest of these by market capitalisation is Vietnam Enterprise Investments (LON:VEIL), managed by Dragon Capital. This targets Vietnamese companies with attractive growth and value potential, good corporate governance and an alignment with the country’s underlying economic growth drivers. Vingroup is the top holding as of 30 June (though VEIL is significantly underweight compared to the index), followed by state-owned bank BIDV and consumer retail chain Mobile World.

Vinacapital Vietnam Opportunity Fund (LON:VOF) invests in privately-held Vietnamese companies as well as publicly-listed ones, and is sector-agnostic. As well as Vinhomes and Mobile World, top holdings (as of 30 June) include real estate development firm Khang Dien House, commercial bank (and Vietnamese Ministry of National Defence subsidiary) MB Bank, and port operation and logistics firm Gemadept.

Finally, Vietnam Holding Ltd (LON:VNH), managed by Dynam Capital, focuses on high-growth companies in Vietnam particularly in domestic consumption, industrialisation and urbanisation.

For more information on each of these Vietnam-focused investment trusts, see our article on The best funds to buy as Vietnam evolves.

If you’ve sold a house recently and it felt like it took an age, you aren't alone. It currently takes 216 days on average to find a buyer and complete the sale of a property across Great Britain.

The average time it takes to find a buyer across England, Wales and Scotland was 62 days and the time taken to complete a purchase was 154 days in June, Rightmove finds.

Sellers with flats who have found a buyer are facing the longest wait to complete – an average of 169 days. In contrast, owners of terraced and semi-detached houses are waiting 149 days on average to complete a purchase after finding a buyer.

Johan Svanstrom, Rightmove’s CEO said this was the longest summer wait on record.

"An average 154 day wait to complete the transaction process itself is simply far too long. Rightmove data shows that in some parts of the country the delays are even more significant. Housing mobility is closely linked to economic growth. We believe greater digitisation of moving journey processes, stronger information standards and transparency to all stakeholders is key," he said.

Delays in the house-selling process were caused by a number of factors including longer chains, legal hold-ups and complications involved with selling leasehold properties.

Rightmove also said a big driver of long competition times was conveyancing solicitors dealing with high caseloads. It comes with £205 billion worth of residential property currently on sale on the Rightmove website, according to the portal's own figures, which, if sold, it said could stimulate UK economic growth.

The regions where properties are selling the fastest and slowest

The analysis reveals homes are generally much quicker to sell in the north of England and Scotland than the south of England and Wales.

It’s currently quickest to sell a home in Scotland with the time to find a buyer combined with the time to complete a purchase sitting at 127 days on average – over four months.

The second quickest place to sell a home is in the North East of England, where the total time to move home is 194 days on average.

The third quickest is Yorkshire and the Humber, with the total time to move home taking on average 207 days.

Homes take the longest to sell across Great Britain in London. It takes 70 days on average to find a buyer and 174 days to complete a purchase, a total wait of 244 days (or over eight months), Rightmove found.

Source: Rightmove

The local authorities where it’s fastest and slowest to sell a home

The 10 local authorities where it’s quickest to sell a home after finding a buyer are all in Scotland, according to Rightmove.

It is quickest to complete the sale of a property in Clackmannanshire where the average wait time is 76 days, then Angus and Dumfries and Galloway where it takes 77 days on average.

The local authority where it takes the least amount of time to complete a house sale outside of Scotland is in North East Derbyshire (120 days), then North East Lincolnshire (122 days) and Chesterfield (124 days).

The time taken to complete a sale is longest in Slough (229 days), Brentwood (209 days) and Colchester (205 days).

Source: Rightmove

How to speed up the house-selling process

Getting paperwork ready and in order can shave weeks of the house-selling process, said Nick Mendes, mortgage technical manager at broker John Charcol.

“Title deeds, Energy Performance Certificate, leasehold info, planning or building regulation certificates, all of it should be sat with your conveyancer on day one, not chased up after an offer lands," he said.

It’s also worth getting a conveyancer involved before you’ve got a buyer, not after.

“Too many sellers wait until an offer's accepted to start looking for a solicitor, and that's time you never get back. Get the ID checks, source of funds and initial searches moving early so things can progress the second a sale is agreed.”

If you’re selling a leasehold property, you can speed up the process by extending a lease through your landlord and requesting management packs as soon as possible.

It can be harder to sell a leasehold property with less time left on a lease while lenders may be reluctant to issue a mortgage to a buyer, which can also delay the house-selling process.

Management packs contain details on what the buyer is purchasing, such as service charges and insurance costs, but can take weeks to arrive.

Mendes added that it’s crucial to set a realistic asking price on your home when putting it on the market. Recent research from Zoopla found many people are setting the initial price too high which means it takes longer for a property to sell, sometimes years.

“Go in too high and have to correct it later, and you've just added time on market and given any chain a chance to fall apart,” Mendes said.

Banking stocks are back. Towards the end of January 2026, Deutsche Bank (Frankfurt: DBK), the perennially struggling German lender, told investors it had booked record profits in 2025 and was trading ahead of management's long-term profitability targets.

This was a landmark not only for the company, but also for the wider global banking sector. Financial institutions generated a total shareholder return of 30.2% last year, according to the latest report from the Boston Consulting Group, ahead of information technology and all other major sectors. Yet most financial institutions still trade at roughly a 40% discount to the market.

If there's one bank that reflects the issues that have affected the sector for the past two decades, it's Deutsche Bank. The bank aggressively chased growth pre-2007 and became one of the world's most influential financial institutions, but quickly fell apart in the financial crisis. It initially avoided a direct German government bailout, but relied heavily on emergency loans from the US Federal Reserve to stay afloat.

As management boasted about not taking cash from any government, it had over the next 15 years to raise capital on four occasions for a collective total of more than €30 billion. The bank also paid approximately $10 billion to settle long-running investigations into its sales practices before the financial crisis. It has also been raided by the German authorities on multiple occasions due to tax probes and money laundering. The lender has paid around $20 billion in fines over the past two decades.

In many respects, it is amazing the bank is still around, but it has struggled on and this year's earnings release seemed to represent a high-water mark. The company reported a post-tax return on tangible equity – a key measure of banking profitability – of 10.3% with a profit before tax of €9.7 billion, up 84% year on year.

Costs fell across the business and it reported a strong rise in fees from its asset-management and private-bank arms. It has also started returning cash to investors. Management outlined plans to return up to €2.9 billion to shareholders in January, comprising a €1 per share dividend and a €1 billion share buyback authority.

Big banking stocks get a lift from tailwinds

Deutsche Bank isn't the only global lender that has reported a surge in profitability over the past couple of years. The entire banking sector is reporting some of the best profit and earnings figures since before the financial crisis and shareholders are reaping the benefits.

The UK's Metro Bank (LSE: MTRO) is another example. It came close to collapse in 2023 before securing a rescue refinancing and has spent the last three years refocusing the business. In the first quarter, it reported a record level of income, delivering a return on tangible equity of 6.4%; management wants to increase that to 18% by 2028.

Metro Bank and Deutsche Bank are two very different institutions, but they are benefiting from the same underlying trends that are acting as significant tailwinds for banking stocks. In its latest set of results, Metro reported a 22% rise in net interest income, as its net interest margin – a measure of lending profitability – came in at 3.17%. Lending to small businesses rose by 67% and the bank cut costs by 7%. All big financial institutions are making significant cost reductions as they embrace and adopt AI. According to US employment data, payrolls in the financial services and information technology sectors have declined by 28,000 per month on average in 2026 as AI adoption has accelerated.

US banks such as JPMorgan Chase (NYSE: JPM), Citigroup (NYSE: C) and Goldman Sachs (NYSE: GS) have all said they will use AI to help employees crunch more data, and that will lead to job losses. Standard Chartered (LSE: STAN) announced in May that it would cut more than 7,000 jobs over the next four years as the bank accelerates the use of AI. Morgan Stanley (NYSE: MS) has also said that it will cut 3% of its workforce as AI takes on more work.

Banks reap the benefits of higher interest rates

Falling costs are only part of the equation for banking stocks. They've also been able to take advantage of the stronger interest-rate environment over the past five years. At its core, banking is all about how much lenders can earn on the spread between deposits received from savers and the money they lend out either to businesses or consumers. This spread between the cost of capital and interest received is called net interest margin – one of the most significant metrics in banking. The global bank net interest margin was 1.65% in 2024 and 1.63% in 2025, according to McKinsey's 2026 Global Banking Annual Review. But while the global rate declined, the margin in the US rose by nine basis points, in Japan by seven and in the UK by six.

Banking stocks are still reaping the benefits of higher interest rates even as central banks the world over have started to bring rates down from the highs seen in the years immediately after the pandemic. Most banks borrow in the short-term lending market and then lend on a longer-term time horizon to consumers or businesses. This helps manage risk and means it can take time for interest-rate changes to filter through the system. Banks also make the most of so-called structural hedges, using stable low- or zero-rate customer deposits as long-term funding and executing interest-rate swaps to convert exposure to floating rates into fixed yields.

For example, Lloyds Bank (LSE: LLOY), the UK's largest mortgage lender, reported a net interest margin of 2.95% in 2024, 3.06% in 2025, and 3.17% in the first three months of 2026. The company has been able to earn more even as interest rates have fallen from a high of 5.25% in the first few months of 2024 to today's rate of 3.75%, as consumers have rolled off long-term fixed mortgages at low rates and have had to fix at a higher rate.

Costs and higher interest rates have helped banking stocks, but so has the economic environment. Despite concerns that higher rates globally would lead to an increase in defaults as companies struggled with a higher cost of debt, in reality the outcome has been very different. All six major US banks that have reported results so far reduced the amount of money they have set aside to cover bad loans. Goldman Sachs reported a 73% decline for the same period last year, Morgan Stanley cut its credit provisions by 50%, while Bank of America (NYSE: BAC), JPMorgan, Citigroup and Wells Fargo (NYSE: WFC) all reduced provisions by 9%-14%.

At the same time, demand for loans has increased. A strong economic recovery in the US has driven demand for business and consumer borrowing. Analysis of the major US lenders' results conducted by Fitch Ratings found that commercial loan growth has now exceeded 7% year on year for 14 straight weeks. All of the largest major lenders reported double-digit loan growth for the second quarter and some smaller banks have reported the strongest growth since 2012. In the UK, too, demand has picked up despite cost-of-living pressures. Across Europe, demand for loans and credit lines has increased in every quarter since the second quarter of 2024 (apart from the first quarter of 2026), according to data from the European Central Bank. In the second quarter of the year, the requirement for loans increased by 3% overall.

Record highs for stock trading and deals

Buoyant global equity markets have also helped the world's largest investment banks report a jump in trading revenue this year. Bank of America reported a record $3.6 billion dollars in equity trading revenue during the second quarter of 2026 (up 70%) and $3.5 billion in fixed-income trading revenue. Goldman Sachs reported a record $7.2 billion dollars in equity trading revenue for the quarter, up 72% from last year. JPMorgan Chase's equities traders posted an 86% gain to $6 billion.

These numbers follow a record 2025. Banks generated $271 billion of revenues from global markets last year, according to strategic benchmarking firm BCG Expand. That's $11 billion above their 2009 total – the highest level in recent memory. The big five US banks generated $134 billion of revenues from markets between them last year, 16% above 2024's levels.

As traders trade, deal makers are raking in cash for these financial behemoths as well. There have been about $1.7 trillion of deals announced so far this year, according to data compiled by Bloomberg, which excludes SpaceX's combination with xAI. That's the fastest pace since 2021, the high-water mark of the past few decades. Goldman Sachs has established a clear lead. The Wall Street bank has advised on more than $1 trillion of mergers and acquisitions this year already, according to data from Dealogic. Some of the deals the bank has helped advise on include Unilever's $44.8 billion sale of its food business to McCormick and Dominion Energy's $118 billion sale to NextEra Energy.

These Wall Street banks tend to eat the lion's share of revenue from global equity trading and investment banking, but European banks tend to be stronger in wealth management, which has also seen a significant increase in profitability, particularly among high-net-worth and ultra-high-net-worth individuals. Swiss bank UBS (Zurich: UBSG) reported an 80% increase in net profit for the first quarter of the year thanks to an increase in income from its investment bank and its Global Wealth Management arm. Net new assets in Global Wealth Management totalled $37.4 billion, equivalent to annualised growth of 3.1% in transaction-based income, and the bank's asset-management unit added $14 billion in net new money. Overall, UBS reported $7.1 billion in revenue from global wealth management for the first quarter of 2026, an 11% rise year-over-year. Group invested assets stood at $6.9 trillion at the end of the quarter.

Deutsche Bank, too, has reported a robust performance by its asset and wealth-management arm. The bank reported topline net revenue growth of 2% for the first three months of the year and a rise in profit before tax of 7%. Revenue at the asset-management arm rose by 10% and profit before tax was up 37% as assets under management increased €84 billion year on year, with further net inflows of €11 billion during the quarter. A near-4% rise in client assets at Deutsche's private bank also helped this division outperform. Profit before tax at the private bank rose 39% overall.

These two banks are both very Western-focused. HSBC (LSE: HSBA) and Standard Chartered, on the other hand, have a stronger reputation for wealth management and investment banking in emerging and developing markets, such as China and India.

Britain's banks have their own attractions

Unlike their counterparts on Wall Street and in Europe, UK banks don't tend to have large footprints in wealth management, private client and investment banking, or trading. This goes back to the financial crisis when banks such as Royal Bank of Scotland – now NatWest (LSE: NWG) – and Lloyds used to have large trading businesses and international operations. These were sold off in the aftermath of the financial crisis as the lenders doubled down on the core business of making loans and taking savers' money.

That said, lenders such as Barclays (LSE: BARC) and HSBC do have large trading arms, although they've never been able to compete in the same arena as the Wall Street giants. Still, despite their lack of exposure to the Wall Street world, UK banks have their own attractive qualities. According to analysts at Berenberg, banks' rolling structural hedges should guarantee around 50% of income for the sector through to the end of the decade, generating steady returns for the industry.

There's also plenty of scope for consumers and businesses in the UK to increase borrowing. Household and corporate debt ratios are at the lowest levels of the past 25 to 30 years, while UK banks' average loan-to-deposit ratios sit at 90%, giving the sector plenty of headroom to increase borrowing. UK banks are trading at just 7.5 times their two-year forward price-to-earnings (p/e) ratio, a level not seen since late 2021 and a 20% discount to the sector. There's a lot of political and economic uncertainty hanging over the market, but this discount seems unwarranted.

There's also plenty of cash to return to investors. Berenberg believes the average total yield of UK banks will rise to 10%-11% by 2028 compared with 7%-8% today, the total comprising a combination of dividends and share buybacks.

Berenberg likes Barclays, for its exposure to the US investment banking and trading world, and NatWest. Barclays has made substantial progress at its investment bank, improving profitability and keeping costs low. Investment banking and trading revenues have grown steadily since 2022, with the teams keeping up with peers at the Wall Street majors. Despite this progress, the bank trades at just 1.2 times tangible net asset value at the lower end of its European peer group. Berenberg estimates that, based on its return on tangible equity of 14.3%, it should be trading closer to 1.6 times net asset value, suggesting an upside of 40%. Earlier this year, the bank pledged to return £15 billion to shareholders as part of its growth plans.

NatWest, meanwhile, is trading at a 25% discount to the average in the European banking sector. The lender is earning a 20% return on tangible equity and is reporting strong organic capital generation. Organic capital generation is expected to exceed 200 basis points per annum over the next few years, which should help fund growth, distributions and potential bolt-on acquisitions. The shares are currently trading at a 2028 p/e of just 6.5 and offer a potential forward dividend yield of 7.5%. The recent acquisition of Evelyn Partners will also help the company expand its footprint in the lucrative wealth-management business.

The most promising global banking players

One of the more interesting global opportunities is Santander (LSE: BNC). This lender has a presence in the US, Europe, the UK and Southern and Central America, making it one of the few genuine global banking opportunities. The bank has 180 million customers around the world and wants to exceed 210 million by 2028. At the same time, it has laid out plans to generate €20 billion (growth of around 40%) in profit by 2028, to be helped by recent acquisitions such as Webster Financial in the US for $12 billion earlier this year and the TSB Bank in the UK. It expects all divisions, loans, wealth management and cross-border finance to contribute to this growth. Growth is just one part of the story. The other side is shareholder returns. The lender is nearing the end of a programme to return €10 billion through share buybacks for 2025 and 2026 and analysts believe it will rebuild this pipeline when the current authorisation has come to an end.

UBS is another global player that analysts believe is undervalued. Now the group has fully completed the merger of Credit Suisse and removed unnecessary costs, it can concentrate on executing its strategy, growing the wealth-management business and its private bank. According to analysts' consensus estimates compiled by UBS, the bank is expected to post $10.7 billion of net income for 2026, rising to $14.4 billion in 2028. The wealth-management arm is projected to increase assets under management by around $1 trillion and see profit before tax nearly double from $5 billion to $10 billion by 2028. Based on these estimates, the shares are trading at a 2028 forward p/e ratio of around 9.5. Analysts have also pencilled in a reduction in outstanding share capital of around 10% and expect the dividend per share to rise 40% to $1.58 over the same period.

A shower of cash for shareholders

Of the large US banks, the cheapest is Citigroup. Trading at 1.2 times book value, the bank has long struggled to live up to the lofty expectations of the market. Its peers, Goldman and Morgan Stanley, are trading at 2.8 and 3.3 times book value, respectively. Still, the bank is benefiting from many of the tailwinds helping its peers. Markets and equities trading revenues were up 17% and 45% respectively in the second quarter, while the group's cost-to-income ratio came in at 57.4% compared to a full-year target of 60%.

In the first half, Citi booked a 13% return on tangible capital employed and is saying it expects 10%-11% for the full year, which suggests it's around a third less profitable than major peers such as Goldman Sachs based on this measure. That deserves a lower valuation, but a discount of more than 50% seems too steep. With a solid Tier-1 capital ratio of 12%, the bank was able to declare a $30 billion multi-year share repurchase programme following the successful completion of the Federal Reserve's supervisory test earlier this year.

Citi's cash returns are emblematic of the sector. In the first quarter of this year, the eight largest US banks showered shareholders with $46 billion in dividends and buybacks, up a third from last year. European banks are expected to return €123 billion this year. It's time for investors to sit up and take notice.

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.

Cameco (Toronto: CCO, or NYSE: CCJ) is a C$54 billion (£28.8 billion) nuclear-industry supplier covering the whole spectrum from uranium exploration, mining, refining, enrichment and fuel fabrication to designing, developing and servicing reactors.

The Iran war and resulting interruption of oil and gas supplies shows how geopolitical tensions can disrupt supply chains and affect share prices. Markets would drop precipitately should China invade Taiwan or Russia attack the Baltic states. Given these uncertainties, there is a strong case for investing in secure, reliable, zero-carbon baseload power. The construction of data centres for AI is also adding to demand for such power.

The renaissance in nuclear for zero-carbon baseload electricity meets these needs. There are already 436 nuclear reactors in the world with 70 new reactors under construction and another 115 planned. And 38 countries have signed a declaration to triple nuclear generating capacity by 2050.

Cameco's reserves of uranium are in Canada, Australia, the US and Kazakhstan, with the majority of its proven and probable reserves in Canada. In 2025, Cameco was the second-largest producer with 15% (Kazatomprom was the largest at 20%). Planned production is expected to fall below demand in 2033 and be only 50% of demand by 2041. Cameco's strategy is to build a portfolio of long-term supply contracts with utilities rather than to rely on the spot market. Current contracts run into the 2030s.

Cameco also has a 49% interest in Global Laser Enrichment (GLE) (and the option to attain 75% ownership); GLE has a worldwide exclusive licence on separation of isotopes by laser excitation (SILEX) – a third-generation enrichment technology.

Cameco's reactor design, development, construction and servicing activities are provided by Westinghouse Electric Company, which is a Cameco/ Brookfield Asset Management strategic partnership, with Cameco holding a 49% stake.

Cameco's four drivers of growth

Four factors are expected to drive growth. Firstly, the expected shortfall of supply from 2030-2031 onwards (rapidly increasing the shortfall from 2033), which will lead to stronger pricing and enable the firm to raise production from its reserves. Uranium prices are already rising. Cameco's fuel-manufacturing division enables it to capture more of the value added than it would as a miner.

Secondly, there's the growing global fleet of nuclear reactors that Westinghouse inspects, services and provides for. The third factor is the 185 new reactors planned or under construction. Westinghouse already has six of its AP1000 reactors in operation, another 30 under construction and 16 planned. The fourth is the potential of SILEX technology for the re-enrichment of depleted uranium and for making low-enriched fuel for future light-water reactors.

Cameco's 2025 results to the end of December showed revenue up 11% to $3.5 billion, adjusted EBITDA up 26% to C$1.93 billion and adjusted diluted earnings per share up 321% to C$1.44. First-quarter results show revenue up 7% and adjusted earnings per share up by more than 100% to $0.47. It says committed sales volumes for 2026 are 29 million pounds (mlbs) to 32mlbs of uranium compared to 33mlbs in 2025. But prices are rising, with an average price in the fourth quarter of 2025 of C$91.3 per pound compared with C$80.9 for same period in 2024. Long-term contract prices in 2026 are around C$131 and 2033 prices are anticipated to be in a range with a ceiling of C$200.

Cameco focuses on securing long-term contracts that anticipate increasing demand and shortfall of supply rather than serving the spot market. For example, in March 2026 Cameco signed a nine-year agreement with India to supply nearly 22 million pounds of uranium ore at market prices. This contract has an estimated value of C$2.6 billion.

Cameco's share price is on the rise

Cameco enjoys stability thanks to long-term contracts and growth potential in all divisions. With respect to the mining of uranium, it has large reserves in stable countries, most being in Canada. The fuel services division refines, converts and manufactures fuels, and benefits from the increasing demand for nuclear reactors to provide zero-carbon baseload electricity.

Cameco’s interest in GLE’s third-generation laser-enrichment technology and its option to take majority ownership provides an extra growth driver for this division. Then there is its 49% stake in Westinghouse (WH), which has the proven AP1000 and AP300 reactors, 30 more under construction and others planned. Westinghouse is also developing small modular reactors.

In October 2025, WH signed an agreement whereby the US government will facilitate the financing and building of new reactors in the US to the value of at least $80 billion to power AI-heavy data centres. This raises the prospect of a separate initial public offering (IPO) for WH that could value it at $15 billion-$35 billion or more (compared with the $8.2 billion Cameco/ Brookfield paid for it in 2023) and yield a capital gain. The UK government sold to Toshiba in 2006 for only $5.4 billion.

Cameco’s recent share price is C$123, with a one-year target of C$185, a forward yield of 0.19% and a strong balance sheet with net cash of C$0.2 billion. The forward price-earnings ratio is 46 for 2027 falling to 36.3 for 2028 and, over one year, the shares are up 13.6%. It is vertically integrated (mining to reactor construction and maintenance) and will be a key supplier in the renaissance of clean, reliable nuclear power. The rising price of uranium and new reactors planned globally suggest a long-term rising share price, with the possibility of a capital return from a Westinghouse initial public offering.

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When looking for Asian stocks, I look for good businesses run by competent management teams, available at a price that leaves a margin of safety. I focus on managing absolute risk and losing little money during market downturns, which should help compound returns at higher rates over the long term.

This discipline leads the portfolio away from popular thematic investments, start-ups, highly geared companies, cyclical businesses earning peak margins and stocks on high multiples to earnings.

As a result of this approach, the Fidelity Asian Values trust is primarily invested in mispriced small and medium-sized companies – the “winners of tomorrow”, before they become well known. Here are three examples.

Asian stocks to watch

Orion Corporation (Seoul: 271560) is a South Korean snacks and confectionery business that owns the well-known brand Choco Pie. It is a good-quality franchise with about a 25% market share in the domestic market as well as notable international revenues, supported by its production bases in China, India and Vietnam. Its international operations continue to grow and China makes a sizeable revenue contribution.

Choco Pie is its largest growing category, but Orion is using the recognisability of its brand to branch out into premium snacks as well as targeting a health-conscious demographic as a future driver of growth. Management has been focusing on enhancing shareholder value –it reported a 40% year-on-year rise in its dividend in 2025. The business is debt-free; the stock is valued at a 12-month forward price-earnings (p/e) ratio of nine times and offers a return on equity of more than 12%.

ManpowerGroup Greater China (Hong Kong: 2180) serves businesses that require workers for a limited time or a specific project, or those who wish to manage their own direct headcount. It also offers its clients headhunting and recruitment services, payroll outsourcing and training services. It is an asset-light business model and the company earns higher margins in its headhunting and recruitment division.

ManpowerGroup Greater China was spun off from ManpowerGroup, a world leader in its field, and therefore has the reliable operational processes of its erstwhile parent and retains a strong emphasis on risk management. Given the highly unorganised nature of the recruitment market in China, ManpowerGroup's scale and geographical spread is advantageous.

Our research on the ground indicates that the recruitment business in China is at its lowest ebb in the business cycle. The stock trades at a 2026 forward p/e of six times, offers a dividend yield of more than 7% and about 95% of its market capitalisation is in net cash on its balance sheet.

JW Life Science (Seoul: 234080) is the largest producer of intravenous (IV) fluids in South Korea, with a 45% market share. Demand for IV fluids is stable as the products are essential components in surgery, intensive care, hydration and patients' nutrition. The company faces competition from three to four players, but there are high barriers to entry given strict quality criteria, the need for strong brands and distribution capabilities, and for high levels of capital expenditure.

An ageing demographic in South Korea is supportive of revenue growth prospects for JW Life Science. The company has robust operating cash flows and a net cash balance sheet, a sustained mid-single-digit earnings growth profile, and offers a return on equity of an about 15%. It is valued at six times 2026 earnings.

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When looking to buy a debt fund, investment trusts are the perfect vehicle. Their closed-ended structure means they are ideal for owning complex and less-liquid debt. It gives them permanent capital, allowing them to hold assets that would be impossible for any open-ended fund that needs to be able to buy and sell quickly in response to inflows and redemptions.

There are a number of specialist trusts that allow UK private investors to access areas that would usually be available only to institutional and high-net-worth investors. What's more, shares in the trusts can be traded at any time regardless of the liquidity of the underlying assets. This means that investors are not subject to the risk of “gating” – limitation or suspension of withdrawals when redemption requests are high – that affects the vehicles these investors typically use.

Why debt funds are highly misunderstood

Despite these strengths, debt funds make up one of the most misunderstood segments of the investment trust sector. There are 16 trusts with total capitalisation of £5.2 billion, split across three sub-sectors: direct lending, loans and bonds, and structured finance.

The average dividend yield today sits in the region of 10%, which in part reflects the fact that the majority of trusts are trading at double-digit discounts to net asset value (NAV). This reflects a lack of awareness of these vehicles, as well as worries around the global private credit market.

For the most part, concerns about the impact of high-profile private credit wobbles are overdone, since most of these debt funds do not own the type of debt under scrutiny. Instead, they hold bonds, asset-backed securities (ABSs) and collateralised debt obligations (CDOs), and much of this is actually relatively liquid.

As an example, let's look at EJF Investments (LSE: EJFI), one of the more esoteric debt funds in the sector. It has a market value of just £76 million and trades at a 24% discount to NAV.

The trust's assets are mostly loans made to smaller banks and insurance companies in the US that have been packaged up as CDOs. It also invests in some other forms of bank debt and in credit-risk transfers (being paid to take on the credit risk on some of a bank's portfolio of loans). At the end of June, it also had around 23% invested in money-market funds and other cash-like instruments, giving it plenty of liquidity to take advantage of opportunities when they emerge.

EJF Investments also owns 50% of EJF CDO Manager, the firm that manages many of the transactions behind these CDOs. In a recent deal, the firm deployed $13.3 million (10% of NAV) into a CDO with the descriptive name of TFINS 2026-2, which is made up of debts issued by 64 US financial institutions. The estimated lifetime yield on the asset is 15%. Since EJF CDO Manager is one of the managers on the deal, it will receive 0.30% per year in fees on the $300 million total value of the CDO.

EJF – a debt fund with solid fundamentals

Broker Panmure Liberum thinks the best way to assess the health of EJF's portfolio is to look at the performance of the underlying issuers. US regional banks have performed well this year, with the KBW Nasdaq Regional Banking index up 19%.

Lenders are benefiting from improving balance sheets, a better regulatory environment and solid demand for borrowing, says analyst Shonil Chande, while rates are supportive. “Banks fund short and lend longer, and while policy rates have fallen from their 2025 peaks, lending rates remain higher further out on the curve.”

Smaller US lenders are also attracting bids from larger peers. Outstanding credits are usually redeemed in these transactions as the buyer can often refinance at lower rates. That reduces income from management fees, but delivers immediate capital gains when credits are called at a premium.

EJF is a specialist debt fund and it will not be suitable for all investors. What's more, fees are high. Investors are being asked to cough up 1.9% per year for access to this niche credit market. But with a yield of 8.5%, the shares look like an attractive income play trading at one of the deepest discounts in the sector.

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Andrew Van Sickle: Canada is always overshadowed by its larger neighbour, so your fund is rarely in the spotlight. Tell us a bit about it.

Greg Eckel: It's a general Canadian equity investment trust, North America's second-oldest closed-end fund. It was set up in 1930, and listed in London in 1995. Think of it as a one-stop shop for investing in Canada. Up to 25% of the trust's assets are allocated to the US (at present the figure is around 20%), typically to gain access to something you wouldn't find in the Canadian market, or for the added liquidity you can get from America.

Canadian General Investments is more diversified than the overall Canadian stock market, which skews heavily towards the financial sector. That contains solid businesses, but they aren't the fastest growers; we want to maintain our long record of beating the index (it's been more than 50 years now), so we look beyond the banks. Financials are 31% of the index; add energy and materials, and we're up to 70%.

AVS: I understand you adopt a largely bottom-up approach, but these are unusually fraught times geopolitically, with mercantilism on the rise and supply chains fracturing. How is Canada placed in this context, do you think, geopolitically and economically?

Greg Eckel: Canada has always had a reputation for geopolitical stability; we are considered pragmatic and centrist. Mark Carney appears to have reinforced this reputation at an important time, proving to be a key driver of trade initiatives and internal spending, which should improve our prospects and help gradually loosen our relationship with the US.

Andrew Van Sickle: What's the latest on trade?

Greg Eckel: We have been carrying on negotiations on what used to be NAFTA, the trade deal with Canada and Mexico. It is known as CUSMA, the Canada-United States-Mexico Agreement. This was supposed to protect around 90% of our goods from US tariffs, but the US recently threatened Canada with extra import levies. There is still considerable uncertainty and the issue hangs over the market like a cloud. About 75% of our exports still go to the US.

Andrew Van Sickle: A long-term plus point, however, is that Canada is amply endowed with raw materials.

Greg Eckel: We have critical minerals too, and currently own a company that refines and purifies them. It's still small, but it's a step towards tackling China's dominance in the field. We have huge deposits of potash, which the US doesn't have. The US, India and China buy nitrogen and phosphate, the other key ingredients in fertiliser, from us too.

Copper and gold are also promising thanks to the energy transition and central-bank buying, respectively, while a commodity we've certainly played to a great extent is uranium. The Athabasca Basin in Saskatchewan contains the highest-grade uranium deposits in the world, with ore concentrations between ten and 100 times the global average.

Uranium is looking especially promising thanks to the revival in demand for nuclear power. Canada's Cameco, a core holding, is the number-one player in this field. Uranium and fertiliser are available from Russia and eastern Europe too, but sanctions are playing havoc with supply chains, so it's easier for Western countries to buy it from us. We have a comprehensive supply chain, so it's easy to ship it around.

Then, of course, there's oil and gas. It's mostly in Alberta, not near the coasts, so we have traditionally shipped it to the US via pipelines. There is now a drive to construct pipelines to the coasts. Finally, we also have abundant soft commodities: fresh water, corn and maple syrup are some of the main ones. We can help feed the world.

Andrew Van Sickle: One of MoneyWeek's key concerns for the next decade or so is what we call “stagflation-lite”: lacklustre growth in the Western world and high prices. Canada seems set fair in this regard given that you have plenty of natural-resources companies; they will tend to have pricing power because raw materials are in everything. You also seem to have plenty of firms in other sectors with pricing power. You've mentioned Canadian Pacific Kansas City in this regard.

Greg Eckel: Yes, there are several companies this applies to. Canadian Pacific has a firm grip on supply chains, which provides the pricing power, and it connects Canada, the US and Mexico, so it is ideally placed to profit from the new trade agreement if it comes to fruition. The company boasts the best operating management team in the North American rail-company sphere.

Meanwhile, the Canadian National Railway Company connects the two Canadian coasts and the Gulf of Mexico. We also have a company among our top-ten holdings called TFI International. That's one of the largest trucking companies. So it's a different play on transportation, but it's been a good grower too. It has a huge US presence as well. So we have circled the wagons on transport, as it were. The US economy still looks strong, and we try to tap into it through these firms. That should bolster their pricing power.

Andrew Van Sickle: Are all these solid prospects fairly priced into the Canadian stockmarket? Is there still relative and absolute value?

Greg Eckel: The benchmark index, the TSX, has outstripped other major developed markets for much of this year. The energy and financial sectors have risen by a quarter. But the fundamentals remain solid. Earnings growth should reach the low teens this year. Inflation remains in check, interest rates are steady and employment is stable. Trouble on the trading front could cause a wobble, however.

Andrew Van Sickle: What sort of price-earnings ratio are we talking about?

Greg Eckel: A forward price-earnings ratio of around 16.4. The US is at 21.5. The spread between the two markets has rarely been this wide. Our dividend yield is around 2.1%, and America's is half that.

Andrew Van Sickle: You have said that the economy is still closely linked to its southern neighbour's, and the stock market presumably is too. There is always something of a “Wall Street leash effect” on other equity indices. Do you think that this could loosen now that Canada is becoming more self-sufficient?

Greg Eckel: Prime minister Carney is leading the charge to reduce Canada's dependence on the US, but this kind of thing takes time. It has taken decades for supply chains to become as integrated as they are, so disentangling them will be laborious.

But clearly, the initiative is there now that we have seen what disruption one person can create. With 75% of exports still going to the US, there is some way to go, of course. Consider too that the average car part can cross either the Canada-US border or the Mexico-US one seven times before finally being installed in a completed vehicle.

Andrew Van Sickle: Your second-biggest sector is IT. This is largely because of your holding in Nvidia, which you are dipping into the US market for – it's your second-biggest holding – and Celestica, your top stock position. Is Celestica Canadian?

Greg Eckel: Yes. We bought Celestica in 2024. We were quite lucky to find it at an early stage. It is a so-called electronics-manufacturing services (EMS) company. Until recently the business made pieces and parts for the likes of Nokia and Cisco.

However, it turns out that the company's products are very helpful for data centres, and so the Big Tech hyperscalers have come straight to Celestica and demanded more and more of the firm's networking switches and related offerings. When we bought the stock, it comprised about 1% of the portfolio. It has been worth 5% at various times in the past two years. We have taken profits on it.

Andrew Van Sickle: Your biggest sector is industrials. That includes the transport giants such as the railways, which will be the heavyweights. What else are you dabbling in?

Greg Eckel: Aerospace and defence is a subsector of industrials, and we found a company called MDA Space in 2024, a space robotics and infrastructure group. That has profited from the excitement about the space economy.

We also recently established a position in a business called Aecon Group, which is a large construction company. The firm builds bridges, water-treatment facilities and nuclear reactors, among many other things. Aecon is a key beneficiary of the drive variously to construct or rebuild nuclear reactors.

AtkinsRéalis is another company cashing in on the nuclear renaissance. It is an engineering group with the rights to the CANDU technology, the intellectual property covering the design and manufacture of nuclear reactors in Canada.

We have also long been impressed with Stantec, an engineering group with a presence in energy, water and transport. That means it is perfectly placed to profit from the drive towards boosting infrastructure across North America.

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UK mid-cap stocks have a takeover problem – one that sums up the trouble with investing in anything from growth companies to turnaround plays in the UK stock market.

Take the bid by US firm Prologis for UK property company Segro. As a holder of both Prologis and Segro shares, I should not be too bothered. Yet in practice, this looks like a pretty rough deal for Segro shareholders who want to stay invested. They swap a focused UK and European logistics investor for part of a much larger group that has 84% of its business in the US, at a valuation that seems favourable to Prologis. To make it worse, the dividends – the key thing, since you buy a business like this for income – will then be subject to US withholding tax. Who gains here?

So we get the usual silly takeover dance as the target gets bullied into submission by short-term investors desperate for the sugar hit of a quick capital gain. The only thing more ludicrous than Prologis's faux-concern about Segro's ability to execute its ambitious growth plans is the way that an offer worth 993p is “highly opportunistic”, but one at 1,032p (not even 4% more) is something that the browbeaten board now “would be minded to recommend”.

The pool of opportunities is constantly shrinking, while the balance of risks and rewards get worse. Make the right call and you stand a good chance of seeing your winners bought out at a still-ungenerous valuation, capping your upside far lower than it should be. Meanwhile, the average quality of what remains behind is likely to decline – many of them will be stocks that do not attract buyers for good reasons.

The absence of good new listings coming to London is why this takeover wave is much more concerning than the one we saw in the mid-2000s, which I was relaxed about at the time. In hindsight, I should have been more concerned because that surely helped lay the foundations for what is happening today.

However, the real tipping point was the bewildering decision to allow SoftBank to buy Arm in 2016 – a call that almost no government anywhere else in the world would have made. That signalled everything was up for sale.

The true market for UK mid-cap stocks

This is a key reason why it is hard to be bullish on the FTSE 250, which has lagged the FTSE 100 for years after historically beating it. There are other factors, but the loss of roughly 150 mostly decent stocks (large, mid and small) from the UK market since 2023 must play a part.

The unhealthy combination of hollowing out and pitiful valuations means that while we think of the FTSE 250 as the benchmark for UK mid-cap stocks, it does not really look like one anymore. By modern size definitions, the true market for UK mid-cap stocks is roughly the bottom 40 of the FTSE 100 and the top 100 of the FTSE 250.

There are clearly opportunities in the UK. However, the best prospects lie with either an all-cap equity fund or specialist small-cap trusts such as Rockwood Strategic (LSE: RKW) instead of trying to earn any kind of intrinsic mid/small premium from such a neglected market.

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Indigo Point, Great Camanoe, British Virgin Islands

A modern estate with three properties surrounded by landscaped gardens. There are no corporate or personal income taxes, or capital gains or inheritance taxes to pay. 2-bedroom main villa, 1-bedroom owner’s cottage, 1-bedroom guest cottage, pool, 2 boat slips, 4.4 acres.

Price: $5.5m Hamptons 020-8618 4551

Bolivia Mount, The Dhoor, Lezayre, Isle of Man

A distinctive property built in 1820 and surrounded by formal gardens and woodland. The Isle of Man operates a low-tax regime with low fixed income-tax rates and no capital gains, inheritance or wealth taxes. 6 bedrooms, 3 bathrooms, 3 receptions, 42.3 acres.

Price: £6.95m Knight Frank 020-7861 1065

Seaside Drive, Guana Cay, Abaco, Bahamas

An ocean-side residence featuring bright interiors with vaulted beamed ceilings, wood floors, floor-to -ceiling windows and an open-plan living area. The Bahamas operates a zero-tax jurisdiction with no personal or corporate income taxes, capital gains, wealth or inheritance taxes. 3 bedrooms, 3 bathrooms, gardens, tennis court, 2.1 acres.

Price: $4.8m Bahamas Sotheby’s International Realty +1 242 367 5046

Courtil Brock, St Peter Port, Guernsey

A fine Regency villa built in 1810, surrounded by landscaped gardens that include an English oak planted by the first owner in 1812. It has 12-foot high ceilings, grand fireplaces, shuttered sash windows, panelled walls and French doors leading onto the south-facing terrace. Guernsey levies a flat 20% personal income tax, and there are no corporate, capital gains, inheritance or wealth taxes to pay. 5 bedrooms, 6 bathrooms, 3 receptions, library, cinema.

Price: £4.9m Savills 01481-713463

Ordino, Andorra

A mountain home in Ordino in the Pyrenees. Although not strictly a tax haven, there are no wealth, inheritance or capital gains taxes to pay. The house has beamed ceilings and a partly covered terrace for outdoor dining. 4 bedrooms, 4 bathrooms, wine cellar.

Price: €3.15m Lucas Fox +376 775 077

Derry Farm, La Route Du Francfief, St Brelade, Jersey

A restored country house with modern bright interiors that retain original features, including marble fireplaces. The gardens include a stream and a swimming pool. Jersey imposes no capital gains, inheritance or corporate taxes, and has a fixed income-tax rate of 20%. 4 bedrooms, 3 bathrooms, 2 receptions, library, 2-bedroom self-contained cottage, 1-bedroom flat.

Price: £7.75m Knight Frank 01534-877977

Shoreview Point, West Bay, Cayman Islands

A renovated home in a gated community, with its own dock on a canal leading out to the ocean. The interiors have marble floors, large picture windows and French doors leading onto the garden and pool. The Cayman Islands has a “tax neutral” status and levies no corporate, income, capital gains or property taxes. 4 bedrooms, 4 bathrooms, reception.

Price: $3.75m Savills 020-7016 3740

Lorne House, Castletown, Isle of Man

A grand Georgian estate, which was originally the official residence of the island’s lieutenant governor. The property has landscaped gardens, orchards and paddocks and a restored walled garden overlooking Castle Rushen, a medieval coastal castle. The Isle of Man operates a low-tax regime with low fixed income-tax rates and no capital gains, inheritance or wealth taxes. 8 bedrooms, 5 bathrooms, 4 receptions, 6.5 acres.

Price: £6.85m The London Broker 020-7193 9969

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Investors had an exciting April and May this year, when America's S&P 500 stock market index rose 19.5%. But June was a quiet month, with the index losing 1%. The third quarter is likely to be similarly quiet as earnings catch up with the market, and the fourth quarter might be too. Market analyst Ed Yardeni is still targeting a year-end level of 8,250, representing a forward multiple of 22 on his forecast of $375 of earnings per share in 2027.

That earnings forecast is well below the consensus, now standing above $400, but leaves room for continued growth thereafter. If the index makes no further progress this year, it will have de-rated to a forward multiple of 20, which would be reasonable even if ten-year US Treasury yields rose to 5% and would leave room for a further market advance in 2027.

Opportunities for investors in US stocks

The end-of-the-world crowd continue to believe the US stock market is overvalued. Dire warnings focus on the supposed bubble in AI-related stocks, including semiconductors. Christopher Watling at Longview Economics points out that food retailers Costco and Walmart trade on prospective multiples of 40, Caterpillar on 35 and GE Aerospace on 47. These multiples certainly look too high. This is definitely an argument for caution from investors and for modest expectations, but there are pockets of opportunity.

Discounts on investment trusts should continue to fall as rising interest in investment meets a net shrinkage of capital. Particularly attractive are the private equity, infrastructure and property sub-sectors, where generous discounts to net asset value and often attractive yields combine with an improving outlook.

The increase in flotations is giving private-equity funds an exit, freeing capital for new deals. Rising construction costs have increased the replacement cost of existing buildings, while rental demand is picking up. Infrastructure funds continue to deliver and even renewable energy is on an uptrend, thanks to asset sales, share buybacks and takeovers.

Among trusts investing in equities, discounts are often low, but those of RIT Capital, Hansa Trust and Pershing Square have scope to fall. The healthcare sector, notably Worldwide Healthcare Trust, is picking up as, at last, may the performance of Finsbury Growth Trust. Nervousness about the technology sector means that the two specialists, Allianz Technology and Polar Capital, trade on near-0% discounts, while the lagging performance of small caps has left attractive discounts in most regions.

Japanese government bonds look good value

The UK government would love people to buy more of the bonds they are issuing in huge volume, but market analyst Charles Gave points instead to the good value of Japanese government bonds, trading on a yield close to 3% for ten years and more than 4% for 30 years. As he argues, a structural growth rate of nominal GDP of 2.4% makes these yields attractive and the devaluation of the yen has made Japan highly competitive. A high national debt is matched by high domestic savings and the hugely successful government policy of investing in equities when the market was much lower.

The cheapness of the yen offers the prospect of currency gain, but for equities there is a risk that a rising yen would slow earnings growth. Japan still looks reasonable value, but a 30% advance in the last year is enough for now. Emerging markets, led by exposure to the Far Eastern technology giants, are up around 50%, which also looks far enough. The UK and Europe are up “only” 20% and appear good value, but are bedevilled by slow growth.

Cautiously bullish on the oil and gas sector

The pause in America's Gulf war has led to the oil price plummeting again, and the oil and gas sector losing a good deal of the first quarter's gain. The war has been far from a triumph for Iran. It is militarily crippled, diplomatically isolated and economically savaged, with its hope for regional hegemony shattered. The closure of the Strait of Hormuz led to the oil price going above $100 a barrel, but not to the $150-$200 that the doomsayers predicted.

As oil and gas increasingly bypass the strait, alternative sources are opened up and the rest of the world follows China in stock-building, future closures of the strait will be even less effective.

This may not be bullish for the prices of oil and gas, but it is bullish for the sector. Governments will want to encourage domestic supply and energy self-sufficiency. This means hands off the sector in terms of taxation, licensing and regulation. Governments will be equally keen to encourage the replacement of fossil fuels with renewable energy, as the Chinese have done. Buying into the recent sector setback looks an attractive option.

The best strategy for the rest of the year is to continue to ignore the bears and use the period of consolidation in markets to invest for the next market advance. That is far easier than chasing it when it again has upward momentum.

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Brazil remains a good old-fashioned emerging market play, while volatile semiconductor manufacturers distort Asian stock indices. Financials make up 40% of the MSCI Brazil stock market index, with energy and materials combined accounting for nearly 30%. The Ibovespa index enjoyed a thrilling spring as global investors looked for a hedge against surging commodity prices.

While Brazil does import some refined oil products, it is a net exporter of crude oil, say Alex Nae and Tae Yoon Kim for FTSE Russell Insights. The FTSE Brazil stock market index returned 47.2% last year. It rallied at the start of 2026, but remains attractively valued on a 12-month forward price/earnings ratio of 9.5, compared with an average of 12.6 in the wider FTSE Emerging index.

Foreign investors dump Brazilian stocks

Since a peak in April at the height of the Iran war, the Ibovespa has fallen 11%, but remains up 10% this year. Foreign investors pulled 14.9 billion reais (£2.2 billion) from local shares in May alone, the fastest pace in six years, say Raphael Almeida and Leda Alvim on Bloomberg. Foreign capital plays an outsized role in São Paulo, accounting for 60% of trading in Brazilian equities, the highest level in any emerging market.

The slump reflects two factors. Firstly, the AI trade has distracted investors from commodity plays. Secondly, expectations of higher inflation and interest rates act like a wet blanket on emerging-market equities. Brazil's benchmark Selic interest rate stands at 14.25%. With east Asian semiconductor firms surging, Brazil's longstanding pattern of underperformance has re-emerged. The MSCI Brazil stock market index has returned an average of 7.5% annually over the past decade, compared with an emerging-markets average of 10%.

All eyes are on general elections scheduled for 4 October. Incumbent president Luiz Inácio Lula da Silva enjoys a narrow polling lead over Flávio Bolsonaro, the son of former president Jair Bolsonaro. Lula can point to “record low” unemployment and strong annual growth, which at around 3% has “outpaced expectations for three years”, says The Economist. The catch? Brazilian debt is “unsustainable on its current path”, with gross public debt forecast to hit 99% of GDP in 2030. The nominal deficit – “composed almost entirely of interest payments” – stands at a “whopping” 8.1%.

Lavish, constitutionally mandated spending on pensions is to blame. Until that is reformed, “the market will never trust Brazilian fiscal rectitude”. Stronger growth does ease the situation, says Gustavo Medeiros in the Financial Times. But it may take a market panic to persuade politicians that a credible fiscal plan is needed. Still, given Brazil’s “humbling valuations”, it wouldn’t take much good news to make the country a “compelling opportunity”.

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Semiconductors are the world's most valuable manufactured good. These tiny, intricately engineered pieces of silicon can perform more calculations in a second than a single person could complete in 30,000 years. This year has brought a semiconductor boom for the ages. The US PHLX chip index has nearly doubled over the past 12 months. Investors, noticing that big US tech firms are planning nearly $1 trillion in spending on AI data centres next year, followed the money to the chip stocks that provide AI hardware.

The global semiconductor supply chain is very concentrated. A handful of manufacturers and designers – Taiwan's TSMC, South Korea's Samsung and SK Hynix, America's Nvidia – capture the lion's share of profits. Yet expectations have run ahead of reality. This week, SK Hynix reported a 557% surge in operating profit, with margins of more than 80%. That Midas-like profitability still wasn't good enough for investors in Korea, who sent the shares tumbling 19%. The Korean Kospi slumped 11% on Tuesday and a further 6% on Wednesday. America's Nasdaq 100 technology index has fallen 9.7% from its peak, says Eva Roytburg for Fortune.

The immediate trigger was talk of new competition from China, where chipmaker CXMT listed on Monday. Those fears are probably overdone – China still doesn't have access to the cutting-edge extreme ultraviolet lithography machines required to make the world's best chips. But the chip stock selloff isn't irrational; for months, the “going trade” has been to sell the hyperscalers – firms such as Microsoft and Meta that appear to be overspending on data centres – and “buy the semis”, companies such as Samsung that are profiting from Silicon Valley's profligacy. Now investors have realised the obvious contradiction: if Big Tech's AI investments really are as wasteful as they think, then at some point that spending will be cut, which would be a disaster for chip stocks, too.

The semiconductor boom is based on very real profits, says Moses Sternstein for a16Z. Rising earnings have come alongside falling valuations – an unusual symptom for an alleged bubble. Micron, whose earnings are poised to rise 60% year on year, trades on a mere six times forward earnings. The wider US semiconductor complex trades on about 21 times forward earnings, a slight discount to the five-year average of 23.8.

The semiconductor industry is infamously cyclical

So are semiconductors cheap? In one sense, yes, but the industry is infamously cyclical. An acute shortage during the pandemic turned into a big bust in 2023 as demand returned to normal levels. “Investors are wondering whether semis can keep it up” this time. As laptop buyers will be well aware, dynamic random-access memory (DRAM), which is used for computer memory, is in acute shortage this year.

Samsung and SK Hynix have joint plans to invest as much as $1.5 trillion to double Korea's DRAM output within five years, say Song Jung-a and Michael Acton in the Financial Times. Yet there are risks of the chip cycle turning again. Should AI demand disappoint or Chinese supply surge, there could be a glut as soon as 2028.

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Income investors have enjoyed a strong quarter with UK companies paying out their all-time highest levels of dividend payments, according to industry research.

The latest Computershare UK Dividend Monitor – a quarterly report produced by the financial administration company, which tracks share registers of limited companies, including how they return money to shareholders – said regular dividends were the driving force behind the regular payments.

In total, companies paid out £35.3 billion in the second quarter of 2026, with £34.8 billion in regular dividends – an increase of 7.4%.

Banks and mining companies were the strongest sectors. Over the three months from April to June, banking stocks paid a record £11.1 billion in dividends, up 20.6% on last year’s equivalent and contributing four fifths of the aggregate dividend growth over the period.

Strong balance sheets, persistently high interest rates and low loan book losses – leading to near-record profitability – are supporting the sector’s performance.

While a year ago, it seemed likely that interest rates would continue to fall, reducing net interest margins for banks and the interest income paid on all reserves held at the Bank of England, the picture has changed.

The report pointed to persistent inflation, which has limited the Bank of England’s ability to cut rates, in turn sustaining higher bank earnings.

“The sector’s balance sheets are very strong and this, combined with high profitability has enabled significant dividend growth,” it said.

HSBC was the biggest driver, raising its end-of-year dividend by 25%, funded partly by a suspension of its share buyback programme.

Elsewhere NatWest and Standard Chartered raised payouts by 53% and 75% respectively, while Lloyds increased its own payouts by 14%.

The top sectors that fared well on dividends

The mining sector showed a strong recovery, with dividends from miners 27.5% higher than last year’s cyclical low.

Booming copper, silver and gold prices boosted dividend increases from Antofagasta, Fresnillo and Endeavour respectively, according to the paper.

The report also said that despite slightly lower profits as a result of falling iron ore prices, strong cash flow and a robust balance sheet enabled giant Rio Tinto to increase its final payout for the year by 13%.

Overall mining sector payouts rose 27.5% on a headline basis, up £917 million year-on-year.

Healthcare payouts rose by 6.1%, led by GSK, with the same level of increase (6.1%) shown across broader financials, with London Stock Exchange Group the highest payer in that space.

Which sectors struggled with dividend payouts in Q2?

At the weaker end was the food, drink and tobacco sector, which reported a 15.9% fall, largely due to Diageo, whose earnings have faced a couple of headwinds.

The report said weaker demand for spirits as consumers rein in discretionary spending and distributors work through their excess inventories. The company halved its dividend in response.

In industrials, the report flagged “pockets of weakness”, naming packaging and paper manufacturer Mondi and recruiter Robert Walters as contributing to the 7.9% dip in the sector overall.

Broadly, 11 sectors posted an increase while nine posted a decline in their dividend levels.

What is the outlook for income investors?

As expected, the larger companies saw significantly higher dividend growth than their mid-cap counterparts, with growth levels 7.7% for the top 100 and 4.6% for the mid 250.

Special dividends remain highly unpredictable, reporting a 76% decline over the quarter to £465 million, weighing on the overall headline growth rate.

But these figures are from a high base. For context, Q2 special dividends have averaged £2.2bn over the last five years – even bigger before the pandemic. There has also been an increase in share buybacks in recent months, which might be a factor. The paper notes that this is a mere notable correlation not a proven cause.

While dividend growth is expected to slow in the second half of the year, the strength of the payments in Q2 have led the business to increase its forecast from 3.1% to 3.4%.

UK equities look set for a yield of 3.2% over the next 12 months, while volatile bond markets amid geopolitical uncertainty are underpinning ‘best-buy’ cash savings rates of 4.2% for an average easy access account.

The average asking price of a home with a sea-view has increased by 27% since 2019, outpacing the national average (22%), new data shows.

A sea-view property in the UK now commands an asking price of £298,810 on average, up from £235,635 in 2019, Rightmove says.

The region with the highest growth in asking price among sea-view homes is the south east of England, where the average asking price for these properties is £416,375, up 24% since 2019.

Meanwhile, the regions with the fastest asking price growth for homes with sea-views are the East Midlands and Yorkshire & The Humber, where prices have surged by over 50% in the last seven years.

Colleen Babcock, property expert at Rightmove, said: “A sea-view has long been seen as one of the most desirable features a home can offer, and our latest analysis shows buyers are willing to pay a significant premium for one.”

She added that while the most sought-after coastal locations in the country still command high prices, there is strong growth in more affordable seaside areas, suggesting homes with sea-views are becoming "increasingly valuable across the wider market".

Which regions are seeing the strongest price growth for sea-view homes?

The East Midlands has seen the largest surge in asking prices for homes with sea-views, as prices have risen by 55% since 2019.

The region’s seaside towns include Skegness, Mablethorpe, and Cleethorpes.

The average home that overlooks the ocean in the region commands an average asking price of £352,789 today, up from £228,083 in 2019.

Yorkshire and the Humber is in close second place for strong asking price growth among sea-view properties. The average asking price for a sea-view home in the region has soared by 53% in the last seven years from £160,771 to £245,119.

The region includes popular seaside locations like Scarborough, Whitby, Bridlington and Redcar.

While these regions have seen strong growth, performance is not the same across the country.

Sea-view homes in Scotland have seen their average asking price rise by just 4% since 2019, increasing from £159,938 to £166,068.

Although sea-view homes in the South East command the highest asking prices overall of £416,375, growth has been slower than most regions of the country, increasing by just 16% in the last seven years.

Source: Rightmove, 29 July

The towns where the sea-view premium is highest

The coastal town which has been the biggest beneficiary of surging asking prices for homes with a sea-view is West Mersea in Essex.

Homes in the seaside town command a sea-view premium of £222,294. Average asking prices in the town are £433,185 but surge by 51% to £655,479 when you can see the sea from your window.

The second-highest premium in the country can be found in Frinton-on-Sea, also in Essex, where there is a £130,699 (36%) difference between the average asking price in the town and the average asking price for a home with a sea-view.

The table below shows the top 10 locations with the largest sea-view premiums.

Source: 29 July

Asian small companies are often overlooked – but they shouldn’t be, Gabriel Sacks, manager of the Aberdeen Asia Focus fund says.

Speaking to Cris Sholto Heaton on the MoneyWeek Talks podcast which is now available on all podcast platforms and our YouTube channel, Sacks says Asia is the largest economic region in the world, and it acts as the engine of growth for the global economy.

“Asia is delivering over 50% of global growth. So a lot of people will look at Asia small caps as being niche but actually in my view it should be really core to people's portfolios because you get away from some of the mega caps and get access to really the engine of domestic and global growth.”

With the region being so large both geographically and economically, there are many opportunities for investors to find real returns.

Sacks says his fund is able to get broad access to Asian markets and look at the opportunities presented by all the different countries in the region and the thousands of listed firms.

That being said, there is a need to narrow it down to just the most exciting ones, but the low amount of research available presents a challenge. Sacks says that this is partially caused by the fact that the Asian small caps market changes very rapidly and the research struggles to keep up.

“One of the differences I think with Asia and emerging markets is that the universe is changing very quickly. It's a very dynamic region. If you look at places like Latin America or EMEA there's a narrower set of opportunities and you can buy these companies and they're great businesses.

“In Asia you need to refresh your views quite frequently.”

He adds that the quality of research available “has probably got worse throughout my career. Things like MiFID (Markets in Financial Instruments Directive) and a passive focus has meant the focus has been on large caps.”

Though Sacks says a passive focus also presents an opportunity for active fund managers to take initiative and make the most of the fast-changing market.

Artificial intelligence is part of the story, but not all of it

Although the broader Asian small caps market encompasses many diverse firms, the current focus of much of the market is, unsurprisingly, artificial intelligence (AI).

While historically the Asia focus fund has been most heavily weighted towards the domestic-oriented India market, the AI boom has shifted the focus to export-oriented Taiwan and Korean markets.

This is a function of good performance coming from firms in that sector, particularly in the semiconductor supply chain.

Sacks said the other factor to consider is that “the market has actually rewarded that part [Taiwan and Korean] of the market much more than other parts. So the index and our portfolio weights have drifted upwards.

“I think we've been taking profit from our AI winners for at least the last 6 months and the weight has still crept up. So we've had some fantastic stocks in that space.”

The performance of some of these firms, like TSMC, Samsung, and SK Hynix, has been boosted by the fact there are very high barriers to entry in the supply chain and the firms who already occupy the area are able to profit from the huge boom in AI.

“There's a lot of money being thrown at AI at the moment, driven by the US, and the Asia supply chains really earn this profit up front because they develop the chips [needed for AI]. They're the ones doing the cooling, they're the ones doing the testing and the services side.”

Sacks adds that the fund is also looking at the firms that are benefiting from the AI boom too.

“We increasingly find second or third order derivative plays on AI which are just emerging. Those businesses that are part of the AI-driven part of the [market] weren't there before. These are very leveraged plays on AI. So many of these names have actually done better than TSMC which again I think goes to show that you don't need to necessarily buy TSMC or large cap to get that AI and tech exposure.

“The nice thing in our space is that it can be more diversified than a single stock, and actually within our portfolio tech is not as high as it is in a large cap portfolio.”

For more on the opportunities in Asian small caps, the tech supply chain, and the consumer sector, you can listen to or watch the full episode of MoneyWeek Talks wherever you get your podcasts.

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MoneyWeek Talks is a podcast that helps you unlock the secrets to financial success. Editors Kalpana Fitzpatrick and Andrew Van Sickle are joined by influential guests – from CEOs and entrepreneurs to economists and policymakers – to share their top tips on managing money, investing wisely and building wealth.

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Technology giants with an edge in artificial intelligence (AI) have dominated equity market returns in recent years, but enthusiasm is slowing down with chip stocks looking jittery as competition heats up.

There have also been warnings of a potential AI bubble, but as yet, the jury remains out over which companies will emerge the longer-term winners or losers. A recent survey by fund management group Natixis Investment Managers revealed that despite a number of global headwinds – ongoing US-Iran conflict, volatile energy markets and persistent inflation – 91% of the 33 strategists interviewed were optimistic that AI will be a driving force behind market performance in the second half of the year. It also found 88% expect the AI sector to accelerate with just 12% believing its bubble will burst in the second half of the year.

But should investors be seeing that disruption as an opportunity?

How to invest in AI beyond ‘big tech’

There are two distinct strategies the AI wave opens up. One is to aim to capture the growth potential of AI but without limiting yourself to the big names, such as the ‘Magnificent 7’ – Apple (NASDAQ:AAPL), Microsoft, Amazon, Alphabet (NASDAQ:GOOGL), Meta, Nvidia (NASDAQ:NVDA) and Tesla.

BlackRock’s Helen Jewell, international chief investment officer of fundamental equities, believes by looking at the AI story through a wider lens, investors could discover more upside with less of the volatility that comes with high valuations and market concentration.

One route is to look at infrastructure and the power investment needed to facilitate the AI boom and the broader shift towards electrification it has helped accelerate. Jewell said this trend is being “turbocharged” by governments focusing on energy independence.

“These sectors may offer exposure to structural growth trends while potentially providing more diversified return streams, attractive valuations and lower concentration risk than some of the most highly valued areas of the market,” she added.

Where are the next big opportunities in global equities?

In 2025, a handful of sectors led market gains – namely banks, aerospace and defence, and industrials.

All three areas are expected to continue to perform positively, as valuations are increasing. European banks in particular look promising; BlackRock's Jewell said they’ve shown resilient earnings despite interest rates calming down from recent highs.

She added that banks are increasingly adopting AI to modernise their own systems. Better integration across the European banking and capital markets system, alongside consolidation indicates a more profitable sector and, therefore, better likely returns for shareholders.

How to invest in contrast to AI

Another way to play the AI theme is in reverse. Concentration risk presents a problem if too high a share of your overall investments are gathered in one stock, region or sector – hence the ‘don’t have all your eggs in one basket’ analogy.

If there’s a correction in AI, and share prices fall (or the supposed bubble bursts), being exposed to different areas of the market that aren’t correlated will offer investors a degree of ballast to their portfolio.

Jewell cited healthcare as a strong diversification play, though it is also a sector that can benfit from AI. The sector has historically traded at a premium to the market but is now at a 15% discount, with earnings growth that has been second only to technology.

Elsewhere, she likes Latin America, which also has a low correlation to the AI trade. It’s trading at lower valuations than historical average, and while it makes up just 0.8% of the MSCI All Country World Index (ACWI), it accounts for 7% of global GDP.

In the UK, the FTSE 100 index has outperformed global stocks on a total return basis, without any direct AI exposure. Broadly, rising interest rates over the past five years and higher energy prices have boosted banks and oil companies, while defence has also returned to prominence amid the ongoing conflicts around the world.

New prime minister Andy Burnham has distanced himself from rumours that he was actively looking at proposals to replace council tax and stamp duty with alternatives that reflect a property’s current value.

It comes after The i Paper reported he was looking at ways to replace the current property taxation system with either a proportional property tax or a land value tax.

However, Number 10 has denied Burnham is considering scrapping council tax and stamp duty.

A spokesperson told MoneyWeek that rumours the prime minister is considering replacing stamp duty and council tax with either a proportional property tax or a land value tax are “not true”.

They added: "As has always been the case, decisions on tax are a matter for the chancellor to set out at fiscal events.”

Burnham has previously said it is unfair that households in affluent parts of London (like Wandsworth or Westminster) are paying far less in council tax than households in poorer areas where house prices are much lower.

In an interview with the BBC on 26 July, Burnham said: “There are people here in Manchester who pay a much higher council tax than people living in much larger homes in London.

“[Former Labour chancellor] Rachel Reeves was right to start to reform council tax to create some fairness there in relation to people in homes that are of much greater value who haven’t seen their council tax go up over the years because of the failure to revalue the banding.”

A proportional property tax would mean higher taxes for people in expensive homes

It had been rumoured that Burnham was considering removing council tax and stamp duty and replacing it with a flat 0.48% annual charge on a home’s current value, although Number 10 has since said this is “not true”.

This proportional property tax method would greatly reduce the amount of council tax people in areas with lower house prices pay while increasing the amount people in more expensive areas pay.

For example, a property in the North East (the area in England where house prices are lowest) cost an average of £181,133 in June, according to Lloyds.

Assuming the tax is levied at a flat 0.48%, the typical household would have to pay £869 a year. This is far lower than the Band D council tax rate in Newcastle of £2,540.

On the other hand, the average house in London, which costs £534,831 according to Lloyds, would pay £2,567 a year. This is far more than a Band D property would pay in all London boroughs.

The most expensive London borough for council tax is Kingston upon Thames where Band D costs £2,050 a year – a household here would pay around £500 more annually under the proportional property tax proposal.

Meanwhile, the borough with the lowest council tax rate is Westminster, where a Band D property pays just £935 a year in council tax – over £1,500 less than the proposed proportional property tax for the average London house.

However, properties in Westminster are far more expensive than in the rest of London – they cost £836,000 on average, according to the ONS.

As the proportional property tax proposal is a flat annual levy on a home’s current value, the more expensive your home is, the more you will have to pay. For example, a home worth £1.3 million would have to pay £6,240 a year.

Could a land value tax be introduced?

Reports from The i Paper also suggested Burnham’s team was looking at a land value tax (LVT) as an alternative to stamp duty and council tax.

A land value tax is paid on the value of the land that a property sits on, rather than the value of the property itself.

This means that, theoretically, a large five-bedroom house in a remote and unappealing area of the country would pay far less in tax than a similar house in the middle of London.

Research by Tax Policy Associates suggests that if land value tax was introduced, households in almost all parts of the country would pay much less tax, whereas those who live close to large cities would generally pay much more.

Could the ‘mansion tax’ threshold be lowered?

In the 2025 Autumn Budget, then-chancellor Rachel Reeves announced a new tax on expensive homes. The High Value Council Tax Surcharge will take effect in April 2027, based on 2026 property values.

Dubbed the ‘mansion tax’, it means households who live in properties worth more than £2 million will have to pay an additional council tax surcharge of between £2,500 and £7,500 a year depending on the value of their home.

The resident is usually liable to pay council tax, but the mansion tax applies to homeowners, rather than occupiers, meaning tenants wouldn’t be responsible for paying the surcharge.

Before Burnham became prime minister, the Mail of Sunday reported he was looking at lowering the mansion tax threshold to £1.5 million, potentially pulling 150,000 additional households into paying the tax.

Would you pay more tax under the proposals?

The biggest winners of a proportional property tax or a land tax would be people who live in inexpensive homes in parts of the country where property is cheap. With low house prices, a 0.48% annual charge would likely be far less than current council tax rates.

They would also pay less under a land value tax, assuming their property is not in a major city or the south east of England.

On the other hand, the biggest losers would be people who live in expensive houses in expensive parts of the country – especially people living in parts of London where council tax is currently low.

The broadcasting industry has had an eventful time of it recently, having been "disrupted" by upstart streaming platforms. Just a few years ago, the wars for audiences and dominance between the streamers had triggered a production boom, and people were talking about a “golden era” of “peak TV”.

Yet just five years on, the future for the streaming industry looks a lot less rosy. The predicted imminent demise of traditional broadcasting failed to materialise and streaming shows signs of plateauing.

People are wondering if the wider broadcasting format can survive at all in the face of competition from social media – let alone from the seemingly relentless rise of artificial intelligence. Still, the evidence seems to suggest that, although people may be changing what they watch on the TV screen, “they are not abandoning it”, as Mark Browning, CEO of Zinc Media Group, puts it. The industry may have fallen out of fashion, agrees Matthew Dolgin, a senior equity analyst at Morningstar, but “things should generally get better” for the sector in the future.

Don't write off legacy broadcasting firms

There is no doubt that what is known as the “legacy media” – the traditional terrestrial broadcasting companies in the UK and the networks and cable companies in the US – is under pressure, from both streaming services and social media, especially YouTube and TikTok.

Indeed, the legacy broadcasters have gone through the five stages of grief, says Ben Barringer, head of technology research at Quilter Cheviot. First, they denied that the new formats posed a threat (denial), then blamed other factors such as sales strategies, the macroeconomic environment and regulatory moves for their woes (anger and blame). Then they started their own on-demand services (bargaining) or merged with competitors (depression). But managers proved to be too invested in a dying industry and lacked agility. Now we're at the final stage (acceptance): investors may have to be content with the companies being gradually run down while raking in what remains of the cash flows.

Others aren't quite so ready to write off the legacy broadcasters. The core business of the main TV and cable companies “is producing good content”, says Srinivasan (Srini) KA, co-founder and president of Global Business at Amagi, and although the way in which that is delivered may be changing, the underlying demand for it is not. So, provided broadcast companies are willing to evolve and embrace new methods, they should have a good future. ITV in the UK and NBC in the US have already changed how they distribute their content, says Srini, and have a strong presence on social media.

Such efforts are already having an impact, says Browning. Ofcom's sixth annual Media Nations report suggested that traditional broadcast television viewing fell by 4% in 2024, but the introduction of on-demand content through digital platforms has largely managed to stem the losses. Legacy media (that is, live channels plus broadcaster on-demand services) still accounted for 56% of all measured in-home viewing in 2024, only slightly down from 57% in 2023. The broadcasters that have a future are the ones with the “most developed on-demand platforms and with a highly diversified audience”, he says.

Streaming services know their audiences

Streaming services should also do better than people might expect. They may increase their revenue at a slower rate than the breakneck expansion they have experienced in the last decade, says Dolgin, and “the biggest services have become somewhat saturated in their biggest markets when it comes to subscribers”, but they nevertheless “definitely have room to grow” thanks to opportunities in international markets in Asia, Latin America, Africa or the Middle East.

As well as adding more subscribers, the big streamers can also boost their revenue by simply increasing prices. They have to date managed to do this without losing customers or hurting the bottom line. Advertising is of course another potentially lucrative source of revenue. Netflix has had a lot of success with its advertising-supported service. At the same time, the streamers should be able to raise profits higher than revenue by pushing down costs, by exploiting the scale they have achieved and by “being a little bit more disciplined”.

Streamers have one big advantage when it comes to advertising, says Sonia Baschez, founder of Bend Growth Co, a marketing consultancy for start-ups. They have developed advertising platforms that make it far easier for them to get to know much more precisely just who is watching each show, thus enabling advertisers to precisely target particular demographics in a way that legacy television companies weren't able to do. With the exception of large events such the World Cup or awards ceremonies, which still tend to attract high numbers across the board, Baschez's clients are increasingly spending their budgets with streaming services.

Cinemas are back

The cinema industry may still have some life left in it, too. It has obviously struggled in recent years, not least because the window of exclusivity (between films appearing on cinema and then on TV) has narrowed, as Randeep Somel, deputy fund manager at M&G Investments, points out. You can now get pretty much any film that you want on demand in the comfort of your own home without having to be tied down by the cinema's timings. Making the trek to the local cinema also looks less attractive during a cost-of-living crisis, and the decline of large American shopping centres mean that parents no longer leave their children at the cinema while they do their shopping.

Still, it's undeniable that you cannot get the same experience at home as you can on the big screen, and many cinemas have begun to recognise that they are now basically in the hospitality as much as the show business. The quality of the experience has thus improved, from better seats to cleaner venues. How we view films may have changed, but going to the cinema can still be a very good experience.

Indeed, “as our lives become more entrenched in the digital world, people are starting to crave that human interaction a bit more, and there's still something very magical about the cinema experience that a lot of people still really connect with”, says Matt Celia, co-founder and creative director of Light Sail VR. Cinema chains could draw a lot of inspiration (and comfort) from the growing popularity of music concerts and experiences such as the Las Vegas Sphere. If cinema chains are going to survive and thrive, then there must also be something worth going to see, of course. It's not up to audiences to save cinemas, but to the studios to make films that people want to watch, and it's becoming increasingly obvious that producing superhero films with special effects and big bangs is not going to be enough on its own going forward. Still, there are a lot of people who love cinema, as shown by the box office success of many independent films, and you can still find cinemas that have long queues of people waiting to watch classic films. Cinema has a future if it can get its offering right.

Some of the biggest streaming services are also able to leverage their technology to maximise the appeal of their in-house content, says Baschez. Apple, for example, spent around $300 million to make F1: The Movie, then made large sums selling advertising space on the cars in the film. Similarly, Amazon has used its knowledge of book sales to spot authors who are popular “and then directly approach them to see whether they would be willing to turn their bestsellers into a movie or TV series”.

The rise of AI

The big elephant in the room is the rise of artificial intelligence (AI). Some argue that it is already radically reshaping the film and television industry, especially at the lower end. Producers are already using AI to create all the backgrounds, says Amir Ahmed, operations manager at Sugarland, a London-based film and video equipment rental company. Film shoots that would once have cost a fortune in design, location permits, travel days and much more can now be done faster and cheaper with AI.

The technology has some way to go before it threatens the wider industry, however. M&G's Somel points out that AI in a broad sense has been around a long time. Pixar has been using CGI technology to replace animation in films such as Toy Story for many years already, without really taking away from the role of studios. That probably won't change. As Somel argues, would Sky have been willing to pay such a premium for ITV if it thought that the future was one of AI-generated content?

Evan Bogart, the CEO of Seeker Music, is similarly optimistic about the continued need for content that is professionally created by humans. His experience in the music industry, seen by many as the canary in the coal mine for television and film, says that, although AI can now produce music that is “quite good”, he has “never heard an AI-created track that has genuinely made me cry”. Given that he helped create award-winning hits for artists including Beyoncé, Rihanna and Eminem, he should know what he's talking about. The younger generation are also increasingly anti-AI and are saying that they don't want their music created by a computer. The future is bright.

The music and film industries learned from what happened with Napster and illegal downloads in the 2000s and are quickly working out how to deal with the disruption threatened by AI, says Bogart. This will involve defensive measures, such as “putting a stop to the bad actors and making sure that regulations and guardrails are in place and that artists and producers are protected”.

In the longer run, however, it will also involve striking agreements and partnerships with AI companies so that the technology can be channelled into areas where it can genuinely boost productivity.

Intellectual property will become more, not less, important in an AI-driven world, says Browning, especially if the property in question is in a format that is hard to copy. Brands will become more important, including those of the platform and production company. Companies with “strong and recognisable intellectual property” will be in a particularly strong position “to dictate the future of how AI is used within the entertainment industry”, agrees Beringer.

The death of the TV may have been exaggerated

So it seems that talk that we have passed through the era of “peak TV” into a period of managed decline is premature. “For the last 30 years people have predicted the death of television,” says Pat Murphy, founder and CEO of advertising firm Murphy Cobb & Associates. It would be more accurate to say that what happened is that video has won – it's video that is “everywhere on every screen and in every format”. We may have passed “peak channels”, but “we've not reached peak content and certainly not peak demand”. Indeed, people are consuming more video content today than they ever have before “and that's just going to keep on growing”.

People are in “constant search of community, and when the community building is real, the medium almost doesn't matter”, says Willie Roberson, managing director at FGS Global, which advises some of the world's leading media, entertainment and financial institutions. Broadcast sports, for example, continue to set new TV viewership records. So although the media landscape may be more “fragmented” than it used to be, this means that companies will just have to pursue a multi-channel approach, one which includes television. Overall, the companies that win “won't just have the biggest budgets, but will know how to build and sustain community no matter where it goes”.

The best investments to buy into now

We look at some of the best bets for investors in this sector.

Netflix (Nasdaq: NFLX) is not only one of the big winners in the television industry, or the broader entertainment sector, but is seen as a technology stock, part of the “FAANG” (Facebook, Apple, Amazon, Netflix and Google) phenomenon. Its shares have fallen by around a half over the last year, says Ben Barringer, head of Technology Research at Quilter Cheviot, but Netflix is “now a scaled player with a broad and strong content slate” which bodes well for the future. Netflix is “exploring new markets at the same time – such as sports, gaming and merchandise” – so there should be “further scope for Netflix to expand its subscriber base internationally”. Despite double-digit revenue growth, Netflix still trades at only 19 times projected 2027 earnings.

Disney (NYSE: DIS) has a huge amount of intellectual property, but is not a pure play media company, making around 40% of its money from theme parks and the like. It also owns a large number of channels, including its own streaming service, Disney+. The stock looks undervalued, says Matthew Dolgin, senior equity analyst at Morningstar, given that its parks business “is worth nearly as much as the market is pricing in for the entire company”. Disney's media and entertainment side of the business should also deliver much better growth than many people are expecting. Disney currently trades at 12.8 times expected 2027 earnings.

Dolgin also likes Fox Corporation (Nasdaq: FOXA). Until recently the company has been highly dependent on pay TV and traditional programming, both of which are in structural decline. Its decision to buy streaming service Roku caused the shares to plunge over concerns that it overpaid, but Dolgin thinks that the deal not only gives Fox access to a “great business”, but also diversifies Fox's revenue stream, while giving it a platform for distributing its broadcasting once pay TV is no longer economical. Fox trades at 9.6 times 2027 earnings and on a dividend yield of 1.1%.

Dolgin also likes Fox Corporation (Nasdaq: FOXA). Until recently the company has been highly dependent on pay TV and traditional programming, both of which are in structural decline. Its decision to buy streaming service Roku caused the shares to plunge over concerns that it overpaid, but Dolgin thinks that the deal not only gives Fox access to a “great business”, but also diversifies Fox's revenue stream, while giving it a platform for distributing its broadcasting once pay TV is no longer economical. Fox trades at 9.6 times 2027 earnings and on a dividend yield of 1.1%.

Another conglomerate worth considering is Comcast Corporation (Nasdaq: CMCSA). Comcast provides broadband, but also owns a media and entertainment business, including film studios, theme parks and various television companies, including Sky. Last month it announced plans to split the company into two separate firms: Comcast and NBCUniversal. This is a “logical move”, says Randeep Somel of M&G Investments, which could unlock value for shareholders, as the broadband business “has been seen as a drag on the rest of the company”. Even though Comcast's revenue has continued to grow, the shares trade at a bargain-basement 6.5 times 2027 earnings, and offer a dividend yield of 5.83%.

Film lovers' enthusiasm for spectacular films will be good for IMAX (NYSE: IMAX). It specialises in large, immersive cinema screens, appearing in 1,798 multiplex locations in 91 territories. Revenue has been growing at a strong rate of around 13% a year since 2021, and is expected to keep on growing thanks to the release of films such as Chris Nolan's The Odyssey, which was shot on an IMAX camera. After a rocky few years in the aftermath of the pandemic, IMAX is now profitable and trades at 19.7 times expected 2027 earnings.

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The three income stocks picked below demonstrate the diversity of opportunities in the Aberdeen Equity Income Trust portfolio and the combination of income and capital growth that we look for.

The trust takes a deliberately index-agnostic approach, searching for companies undergoing change that the market under-appreciates. The idea is simple: the most compelling opportunities are often found in overlooked or under-researched areas. This leads to a portfolio that looks very different from other traditional UK equity income strategies.

With no sector constraints and a flexible approach to size, the trust can access a broader universe of income stocks, many offering attractive yields and the prospect of dividend growth. As the businesses gain wider recognition, valuation re-ratings can follow, supporting capital appreciation. With the macro backdrop starting to improve and investor attention moving beyond the FTSE 100, this approach is increasingly relevant.

Three income stocks to consider

We have held Chesnara (LSE: CSN) since 2014, reflecting our long-standing confidence in its business model. It operates as a disciplined acquirer of legacy life insurance assets, completing £440 million of acquisitions over the past five years. As large financial institutions streamline operations and dispose of non-core assets (often at attractive discounts) and private equity focuses elsewhere, Chesnara has carved out a niche by pursuing overlooked deals and refusing to overpay. This disciplined approach has built a strong record of earnings-accretive transactions. At the same time, the steady flow of acquisitions replenishes the book as older policies run off. Scale has increased meaningfully, with assets under administration rising from £8.5 billion to more than £20 billion, alongside expansion into Europe. With more than £100 million of available firepower, management sees further opportunities ahead. Chesnara generates cash through efficient management of existing books and delivers investment returns above the risk-free assumptions embedded in its actuarial models.

GTT (Paris: GTT) is a global leader in containment systems for liquefied natural gas (LNG), a market set for structural growth. Demand for LNG is expected to rise by around 60% between 2025 and 2040 as economies transition away from coal, driving the need for additional tanker capacity. GTT's membrane technology is critical to the safe transport of LNG, and decades of research and development have secured it a dominant market position. Barriers to entry are high, with shipowners and insurers reluctant to risk unproven suppliers, thus supporting pricing power and consistently high margins. Core growth should benefit from increasingly global LNG flows and a replacement cycle for an ageing tanker fleet. GTT is also building a digital services platform, with technology already installed on more than 15,000 vessels. This creates a valuable opportunity to cross-sell software and consulting services – an area that remains under-monetised, but offers high returns. A new CEO may accelerate this focus, while robust cash generation underpins both dividends and reinvestment.

The sharp correction in software stocks in early 2026 created an opening for investors hunting for income. UK IT reseller Softcat (LSE: SCT) plays a key role in connecting businesses with complex IT, partnering with more than 200 global technology providers. It has delivered consistent organic growth, expanding market share and securing a highly loyal customer base – 95% of revenues come from repeat business. The rapid adoption of AI is driving demand for processing power, storage, networking and security infrastructure – areas where Softcat is well positioned. This structural tailwind is expected to support continued earnings growth for the business, resulting in rising dividends.

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Homebuyers could save up to 47% on the price of their prospective home by looking for properties in neighbouring postcodes, according to new analysis from Lloyds.

Those looking to buy a home in some of the UK’s most attractive postcodes are stuck paying a premium for location – but by looking at properties just beyond the boundaries, you could potentially spend hundreds of thousands of pounds less.

On average, properties in postcodes next to the most sought-after locations are 28% cheaper than their counterparts, and in many places this discount is higher, the research shows.

For example, buyers in the North East can find the biggest savings. House prices in the seaside town of Whitley Bay are £304,022 on average, but ones in the neighbouring port town of Blyth are just £162,075 on average – a saving of 47%, or £141,947.

Amanda Bryden, head of mortgages at Lloyds, said: “It’s easy to focus on the ‘must -have’ locations when you’re searching for a home, but this research highlights just how much value can sit right next door.”

While these homes are in less sought-after areas, they have the benefit of being significantly cheaper, making them much more affordable while still being close to prestige areas. This can be helpful, especially for those trying to get onto the property ladder.

Byden added: “Of course, neighbouring areas aren't always directly comparable and each will have its own distinctive character, housing stock and local appeal. But in many parts of the country, looking just beyond the most sought-after postcodes can reveal more affordable options while still keeping buyers close to jobs, transport links, amenities and the communities that matter to them.”

Where in your region has the biggest postcode discount?

Discounts can be found by looking in neighbouring postcodes all across the country.

While the biggest example by percentage is the gap between Whitley Bay and Blyth, you can still find sizable discounts elsewhere in the UK.

For example, people who buy in South Luton and surrounding areas in Eastern England rather than the pricier Harpenden could, on average, save the most amount of money, by changing postcodes.

The average home in Harpenden costs £587,884, while it’s £351,742 in the South Luton LU1 postcode area. This means there’s a postcode price gap of £236,142, or 40%.

Likewise in Greater London, buyers could save £232,419 (30%) by moving to Cricklewood in the capital’s NW2 postcode, rather than NW3, which covers Hampstead, Belsize Park and surrounding areas.

On the other hand, the smallest savings are seen in Northern Ireland. The largest postcode gap is between the BT4 postcode that encompasses East Belfast and the BT16 postcode that covers Dundonald and the surrounding areas.

The average house price in the BT4 postcode is £278,143, compared to £247,068 in the BT16 postcode – a potential saving of £31,075 or 11%.

The table below shows the neighbouring postcodes where buyers can find the biggest savings in each region of the UK.

Source: Lloyds, 27 July

Ten years ago, the directors of JPMorgan Global Growth & Income (LSE: JGGI) – then called the JPMorgan Overseas Investment Trust – adopted a new strategy to address the fund's persistent discount to net asset value (NAV). The trust would invest globally without regard to income but pay an annual dividend of at least 4% of net assets. The idea was to give investors an attractive income via an approach that wasn't held back by the hunt for yield.

The renamed fund was an instant success. Performance improved, and the discount to NAV disappeared. The trust grew – by absorbing two other trusts in 2021 and 2025 and by issuing new shares for cash – and achieved greater economies of scale. Today, JPMorgan Global Growth & Income has £3.4 billion of assets – up from £200 million a decade ago – and operating costs of just 0.42%.

JPMorgan Global Growth & Income's spell of weak returns

However, the shares returned to a discount amid the wider market setback for investment trusts in 2022 and the directors had to start buying back shares again. The discount shrank, but in August 2024, performance began to flag. A NAV return of 16.7% over one year and 50.9% over three lags the benchmark (the MSCI AC World index) by 11% and 13.4% respectively. However, manager James Cook points out that it is still nearly 2% per year (net of fees) ahead since the change of strategy.

“We have seen many similar drawdowns over the last 30 years for our style,” he says. “On average, they last a year and cost performance 9%.” The latest one has lasted longer and cost more, which reflects market trends. “It has been a market strongly based on momentum rather than on the long-term valuations and earnings growth, but a return to normal will be very good for fundamental investors, as it has been after previous such phases.”

Cook and his team look for firms with high-quality earnings that are growing 2% faster than average but valued similarly to the market based on free cash flow. “Less than 3% out of 2,500 stocks in the investment universe offer all three.”

Manager James Cook backs AI winners

Cook has been reducing exposure to “low growth cyclicals” and buying AI-related semiconductor stocks such as Nvidia, which is 6.3% of the portfolio. “It is back at a trough-level multiple, yet the AI market keeps accelerating, and its newest Rubin chip is five times more powerful than the Blackwell chip.”

AI “is bigger than the internet in 2000, with long duration growth. Semi-conductor manufacturers are booked out for years.” Hence TSMC is also in the top five holdings. “It is really attractive on valuation while producing over 90% of the world's leading-edge chips.”

Overall, the technology sector makes up 25% of the portfolio (excluding Alphabet and Amazon, which are classified elsewhere). Cook has also been buying payments network Mastercard – “widely regarded as an AI loser but the fraud detection and identity verification services it provides are increasingly important”.

Insurer Tokyo Marine was added for its “strong earnings growth” shortly before Berkshire Hathaway acquired a stake and pushed the share price up 30%. Vesta, a provider of assisted living in the US, is “the beneficiary of demographic change in a market with a structural supply shortage”. Oil major Shell has been bought on “a really attractive valuation”.

Few of these are high-yielding. Sizeable positions in Alphabet, Amazon, Apple, Microsoft, Nvidia and TSMC would be impossible if the 4% yield were paid solely from income, showing the flexibility of this strategy. Most of JPMorgan's other trusts and some other firms have followed JPMorgan Global Growth & Income's lead in paying an enhanced dividend out of capital, reducing its competitive advantage. But for yield-hungry investors unwilling to sacrifice capital returns for extra income, it is attractive, while Cook's case for the period of dull returns being near the end is compelling.

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This interview is an excerpt from Andrew’s recent filmed MoneyWeek Talks podcast episode with Jeremy, available on all podcast platforms and YouTube.

Jeremy Grantham, originally from Yorkshire, is the co-founder and long-term investment strategist of asset management group GMO, based in Boston. Jeremy’s reputation is based on his long-standing ability to spot bubbles. He called the Japanese bubble in the late 1980s, and rightly refused to rush into the tech bubble in the late 1990s, a strategy that earned him notoriety as a permabear. But he also turned bullish in March 2009, just as the market bottomed after the crisis.

These episodes, and a great deal else, are chronicled in his memoir, The Making of a PermaBear: The Perils of Long-Term Investing in a Short-Term World, published earlier this year.

Andrew Van Sickle: Jeremy, we learn in your book that you weren't always a patient value investor. I enjoyed the section about the late 1960s. You say you became a “gunslinging nitwit” in an expensive market, but you came a cropper with a couple of stocks. Will you tell us a bit about that episode and how it became a formative moment?

Jeremy Grantham: Just after I got my first job in the investment business, I came up to Boston and joined this lunch club of gunslinging kids, fresh out of business school. Every time we met, someone would have a hot story. And typically these stocks would go up and come down very quickly. One was American Raceways, a motor-sports group that had Stirling Moss on the board. It was going to introduce Formula One to the US. I thought it would work. It seemed desperately American: power, noise, blood and death.

American Raceways bought one track in the middle of the country and everyone showed up. Expecting the races to catch on nationwide, I bought 300 shares at $7. I went to England and Germany for three weeks to get married; we came back and the stock was at $21. So I like to say that I did what any good value manager would do. I sold everything else I had and tripled up. I had 900 shares, a lot of them on borrowed money, at $21. And fate always teases you and wants to get you fully committed to a bull market, so the price was $100 by Christmas. All I had to do was sell and run. While my wife and were deciding whether to make a higher bid on a house we had our eye on, the market started to break and pretty soon American Raceways was slumping. And I scrambled out and got into another company equally far ahead of its time (Formula One is now doing well in the US).

This company was going to put a monitor on everyone's desk, which back then was hugely high-tech. And on this little screen they were going to have the option price of individual stocks. But the idea, a forerunner of Bloomberg terminals and the internet, didn't catch on at that stage, and the company never took off. It went belly up and I was lucky to scramble out with enough money to pay the banks back. From then on I thought I'd better revert to my Yorkshire instincts and be a cheapskate and a value manager.

Andrew Van Sickle: Having had your fingers quite badly burnt, you decided to take a very thorough look at stock market history and how human nature always ended up in these situations. And you constructed by hand, as part of your research, the first index for small-cap stocks?

Jeremy Grantham: Yes. We had to go back into the archives and put together an index going back to 1925. And what we saw were long periods of small-cap domination and long periods of large-cap domination. They ebbed and flowed in these multi-year cycles. And the interesting thing to me was that we were in a big “nifty-fifty” blue-chip cycle and small stocks' valuations had become extremely depressed relative to the rest of the market. And so we put 100% of our money into small caps, which was so original as to be totally unique back in the day. Institutions didn't dabble in small caps back then. They were beneath contempt.

And so we had a very strange portfolio that was difficult to sell. There were 99 rivals selling Coca Cola and there was one of us selling companies that no one had ever heard of. So it was at least entertaining. It amused the clients rather than anything else.

Andrew Van Sickle: So the idea was to seek out investments that people had overlooked, and you clearly enjoyed the number crunching – later your asset management group was one of the first to use a computer to keep doing so, wasn't it?

Jeremy Grantham: Yes, it was painfully expensive, filled the whole room and created a lot of heat. But it did give us a little advantage for a year or two. And what we found, by the way, was that the numbers we'd hand-crunched were pretty accurate. And what was nice about hand-crunching numbers was that no one else did it. Whereas once we got a computer, everybody else did. Pretty soon, a computer was simply a cost of doing business.

And no one made a killing by having one, you just had to have it and pay for it, whether you liked it or not. This is, incidentally, getting ahead of myself, very analogous to AI. In five or ten years AI will be a cost of doing business. But it won't be a way you get ahead. It will be a case of falling irretrievably behind rivals if you don't use it. New technologies confer an advantage on the early adopters. And when it's clear that they have an edge, everyone copies them and it goes away. But we'll come to AI later.

Andrew Van Sickle: The notion of an early lead being eroded brings us to the issue of mean reversion, one of the principal themes to emerge from your research. What goes up must come down. This applies to corporate profits, which get competed away. Similarly, asset markets get euphoric, human nature being what it is; we overdo things on the way up and on the way down.

Bubbles blow up and burst, but one can never really tell when things will revert to the mean. What did it feel like in late Japan and late 1990s America, knowing that you were right to be bearish – because mean reversion is something unavoidable – but standing practically alone for years on end?

Jeremy Grantham: Well, it gave you lots of time to do more research, particularly in 1998 and 1999. We didn't start to lighten up on US stocks until the end of 1997, when the trailing price/earnings (p/e) ratio reached 21, the same as at the peak in 1929. So it was an emotional point to reach. By the end of 1998, we were as light as we could get. And the p/e went all the way up to 35 by the peak. Japan was even worse, of course: the mother and father of all bubbles. The p/e had never eclipsed 25, and in 1989 it soared to 65.

Of course 35 wasn't 65, thank heavens, or we would definitely have gone out of business. But conveniently at 35 the market beat a magnificent retreat and we were positioned for it, having doubled and redoubled our ante until there was nothing left to do, and we actually made good money.

To give you an example of how much of a bargain value stocks were around the market peak, consider real estate investment trusts (REITs). Properties were selling at a discount to replacement cost, and Reits were yielding 9.1%. The overall S&P 500 yielded just 1.5%, a record low. When the overall market slumped, Reits jumped by 30% amid a flight to safety and value.

Andrew Van Sickle: For your business it sounds like a race against time, with clients no doubt increasingly frustrated that you were sitting out the big technology-led gains of 1998 and 1999. They would have had the same perspective as Chuck Prince, CEO of Citigroup, in the credit bubble in 2007: “[As] long as the music is playing, you've got to get up and dance.” Do you think that if the bubble had burst a year later, you would have gone bust?

Jeremy Grantham: Yes, I think so. Incidentally, coming back to Mr Prince, George Soros' take was that “Actually, the music had stopped, he just hadn't noticed,” which was typically cruel.

Andrew Van Sickle: Did lots of people you spoke to at the time think it was a bubble, too, but just didn't want to say so publicly?

Jeremy Grantham: That's exactly right. We were a purely institutional firm dealing with lots of big pension funds. The hired guns in the pension funds usually had a lively understanding of how risky the market was. But their committees – made up of private equity and VC investors, and all manner of people who'd made lots of money and were very, very confident – insisted on going with the flow, and that anyone who didn't was stuck in the past and should be fired.

The upshot is that the uncertainty surrounding the timing of bubbles is greater than the typical client's patience. And that is all you need to know about institutional investing. Most of the engine-room players saw the bubble. It's just that the marketing people and the bosses realised that scepticism was not a good business strategy.

If you are a big firm, you simply mustn't bet on the bursting of a bubble. You have to go with everybody else, you have to be willing to run off the cliff, and you have to be willing to be professional and slick and quick, saving some money on the way down and redeploying it. If you do that, you will thrive. If you try to fight the bubble, well, you may get lucky, you may win one. We, in a sense, won the great financial crash. We explained it in quarterly letters. We prepared for it and we got out in a timely fashion and everything worked well. But if you get it wrong, watch out.

Keynes, just about my solitary hero in the economics business, said the key to investment life is never be wrong on your own. So you can be wrong in company and you don't lose your job. Even being right on your own, he said, was dangerous in that they would pat you on the head if you won, but then describe you as an eccentric when you'd left the room. That's not a great reputation to have. And he said that if you're wrong on the downside, if the market doesn't break and you were positioned for a bear market, “you will not receive much mercy”.

Andrew Van Sickle: Turning to the bubble of the moment, what is your take on AI and the market's view of it?

Jeremy Grantham: In 100 years they'll be writing about this point in stock market history as they write about the South Sea bubble. It is simply magnificent. The SpaceX prospectus was of the order of the famous South Sea bubble equivalent: “An undertaking of such profound importance but cannot at this time be revealed.” Just give us your money.

Andrew Van Sickle: I was horrified to read that Isaac Newton went for the South Sea bubble. He should really have known that what goes up comes down.

Jeremy Grantham: He said something along the lines of: “I know a lot about the movements of heavenly bodies but nothing about human nature.” The SpaceX prospectus is unbelievable – mining asteroids and colonies on Mars and moving through space and a projection of revenue streams, 90% of which seem to relate to AI. And it's not clear, of course, that SpaceX's version of AI, which is at the moment having its bottom kicked around the block by Anthropic and the rest of the boys, is going to be around in the long term. Talk about tulips.

Andrew Van Sickle: You've said that you think excitement over the advent of AI essentially stopped the bubble of late 2021 deflating fully.

Jeremy Grantham: Yes, December 2021 met all the conditions of a bubble, we thought, and there was a slump in 2022. But for the first time in history, halfway through a bubble breaking, you come out with an idea that is so colossal and accompanied by so much capital expenditure that you change the game.

On that infamous day in late 2022, ChatGPT appeared and someone rang the bell and said: “All change.” And the rest of the market didn't believe it for ten months, drifting down a bit. But by then the Magnificent Seven had doubled, and it dragged the rest of the market up.

I used ChatGPT, telling it to please summarise War and Peace in ten points, and then do it in German. And that was enough to make me realise that this was going to be impressive. It's clearly better than anything else other than the railroads.

People don't realise that the more obvious and important the idea, the more likely you are to attract too much capital and have a capital bust and a market bust. The railroads transformed our lives, they added enormous productivity, and yet they were so obviously going to do that, that everyone built too many railroads, and everybody lost their money. And that will happen in AI.

At present there are seven companies plus another 15 snapping at their heels. All are aiming at the same market, AI. The one that gets there first, they believe, has a licence to make more money than you could shake a stick at. More than anyone has ever made on anything. And they are all saying the main risk is not spending enough. We will spend our vast cash flows, they are saying.

They're going to fight until someone survives. This could be the most vicious fight to the end that we have ever seen, starting now. In that sort of fight, they do not make lots of money and the stocks get crushed. And then they emerge out of the wreckage. Like the internet. Amazon declined 92% in the tech slump. And yet it then rose and inherited the Earth. The railroads rose from the ashes. And this will rise from the ashes.

Andrew Van Sickle: While investors take bets on who might survive, where are you finding value outside the US?

Jeremy Grantham: That was an easier question to answer at the beginning of last year. At that stage, valuations looked unremarkable and therefore priced to make a decent return. Since then, the S&P has gone up another 23% but that is nothing like the rest of the world, led by emerging markets. Emerging markets are up 60%. And value in Europe is up 45%. And these are very big gains over the S&P. The rest of the world now begins to look a tad overpriced, while the US has moved into “read all about it in 100 years” territory.

Andrew Van Sickle: We get the impression that Japan is certainly no longer cheap, although it's probably reasonable.

Jeremy Grantham: Yes, reasonable, and it's done very well. And again, it has handsomely beaten the S&P since the start of last year. The main thing that impresses a lot of people, however, is that even though the S&P may have been at the back of the pack in the last 18 months, it still went up handsomely, and so it's created the impression that, therefore, it defies the pull of gravity.

And this feeling that it will go on forever is, of course, absolutely classic. That's exactly how people wrote and thought in 1929 and how they wrote and thought in 2000. This time is not different.

Of course, people hate you if you say this. They are so involved in making money they loathe the notion that the whole thing is a mass delusion. Perhaps they hated me more in 2000, but it's getting close. In the comment section of a recent podcast, three people said that my ears were big. And of course they are big. It's just that people don't usually say so after the age of seven or eight.

Andrew Van Sickle: I don't suppose the boy pointing out the emperor was naked was very popular either.

Jeremy Grantham: I don't know. The episode wasn't recorded.

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Two oil stocks are among the cheapest equities on the London market today. Harbour Energy (LSE: HBR) and Serica Energy (LSE: SQZ) are trading at price-to-earnings (p/e) ratios of 5.3 and 2.7, respectively, for 2026 based on figures compiled by Peel Hunt. On a cash flow basis, the companies look even cheaper. The shares are trading at free cash flow yields of 35% and 29.9%, respectively, and a large chunk of this cash is flowing right back to investors. Harbour is trading with a forward dividend yield of 9.9%, rising to 15.4% next year, and Serica is expected to yield 7% for 2026 and 2027 at the current share price, according to Peel Hunt.

It's clear why investors are steering clear of these businesses. Both are UK-focused oil and gas companies, and they're highly exposed to the country's unhinged energy and tax policies. But in the words of billionaire distressed-debt investor Howard Marks, there are no bad assets, only bad prices, and at current prices, the market is valuing these oil stocks at such a deep discount that it's going to be hard for the market to continue to ignore them.

Investors should buy these oil stocks together

I view Harbour and Serica as a deeply discounted pair that should be acquired together rather than individually. While both are cheap (Serica is half the price of Harbour), buying the two helps spread management execution risk. Harbour Energy is the largest London-listed independent oil and gas company. It used to be entirely UK-focused, but after a series of deals it now has a global presence, with assets in the UK, Norway, Germany, North Africa and the Americas. It also holds a 15% stake in Southern Energy SA, Argentina's first large-scale floating liquefied natural gas (FLNG) export project.

The group started the year with production of 506,000 barrels of oil equivalent per day (boepd) in the first quarter, thanks to higher output from the recently acquired US LLOG assets in the Gulf of Mexico. Its Norwegian assets also helped boost output and, combined with new wells, management is now looking for between 480,000 and 500,000 boepd for the rest of the year, with average operating costs of $14.5 per boe.

Based on these costs, the company is modelling free cash flow generation of $1.4 billion for 2026, up from $600 million at the beginning of the year, assuming an average oil price of $80 and $13 for gas. These numbers don't look too outrageous for the rest of the year. While the Brent benchmark trended down to the low $70s per barrel at the beginning of July, when it looked as if the US and Iran would sign a lasting peace agreement and the Strait of Hormuz would reopen, the recommencement of hostilities has sent oil back up to $88 at the time of writing.

Analysts at Canaccord Genuity have modelled Brent averaging $83 in 2026 and $75 in 2027 before falling to $70 in 2028. Based on these estimates, they have Harbour generating free cash flow of $1.9 billion in 2026, $0.7 billion in 2027 and $1.1 billion in 2028. Analysts at Zeus are a bit more cautious, forecasting a Brent price of $75 for the rest of the year.

Even on this lower target, based on Harbour's goal to pay out 45% to 75% of free cash flow to shareholders every year, the analysts believe the company will return in the region of $500 million to shareholders at the low end of this target, giving a dividend yield of 6.9%. Canaccord has pencilled in a yield of 8.3%, and Peel Hunt's is the most optimistic at 9.9%. The yield will probably land somewhere in the middle, but whichever way you look at it, it's clear Harbour is cheap and throwing off cash.

Serica's valuation is a bargain

Serica's production profile is predominantly UK-based, and the company is listed on the Aim market, which goes some way to explaining its bargain-basement valuation. The first point it can't do much about, but on the second point, Serica is working to remove some of the uncertainty by moving to the main market in the third quarter of 2026.

Despite its UK focus, Serica's management believes the company can maintain production at over 50,000 boed into the 2030s (it aims to exit 2026 with production in the 65,000 boed range) based on its existing portfolio with well-executed capital spending.

Capital spending is expected to rise through to the end of the decade, which will crimp free cash flow. Still, management has outlined plans to pay out 30% of cash flow from operations over the coming years, which, Berenberg estimates, delivers a dividend yield of 11% in 2027 and then averages 7% through to 2030 based on an average oil price of $75.

Unlike Harbour, which has accumulated a large pile of debt following a series of mergers and acquisitions, Serica is expected to move from a net debt position of –$203 million in 2025 to +$91 million in 2026 and +$192 million by 2027. This, analysts at Berenberg believe, will allow management to begin considering bolt-on acquisitions of increasing size. Last year, it completed mergers with Prax, One Dyas and Spirit Energy, which added production from 25 fields in the North Sea.

As other companies have decided to flee the UK-owned section of the North Sea, Serica has been able to step in as a buyer of last resort. These deals were done at between $2 and $4 per barrel of reserves. By comparison, Harbour paid around $12 for the US LLOG assets at the end of last year. When it comes to further deals, Serica is following Harbour's lead and looking for deals outside of the UK. In conversations with analysts, Serica has highlighted Southeast Asia as a region of potential interest.

As the company moves forward with these growth plans, it may only be a matter of time before the market catches on and re-rates the stock.

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What is a land value tax?

A land value tax is an annual levy paid on the value of the land upon which a property – or no property – sits, rather than a tax on the property itself. The basic idea is that land gets its value from location, rather than the calibre of the development that sits on it. And what gives a location value is what is going on around it. Is it close to the centre of a city? Is it in an area with great transport links, good schools, beautiful parks, hospitals and so on? Generations of taxpayers paid for all that civic infrastructure and a land value tax is a fair and efficient way of taxing what economists have called the “unearned betterment” part of the value of a property – that is, the rise in value that has nothing to do with the owner's efforts and everything to do with the state and community.

Is a land value tax a new idea?

Not at all. Land value taxes have their roots in the ancient principle that people enclosing common land for agricultural use had a duty to share some of the resulting crops. In Anglo-Saxon England, the unit of land measurement called the hide (around 120 acres) was used to assess people's liabilities and obligations for such things as the maintenance and repair of bridges, fortifications and manpower for the army. A thousand years later, in The Wealth of Nations (Book V, chapter 2), Adam Smith argued in favour of a land tax on the grounds that it would fall on the owner of the land and not harm other economic activity. “Nothing could be more reasonable,” he concluded. David Ricardo, too, was a strong advocate. More recently, the most famous proponent of a land value tax was the late 19th-century US journalist and free-trade campaigner Henry George. Winston Churchill was a big fan, too.

Why is a land value tax so popular?

It's one of those interesting ideas (such as universal basic income or congestion pricing) that attracts support from a strikingly broad range of voices. Left-wingers are attracted to land value taxes because they capture unearned rents and reduce inequality from land ownership. Free-market liberals are keen because land value taxes are seen as highly efficient and tax a fixed resource without discouraging work or investment. The key point in favour is that such a tax “allows us to raise more money from the unproductive rich without disincentivising the productive rich”, says David Goodhart on Substack. Andy Burnham, during his first bid for the Labour leadership in 2010, backed the policy as “aspirational socialism”. Milton Friedman – guru of the “neoliberalism” so disdained by the new PM – also supported it as the “least bad tax”.

Why did Milton Friedman call it the 'least bad tax'?

Because if states must tax – and they must – then it's best that they do as little damage as possible to incentives that promote growth and enterprise. Income taxes disincentivise employment. Taxes on profits make businesses invest and trade less. But the supply of land is fixed: no tax increase will result in there being less of it. And “even the most tax-shy landlords cannot take their acres offshore or dodge the tax with legal jiggery-pokery”, says Edward Lucas in The Times. Moreover, a land value tax “stimulates growth by penalising inactivity. Landlords pay the tax anyway, so they had better make use of their land, or sell it, dropping the price if necessary” – and selling to more productive owners. Land value tax, in other words, helps tackle “grey belt” decay and discourages land hoarding and speculation, smoothing out booms and busts.

How high should the land value tax be?

Another proponent is Dan Neidle, the City lawyer turned tax reform campaigner. He supports scrapping stamp duty (which harms growth and labour flexibility by discouraging people from moving house); council tax (out of date, unfair and under-taxes the very rich); and business rates (arbitrary, stifle growth and stoke perverse incentives). To replace the £100 billion these three dreadfully designed property taxes bring in, Neidle's Tax Policy Associates think tank proposes a land value tax set at around 1.3%. Other groups have proposed models at between 0.48% and 1%. Stamp duty and council tax between them account for roughly £57 billion. At the 1.3% rate, at least 63% of people would be better off immediately (compared with council-tax payments), and in the long run the boost to the economy would make it a win-win for all.

What would a land value tax mean for homeowners?

In the short run, millions of homeowners in southern England would be looking at gigantic new annual tax bills. And that's not the only reason why land value taxes are a tough sell, politically. Initial implementation is tough, since the scope for disputes and legal challenges against a levy on a hypothetical value is clear. And opponents worry the tax would be unfair on asset-rich but low-income homeowners, especially the elderly. Without some kind of lengthy phasing in, a land value tax would constitute a one-off windfall tax on the current generation of land owners, since once they are introduced, land values would fall to reflect future tax liabilities. And letting cash-poor pensioners pay the land value tax from their estates risks turning it into a disguised inheritance tax.

Will Britain get a land value tax?

This week Andy Burnham appeared to back away from a far milder form of tax reform that he espoused as recently as last week – a big rise in the personal allowance to take more low earners out of income tax. So it's highly unlikely he would have the political capital – or mandate – to push through such a radical move this side of a general election. But it may be an idea whose time has come. An early attempt at a land value tax in Britain – under Lloyd George's Liberals – collapsed under the weight of the administrative burden involved and trenchant opposition from landowners. But today's technologies mean the task is not insurmountable, given the political will. Versions of a land value tax have been introduced in jurisdictions including Australia, Canada, Denmark, Estonia, Singapore and Taiwan. “Burnham has been right about this for 16 years,” says Neidle in The Sunday Times. “The question is whether he's willing to be right today.”

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Barton Olivers, Burton Bradstock, Bridport, Dorset

A Victorian villa with uninterrupted views over the sea and a garden with a gate opening onto the coastal path. It has open fireplaces and a kitchen with French doors leading onto a terrace. 5 bedrooms, 5 bathrooms, 2 receptions, indoor swimming pool, 2.96 acres.

Price: £3m Knight Frank 01935-810064

Harbour Island, Crinan, Lochgilphead, Argyll & Bute

A renovated, contemporary house and cabin on a private island off the coast of Lochgilphead. It has floor-to-ceiling windows, an open-plan dining kitchen and a raised deck. 3 bedrooms, 3 bathrooms, office, 2 receptions, conservatory, 9.7 acres.

Price: £1.25m+ Savills 0141-222 5875

Mount Severn, Freshwater East, Pembrokeshire

A modernist house situated in the woods above Freshwater East Beach. It has floor-to-ceiling windows, wood-burning stoves, an open-plan dining kitchen and living area with bi-fold doors leading onto a terrace and a two-bedroomroom apartment. 4 bedrooms, 4 bathrooms, receptiontion, office, garden room, studio, heated swimming pool.

Price: £1.5m Country Living Group 01437-616101

Rosebank, Dartmouth, Devon

A renovated house in a commanding position on the banks of the River Dart. It comes with its own boat house. The house has vaulted, beamed ceilings, arched sash windows, wood floors, period fireplace and a sun room with far-reaching views over the Dart Estuary. The gardens include a terrace and a decked area. 3 bedrooms, 2 bathrooms, dining kitchen/living area, sun room, porch, balcony, boat house, terraces, gardens.

Price: £1.75m Savills 01548-800462

Malindi, Eastcliff, Cornwall

An energy-efficient house surrounded by gardens that include steps leading down to Porthtowan Beach. It has floor-to-ceiling windows, bi-fold doors, polished concrete floors and an open-plan kitchen. 2 bedrooms, bathroom, dressing room.

Price: £1.55m The Modern House 020-3795 5920

Aline Estate, Isle of Lewis, Outer Hebrides

An 18th-century lodge on a sporting estate overlooking Loch Seaforth and the Isle of Skye. It comes with its own island, fishing rights and red-deer stalking. 6 bedrooms, 5 bathrooms, 2 receptions, study, staff bedroom, kitchen, sunroom, 3 cottages, cottage occupied by the estate gamekeeper, outbuildings, boathouse and slipway, industrial pier, woodland, 8,202 acres.

Price: £4m+ Strutt & Parker 0131-226 2500

King Street, Aldeburgh, Suffolk

A renovated, four-storey townhouse situated on the seafront overlooking the beach. It has exposed brickwork, arched windows, period fireplaces, modern wood-burning stoves, a plywood staircase, bespoke kitchen and a balcony on the top floor that commands wide-ranging views over the North Sea. 2 bedrooms, bathroom, receptiontion, dining kitchen, study.

Price: £775,000 The Modern House 020-3795 5920

Sea Road, Westgate-on-Sea, Kent

A four-storey, New England-style house situated on the seafront on the North Kent coast in the centre of West Bay, overlooking the sandy beach. The house has a central oak staircase, a large dining kitchen and a south-facing garden with a heated swimming pool and pool house with bi-fold doors and a kitchen area. 6 bedrooms, 4 bathrooms, 3 receptions, cinema room, laundry, gym, double garage, terraces, heated swimming pool.

Price: £1.75m Miles & Barr 01843-844899

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Travel firm Expedia has experienced the rough and the smooth of recent turbulence in the travel industry.

America’s war on Iran has raised the price of jet fuel, and higher prices at the pumps have compounded a cost-of-living crisis that has prompted many to wonder whether they can even afford to take a holiday.

More broadly, however, the industry continues to enjoy a post-pandemic boom, while a further tailwind is the increasing propensity (among younger people in particular) to prioritise experiences over possessions.

Expedia (Nasdaq: EXPE) has two main businesses. Around two-thirds of the group's revenues come from a range of consumer-facing websites that help customers book hotel rooms and car rentals, including Expedia.com, Hotels.com, Vrbo.com and CarRentals.com. However, in recent years, a growing proportion of its revenue has come from supplying the technical infrastructure that allows hotels, car-hire companies and other firms to manage their bookings.

Expedia isn't threatened by AI

After tripling in three years, Expedia's shares swooned at the start of this year. Markets were buffeted by the current conflict in the Gulf and concerned that AI could carry out much of Expedia's work automatically. In the worst-case scenario, developments in “agentic AI” would allow people to type a few prompts into a chatbot, which would then automatically book a holiday with the best prices, completely bypassing the need for comparison websites such as the one Expedia runs.

However, such fears seem overblown. While an increasing number of people seem willing to rely on chatbots to provide advice about what to see, few would trust it enough to allow it to book hotel rooms on their behalf, even if such software merged. Large companies are even less likely to trust a chatbot to oversee the distribution of hotel rooms and flights for their staff. At the same time, Expedia's exclusivity agreements with several hotel chains and airlines such as no-frills carrier Allegiant Travel provide a degree of security. Expedia is also examining how it can use AI to enhance its own operations.

The group has a strong record, with profits more than quadrupling since 2022. Expedia also has strong operating margins, with a return on capital employed of more than 30%, allowing it to raise dividends and buy back $5 billion of shares while growing sales at a double-digit pace. Despite this fast growth, Expedia appears relatively cheap, with the shares on only 12 times 2027 earnings.

Investors' confidence in Expedia seems to have recovered: the stock is up 33% from its low of early 2026, and is now close to its 52-week high. It is are also above both its 50-and 200-day moving averages. I would therefore go long on Expedia at the current price of $268 at £9 per $1. Put the stop-loss at $168, giving you a total downside of £900.

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The ‘active versus passive’ debate has raged for over two decades, with one investment style broadly dominating the other at any given time.

Investing platform AJ Bell’s latest Manager vs Machine report, found that just 42% of active funds outperformed a passive alternative during the first half of the year – despite typically charging higher fees than passive counterparts.

Analysis from investment research company Morningstar has backed up the notion that active managers underperformed passives during the first six months of 2026. Morningstar analysed the performance of around 32,000 active and passive Europe-domiciled funds (accounting for around half the assets in the European fund market).

It found that, during the first six months of 2026, the one-year success rate for active equity managers (the percentage of active funds that both survive and outperform comparable passive alternatives over the last year) fell to 28.4%, from 30.5% at the end of 2025. Active managers’ success rates fall further over longer time periods, too: the figure stands at 20.3% over three years, 15.2% over five years and 11.9% over 10 years.

“We’ve had yet another six-month period where a large chunk of professional stock pickers failed to deliver the outperformance they’re being paid to do,” said Dan Coatsworth, head of markets at AJ Bell.

Given that active funds usually charge higher fees, why are they underperforming compared to passives?

Which active funds struggle to keep pace?

AJ Bell identified certain areas where the performance divergence between active and passive funds was especially marked.

While only 22% of global active funds beat their average passive equivalent, UK-focused actively managed funds fared even worse; just 19% beat their passive peers in the first half of 2026.

Coatsworth said the handful of global equity managers that outperformed did so by a significant margin, but overall the data was a “huge embarrassment for the active fund management industry”.

Global trackers, according to Coatsworth, have become the default choice for first-time investors. “Low costs and broad exposure to companies around the world make them easy-to-understand investment products. For some people, that’s all they need.”

But this has led to heavy market concentration, particularly in large US technology companies.

The MSCI World index, for example, has more than 1,200 constituents but the top 10 account for more than 25% of its total assets.

“Part of the problem is down to market concentration, with global indices heavily driven by a handful of stocks dominated by the technology sector,” said Coatsworth. “Any manager with less exposure to these blockbuster names than the global benchmark might have struggled to outperform.”

Similarly, Eugene Gorbatikov, passive strategies analyst at Morningstar, said that high concentration had made it “difficult for active managers to keep pace with the momentum generated by the technology sector”.

Why are active managers underperforming?

Coatsworth pointed out that certain sectors – such as gold mining, defence, pharmaceuticals and biotechnology – that were stronger in 2025 lost momentum in the first half of 2026. “Active managers might have been caught out by the rotation and didn’t move fast enough, or they were simply parked in the wrong sectors to beat their passive counterparts,” he said.

There is an argument that active managers’ underperformance isn’t related to skill, but is to some extent inevitable given the rise in popularity of passive funds.

By definition, market cap-weighted index funds (which are a natural choice for most inexperienced investors) act to boost the market caps of larger companies when their share price is rising.

An academic study by Hannah Unterberg of the University of California’s Paul Merage School of Business, published in June, attributed the decline in active manager performance to the rise of passive funds, especially after 2010.

It made the case that any time money leaves an active fund and goes into passive funds, this hampers an active manager’s performance – because they are forced to sell holdings, especially the stocks that are least popular but in which the manager has high conviction. In other words, the ones that are supposed to give them an ‘edge’.

Perhaps it’s not about picking either active or passive, but about recognising the potential advantages and shortcomings of each.

“We champion a blended approach,” said Dan Cartridge, fund manager at Hawksmoor Fund Managers. “No one has solved investment, and styles and approaches come in and out of favour.

“Despite the 15-odd years where passive has performed well, that doesn’t mean it will continue indefinitely. There have been long windows over the past 15 years where active funds have performed well.”

His team’s flagship multi-asset fund, Hawksmoor Vanbrugh, launched in 2009 and has beaten a typical 60/40 equity/bond passive mix since inception.

Does the asset class matter when choosing active or passive?

Cartridge added that it is worth making sure that your active positions are used to gain exposure to something you don’t already have via passive investments – otherwise you’re just doubling down and duplicating positions.

There are also discrepancies in the relative performance of active and passive funds in different asset classes.

Morningstar’s analysis found that active bond managers tend to outperform active equity managers – though even in this category, one-year success rate fell to 46.8%, from 54.8% at the end of 2025.

There is also some discrepancy within equity funds. AJ Bell found that almost two-thirds of active funds from the Asia Pacific ex-Japan (65%) and Global Emerging Markets (63%) sectors beat their passive counterparts.

Certain markets generally lend themselves better to index investing. The larger, more liquid, more widely researched a market is, the less chance an active manager has to discover price discrepancies or hidden gems that aren’t widely known by their peer group.

Active managers typically struggle to beat a US large-cap index, whereas smaller and mid-cap stocks tend to offer a better hunting ground for active stock pickers – in any market, not just the US.

Investors in Japanese stocks – like investors everywhere – need to be alert to concentrated exposure to the AI story. Over the past few months, it has gone from important to indispensable.

Wherever you look, the stocks that are doing best are linked to AI demand, while those that are AI-agnostic or an “AI loser” are mostly lagging. The emerging markets index is now trading like an AI play, due to TSMC, Samsung Electronics and SK Hynix, but this is by no means the only example.

Among Japanese stocks, the top performers are firms such as Kioxia, a chipmaker that soared from ¥1,455 when it floated in December 2024 to a high of ¥112,700 in June. Other big hitters include tech conglomerate Softbank and firms involved in chipmaking and testing such as Advantest, Murata Manufacturing and Tokyo Electron.

Implausible-sounding companies such as food-seasonings firm Ajinomoto and toilet manufacturer Toto have also been carried along: their core businesses make them leaders in materials that play a role in the chip-supply chain.

Japanese stocks have made a strong start to the year

“The result has been an unusually narrow, yet powerful market,” note Alex Bowles and Brett Moshal of the Japan equity team at asset manager Orbis. As of the end of June, the Topix index has made a strong start to the year (up 19%), yet only a third of Japanese stocks have beaten the benchmark. A basket of 67 AI companies accounts for 14 percentage points of that return.

This has been a headwind for any investors underexposed to AI, although Bowles and Moshal argue that it is also creating contrarian opportunities. They point to Nintendo, which has halved amid fears of a memory crunch hurting hardware sales in the short term, but also the threat that AI poses to its competitive advantage in game development. This is overdone given the strength of Nintendo's intellectual property, they argue.

Foreign investors held back by a weak yen

Diversification between regions may not be much protection if the AI boom ends badly. That said, for now, the market is still doing well, and the drag for foreigners is the currency.

The yen keeps weakening and now stands at ¥163 to the US dollar and ¥218 to the pound. There has been little sign of this bottoming out, notwithstanding talk of “appropriate and bold action” by the finance minister this week. The result is that Japan has become one of the cheapest developed-market countries to live in, note Jim Reid and his team at Deutsche Bank. In purchasing power parity terms, with price levels measured on the basis that the US is 100, Japan now comes in at 60; in 2012 it was at 125.

In theory, the yen is deeply undervalued. Yet this has been near-consensus and it keeps sliding. Our exchange-traded fund (ETF) portfolio is invested in Japan through Vanguard FTSE Japan (LSE: VJPN) and this has done fine, but clearly a currency-hedged ETF would have done better. We are sticking with the unhedged position since we expect the yen to rally eventually – but iShares MSCI Japan GBP Hedged (LSE: IJPH) or UBS Core MSCI Japan hGBP (LSE: UB0D) are other options to cut the risk it falls further.

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Could Andy Burnham’s leadership mark a shift in tone and pace for the UK’s beleaguered economy?

Business leaders hope so. Gregor Paterson, fund manager in the UK team at fund management group Amati Global Investors, highlights that the new prime minister ought to have the expertise on hand to do so.

“Burnham himself has a lot of experience, and has a pretty heavyweight team of advisers around him,” says Paterson. “He must be aware – as we all are – of how much Keir Starmer’s team struggled to get the economy moving, and you’d hope that he has a plan.”

The sense of urgency is critical. One key frustration with the previous government was the lack of clarity around policy direction, especially around the Budget.

“Businesses weren’t able to hire, expand or build because they didn’t know what was coming,” Paterson says, pointing out successive delays around fiscal events, whereas Burnham already looks to be moving at pace.

“It looks like he’s putting his team in place and keen to get things moving much more quickly than might have been the case if there had been a messy leadership battle.”

To the business community, speed and clarity are essential for planning – not merely political virtues. There is a deeply felt need for a credible and ambitious growth strategy.

Anna Leach, chief economist at business leaders’ professional body the Institute of Directors (IoD), says some elements of the previous government’s approach were well-intended but overshadowed by uncertainty.

“We need a better industrial strategy and it all needs to be done a bit more quickly and at a grander scale,” she says.

Infrastructure is a key area of focus

Leach would welcome a clearer long-term framework that gives companies the confidence to commit capital, hire staff and expand their operations.

Planning reform and infrastructure investment should form two central pillars of a growth strategy and she supports Burnham’s ambitions for a more balanced economy.

“A regional growth agenda and devolution are really good ideas. There’s strong economic evidence that – if well-designed – these can deliver strong growth and help draw in private sector investment,” she adds.

But execution will be key.

“It does come down to design because while Manchester looks like it has been successful, I don’t think one could look at Wales and Scotland and say that devolution has unleashed any animal spirits in those two regions.”

Job market dynamics are another area of concern. Cost pressures have intensified, the jobs market has cooled, hiring is declining and vacancies are falling. This all raises questions over how to meet conflicting priorities.

“We want to see how we shape the labour market in a way that balances everybody’s needs… because at the moment things are looking a little bit risky, particularly when you layer in artificial intelligence,” says Leach.

All eyes on Burnham’s tax policies

Given the £3 trillion debt burden, the key question is one of tax. For many in the business community, their immediate wish is not further reform but stability, with uncertainty particularly acute around the non-domicile regime.

“The constant speculation about what tax increases should fall on wealth creators, following big tax increases on businesses themselves, is all detrimental to private sector investment,” adds Leach.

She also highlights the cumulative effect as the business tax burden has been creeping up in successive budgets.

“In the near term… more certainty and a lack of vilification of business would be pretty pleasant to start with.”

Darius McDermott, managing director of investment platform Chelsea Financial Services agrees; he’s a clear believer that if you overtax the wealthy, they will leave the country, shrinking future potential tax revenues.

“If additional rate taxpayers face a 1% increase, I don’t expect you’d see a huge outcry. But if it goes up to 60% over a certain number, then I think you’d see a lot of unhappy wealthy people,” he says.

Markets rely on confidence as well as policy

From a market perspective, the challenge is not just policy design but sentiment.

According to Anna Macdonald, investment strategy director at Hargreaves Lansdown, the UK needs a “credible, investment-friendly plan for economic growth, alongside clarity and stability on tax”, otherwise investors will remain hesitant.

“Constant speculation, including around capital gains tax, risks making people more cautious about moving their money from cash into long-term investments, at precisely the moment when the UK needs more people to invest for their future.”

Critics of Starmer say that Labour was voted in on the promise of growth and change, but it soon emerged he didn’t have a clear plan to achieve it.

“What markets want to see is how we're going to start to grow the economy and grow productivity. We thought the answer to that previously was going to be in housebuilding but that didn’t really materialise,” adds Paterson.

“When you have such high levels of debt, you have to grow your economy. And I think neither people nor businesses feel confident enough to invest – hire people, build factories and expand.”

It’s early days, but if Burnham can shift the mindset, his impact could be significant.

“If he can inject some confidence back into the system, then people and businesses will hopefully start to react,” adds Paterson.

One move that would encourage investors towards UK companies is if the new administration were to lower the rate of stamp duty reserve tax on most UK-listed stocks and shares.

Currently investors directly purchasing more than £1,000 of UK-listed shares, unless they were newly listed or traded on the Alternative Investment Market (AIM) – even inside an ISA – would need to pay 0.5% stamp duty.

“If you were to buy Tesco shares to put in your ISA, you’ll pay half a percent tax when you buy those shares, but if you buy Walmart shares, you won't pay any tax,” Paterson says.

Scaled up, those amounts soon mount up. He says as well as eroding returns, the UK could be putting itself at a disadvantage compared to other markets.

“It’s something most markets don’t have. The French do, but it's only 0.3% and it’s only on the very largest companies. So we're a bit of an outlier in charging people to participate in our stock market.”

Which investments could benefit under Burnham’s government?

John Healey being named chancellor was the big announcement many of us were waiting for.

He stood down as defence secretary on 11 June in protest over insufficient funding of the country’s defence strategy; he’d been calling for a defence budget of 3% of GDP by 2030.

Healey’s appointment saw a bounce in some defence names. Babcock International Group (LON:BAB) jumped roughly 7% following the news and BAE Systems (LON:BA.) was also up around 3% the following day. Both share prices climbed further over the next few days.

While it remains to be seen which defence companies are the specific longer-term beneficiaries, the sector as a whole will be a clear structural winner, according to McDermott.

He says: “The increase in spend isn’t over one year; it’s a multi-year increase. We may see the investment into companies from other countries, the US or elsewhere, but I think European defence, of which we’re obviously a subsector, is likely to see a decent amount of growth over the next decade.”

As always, individual investors should try to avoid overreacting to political headlines or any market noise as the new government sets out its plans.

“Changing a long-term investment strategy in response to a change of chancellor can easily do more harm than good. Staying invested and focused on long-term goals remains the most sensible approach,” says Macdonald.

Technology, and its ever-present subsector artificial intelligence (AI), are perhaps the hottest topics in investment – and have been for several years.

Information technology officially accounts for 32% of the MSCI ACWI Index. Yet in reality, what we’d all intuitively think of as ‘tech’ companies account for a greater proportion of this, since MSCI officially designates companies like Alphabet, Amazon, Meta and Tesla into industry sectors other than information technology.

This concentration brings risks with it. Passive tracker funds act to condense stock markets into the biggest names, and investors therefore run the risk of being over-exposed to the sector – which can exhibit volatility when times get tough.

There is also the intensely competitive nature of tech growth to contend with. Nascent, disruptive technologies like AI can create as many losers as winners, if not more. Knowing which stocks to invest in can be difficult, even for the professionals.

An investment trust – which is by definition actively managed – has the potential to mitigate some of these risks, and the vehicles offer some structural advantages too.

“The closed-ended nature of investment trusts makes them well-suited to technology investing,” said Alex Trett, investment trust research analyst at Winterflood Securities.

“The permanent capital allows managers to take a genuinely long-term approach, supporting investments in private companies and giving them the patience to see investment theses play out over time.

“The structure can also facilitate exposure to smaller-cap technology businesses, where liquidity can be a constraint for other investment vehicles. In addition, it enables managers to build concentrated, high-conviction portfolios, allowing them to express their strongest investment ideas.”

Here’s six of the best-known investment trusts that can offer you exposure to some of the world’s most innovative technology companies.

Scottish Mortgage

Just as many ‘big tech’ companies aren’t designated tech, one of the biggest investment trusts that many people think of as ‘tech-focused’ isn’t actually a technology trust.

Scottish Mortgage (LON:SMT) aims to own “the world’s most exceptional public and private growth companies”. As it happens, a lot of these are tech companies, but the trust emphasises that its focus is on long-term growth potential, whatever sector that may be in.

Still, buy Scottish Mortgage now and you’ll get a lot of tech. As of 30 June, SpaceX accounted for over 25% of the portfolio, followed by Taiwan Semiconductor (6.4%), Nvidia (5.0%) and TikTok’s owner Bytedance (4.2%).

ByteDance and, until recently, SpaceX have exemplified part of the appeal of SMT: its ability to hold private companies alongside publicly listed ones, tapping into the future growth potential they offer. The heavy weighting towards SpaceX is largely a consequence of this and its recent initial public offering (IPO); Trett expects the position to be trimmed once lock-up periods permit.

^{Source: Association of Investment Companies, as of 21/07/26.}

Polar Capital Technology

Polar Capital (LON:PCT) has focused its approach on the hardware and infrastructure underpinning the buildout of artificial intelligence (AI).

“The managers believe these areas offer greater earnings visibility and forecastability, with semiconductors representing the largest exposure at 44% of the portfolio, followed by equipment, components and storage including Advanced Micro Devices and LAM Research,” said Trett.

^{Source: Association of Investment Companies, as of 21/07/26.}

Allianz Technology Trust

All of these trusts are listed in the UK, but Allianz Technology (LON:ATT) is distinctive in having its management team based in San Francisco, giving it close access to many of the companies in its portfolio – approximately 90% of which is allocated to North America, as of 30 June.

“The portfolio provides broad exposure across the technology and AI ecosystem,” said Trett.

“The managers have highlighted the role of technology in creating differentiation across a wide range of industries [and] believe the AI opportunity is continuing to broaden beyond the initial infrastructure buildout, supporting a more diversified and durable phase of growth across the technology sector”.

^{Source: Association of Investment Companies, as of 21/07/26.}

Schiehallion

Like Scottish Mortgage, Schiehallion (LON:MNTN) is managed by Baillie Gifford and, depending on how pedantic you’re feeling, isn’t technically a technology investment trust.

But it has an interesting focus on early-stage companies – even more so than SMT, given that it invests in later-stage private companies.

“While not a dedicated technology fund, technology represents around 47% of the portfolio, with holdings including Anthropic, Bending Spoons, SpaceX, ByteDance and Databricks,” said Trett.

^{Source: Association of Investment Companies, as of 21/07/26.}

Herald Investment Trust

Again, Herald Investment Trust (LON:HRI) technically belongs in the Global Smaller Companies category, but it has a strong focus on technology and communications companies.

It was the subject of a bid from Saba Capital Management to displace its board, which led to a tender offer and for the trust to become part of Aberdeen.

Trett picks out Super Micro Computer, BE Semiconductor Industries, Celestica and Fabrinet as among its key holdings.

^{Source: Association of Investment Companies, as of 21/07/26.}

Manchester and London

Some people use investment trusts to diversify away from big tech concentration. Manchester & London (LON:MNL) is an investment trust for people that want to lean into it.

The fund takes a concentrated approach to investing and predominantly holds large-cap stocks, with AI a high-conviction play for the managers.

“The fund’s concentrated portfolio allows it to hold significant positions in its preferred ideas; Nvidia represented 43.6% of net assets in January before being subsequently reduced to 9.0% as at 30 June,” said Trett.

^{Source: Association of Investment Companies, as of 21/07/26.}

Biotech is one of the most innovative and fast-changing sectors of the stock market, with lots of areas where investors can find value.

It can be a tricky sector to define as the term is so broad. Biotech initially referred to firms using what we know about biology to help treat diseases. But now it's expanded into a more capital markets definition where many emerging, developmental stage companies that combine tech and biology are lumped together.

Biotech firms have long laboured under the unfair characterisation that they are all small, risky, unprofitable, and always going under.

But in the latest episode of the MoneyWeek Talks podcast, Ailsa Craig, fund manager of Schroders’ International Biotechnology Trust, tells Andrew Van Sickle, editor-in-chief of MoneyWeek, that this is far from the truth.

Craig suggests this prejudice may come from a time when many biotech firms were listed in London and failed. However, across the pond in the US, many of these firms have been great successes and some are even larger than well-known pharmaceutical companies.

“For example, Gliead and Amgen, are hundreds of billions in market cap. Glauco is $100 billion. So they are very much in the ‘big pharma’ pack, but are still named and classified as biotech for legacy reasons. So over in the US they have matured.”

“Many companies are still in clinical development – which we would call ‘white coat’ biotech – but many companies are mature, cash flow generating, high growth healthcare companies.”

At the same time as many biotech firms are now maturing, big pharma firms are also finding that patents for their drugs are running out. As the larger pharmaceutical companies are scared of losing revenue, they need to find new drugs to sell. This presents a tailwind for biotech.

Craig said: “Pharma is facing a wave of patent expiries much larger than we've seen before. Hundreds of billions of dollars in sales are going off patent in the next two to five years.

“They've got a problem – their internal R&D [research and development] productivity isn't great, so they're looking to biotech companies to fill that void of sales.”

For more on biotech, the future of weight-loss drugs, and how AI can impact the sector, listen to or watch the full episode of MoneyWeek Talks wherever you get your podcasts.

About the podcast

MoneyWeek Talks is a podcast that helps you unlock the secrets to financial success. Editors Kalpana Fitzpatrick and Andrew Van Sickle are joined by influential guests – from CEOs and entrepreneurs to economists and policymakers – to share their top tips on managing money, investing wisely and building wealth.

Subscribe to the MoneyWeek Talks podcast and get ready to make it, keep it and spend it with confidence.

There have been just three initial public offerings (IPOs) of investment trusts between 2023 and 2025, and none of them raised over £100 million. Achilles Investment Company (LSE: AIC), an activist trust, raised £54 million last year, while Ashoka WhiteOak Emerging Markets (LSE: AWEM) raised £30.5 million in 2023. Both have received a reasonable amount of coverage.

By far the smallest and least well-known of the three is Onward Opportunities (LSE: ONWD), which has raised £12.8 million through a listing on Aim in 2023. It has since grown in size to £42 million via several follow-on raises and graduated from Aim to the main market this year.

Onward Opportunities has a focused approach

Onward, which focuses on UK smaller companies and micro-caps, set a target of earning an annualised return of at least 15% and doubling invested capital within a three-to-five-year holding period. A share-price return of 18.5% (and a total net asset value (NAV) return of 26%) over three years means that it has so far failed to meet this goal. Still, it has outperformed the UK Aim All-Share total return index (8.4%) and matched the performance of its peer group, the AIC UK Smaller Companies sector.

The trust is managed by Laurence Hulse, who started his career at Gresham House in 2015. He worked on a number of equity funds – including Gresham House Strategic (which is now Rockwood Strategic (LSE: RKW)), the Strategic Public Equity Fund and the Gresham House Smaller Companies Fund – before he moved to Dowgate Wealth in 2022 to start Onward. Hulse and his team own 5% of the trust, and Dowgate owns 33%.

Onward has a concentrated portfolio of ten core positions and 12 smaller holdings (25% of the portfolio), which the team call “nursery” positions. It looks for profitable, cash-generative businesses, while also aiming to take meaningful positions in situations where an activist approach can unlock value.

The top two holdings at the end of June were Likewise (9.5%) and Angling Direct (8.3%). Likewise is a UK distributor of floor coverings, rugs, and matting that Onward first bought in 2024. It doubled down on the position at the end of last year, arguing that Likewise is well-positioned to outperform its “loss-making and heavily indebted rivals”, whose continued decline is a key part of the thesis. CEO Tony Brewer, who co-founded the firm in 2018, was previously at competitor Headlam, where he increased the firm's value tenfold between 2009 and 2015.

Angling Direct, a leading UK retailer of fishing equipment, has been a top holding for the trust since its inception. Onward wants management to reconsider the company's expansion into Europe amid continued losses and to focus on its app and social channels.

Pottery firm Portmeirion is a recent new nursery holding. While this firm has lost money over the past two years, Onward believes its new CEO Michael Scheepers, who comes from Le Creuset, can help drive the company forward.

Onward Opportunities is too expensive

While Onward is establishing a solid record in the small and micro-cap sector, the fees are quite pricey. The management fee is 1.5% of NAV up to £50 million and 1% above £50 million. On top of this, there is a performance fee of 12.5% of the excess return above a non-compounding hurdle of 6% per annum. While this gives managers an incentive to outperform, it's eating into returns.

Ongoing charges, including the performance fee, hit 4.4% in 2024 and 5.2% in 2025. This makes the trust nearly five times more expensive than the weighted average for its peer group, and 2.5 times higher than Rockwood Strategic, which has returned 56% over three years.

It's a shame that performance accrues to the managers rather than to investors. Strip out the fees and it would be a top performer.

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Joe Studwell is a development economist at Africa Urban Lab, a research centre at the African School of Economics, Zanzibar. He is also a founder and director of the Asian research and advisory firm Gavekal Dragonomics. His books include The China Dream, Asian Godfathers and How Asia Works. How Africa Works: Success and Failure on the World's Last Developmental Frontier is published by Profile Books (£25).

Matthew Partridge: The thesis of your book How Africa Works is that Africa is finally starting to take off economically.

Joe Studwell: We've already seen an uptick in growth in the last 20-30 years, as well as a move to more consistent growth as Africa becomes less dependent on minerals. We don't know at what level continental growth will settle, but I suspect across the 55 countries, we can now expect to see growth averaging something over 4% per annum, with some countries expanding at the sort of rates we associate with East Asia: 9%-10%.

Matthew Partridge: There have been several occasions over the past few decades when it looked as though Africa had finally reached take-off speed, only for it to fall back. How is it different this time?

Joe Studwell: This time the demographic story is different. The central thesis of the book is that demographics have been the main constraint on the continent. African population density in 1960 was equal to Europe's in 1500, so it was unrealistic to expect sustained growth.

But by 2030 the population density of Africa will be equivalent to that of Asia in 1960, and of course Asian density then tripled during its period of fast growth. What's more, while most African countries still aren't well governed, a handful are – and even the poorly governed are still enjoying faster growth.

Matthew Partridge: So, is urbanisation going to drive growth?

Joe Studwell: Yes. Cities are the big drivers of growth in Africa, with the pace of urbanisation faster than anywhere else. You get a much more efficient division of labour within cities, as well as more affordable infrastructure, and then you get higher-yielding agriculture in the surrounding areas as the proximity to the market encourages people to put lots of fertiliser on the land.

Matthew Partridge: Returning to demographics, do you think Africa's younger population, compared with Asia's and Europe's ageing ones, is a positive?

Joe Studwell: It's a positive. But the sweet spot will be when Africa's population matures, so you get a lot of people aged 15-64, the most economically active age. That maybe a little way down the line. What's more, while you do get younger people pushing for political change, Africa is already more democratic than Asia was at the same level of economic development.

Part of the reason for that is the ethnic diversity in Africa. With the dominant ethnic groups accounting for less than 30% of the population in some cases, it makes autocracy much harder to maintain than in East Asia, where ethnic minorities comprise less than 5% of the population.

Matthew Partridge: Africa has received large amounts of investment from China and the Middle East. Do you think that's helping to drive growth?

Joe Studwell: Foreign direct investment is important. It's not just the hard currency that comes in, but also the knowledge. And Chinese firms often say they are interested in Africa because margins are better than they are in China, where manufacturing is phenomenally competitive. The Middle East is branching out into services such as ports and real estate. Hopefully this will be supplemented by more European and US investment down the road.

Matthew Partridge: Could Chinese investments be a Trojan horse? Does China secretly want to secure dominance of those areas?

Joe Studwell: I don't think there is any evidence of some grand strategy. I think that China today is like Korea and Japan before it. It has massive surplus manufacturing capacity and vast amounts of foreign exchange. It is keen to move into both foreign markets.

And just as the Koreans did in the Middle East in the 1970s and 1980s – and the Japanese in Southeast Asia in the 1960s and 1970s – China has decided that Africa is the most natural target for its manufacturing and foreign-exchange surplus. What's more, while there has been some investment by the Chinese state, most of it is spearheaded by China's private companies

Matthew Partridge: You talk about some of the biggest success stories: Botswana, Rwanda, Ethiopia, Mauritius. What do you think are the key lessons from their success?

Joe Studwell: The thing about Africa is that there is no special African recipe, just the approach that worked well in Asia and in Europe after World War II. This was the emphasis on smallholders' agriculture and raising the intensity of production and yields, combined with a focus on manufacturing as a major job creator.

What I found in Africa was that context is very different. All the successful countries have leaders who managed to forge cross-ethnic coalitions. While this wouldn't be necessary in a country such as China where 95% of the population is Han Chinese, it is necessary in Botswana or Ethiopia or Rwanda, as you've got to bridge these big ethnic gaps if you're going to get political traction and enduring policy.

Matthew Partridge: What went wrong in the African countries that haven't succeeded?

Joe Studwell: The application of developmental policy requires leaders who believe in the possibilities of development, and many of the countries that failed couldn't construct cross-ethnic national coalitions to that end.

Worse, you had some utterly dysfunctional countries, such as Sudan or Somalia today where there's so much political disagreement and violence that there's no chance to get anything moving to promote development. This is a tragedy. Sudan has agricultural and manufacturing resources that could easily translate into a 10% growth rate.

But between the failed states at one extreme and a country such as Ethiopia (which will grow at 10% this year) at the other, there's an awful lot in the middle. Nigeria had a horrific civil war in the 1960s and has had governments that have since struggled to bind the ethnically diverse population together. But there is nonetheless a private sector going from strength to strength, with Aliko Dangote, the richest man in Africa, building the first economically successful petroleum refinery in Lagos, something that the government has struggled to do. He is active in a host of other businesses as well.

I'd urge everybody to go to Lagos because it's such a wild and remarkable place, with more than a fifth of the Nigerian economy in just one city. It is often said that everybody in Lagos wakes up that morning not quite sure how they'll eat that day, yet everybody seems to. Kenya would be another example. It is a largely mismanaged state, but with a vibrant private sector and lots of growing firms doing very interesting things.

Matthew Partridge: You talk about the role of governments in promoting manufacturing and industrialisation, but hasn't the state been very bad at picking winners?

Joe Studwell: Nobody who ran a good industrial policy ever set out to pick winners. Instead, you provide a subsidy and support in the context of competition between firms that are receiving that subsidy, and then you let the market decide who wins. You also pressure them to export, as manufactured exports are the most competitive part of the world economy.

But it's true that where it goes wrong, it tends to go wrong because governments fail to understand the role of competition and they do indeed try to pick winners. We had a case of that in Ethiopia with the huge state conglomerate Metals and Engineering Corporation (Metec), which was working on all the sugar mills for the sugar plantations that were being built. But the government has learned there, and is now splitting Metec up into four divisions, which will compete with each other and against other firms.

Matthew Partridge: Which African countries look the most interesting now from an investor's point of view?

Joe Studwell: I'd be reluctant to say. What's more, as we saw in East Asia, the most successful developing countries will take quite a long time to produce a good return for portfolio investors because they retain capital controls and they manage their banking system to direct credit to manufacturing and smallholder agriculture – policies that focus on the long-term good of the country rather than simply maximising investors' returns.

So, you could put money into African banks in countries with liberalised financial systems and you'll probably do quite well. But generally, Africa requires a lot of hard work because top-quality information about African companies is in relatively short supply. I think financial-services firms should be opening small offices and just having a look around rather than trying to woo people to put their money into what remain broadly frontier markets.

Matthew Partridge: How can the rest of the world help Africa to keep growing?

Joe Studwell: I hope that multilateral and bilateral institutions talk to African governments about what they really need and what their ambitions are, rather than turning up with shopping lists of what they think governments should be doing, which has been the weakness of all those institutions around the world.

Moreover, there's not much appetite in multilateral and bilateral institutions for supporting smallholders' agriculture or industrial policy. The latest trend in aid seems to be to treat aid like private equity. Bilateral donors give money to private-equity firms today on the basis that this constitutes a useful contribution to economic development, and I'm not sure that it does. Still, it doesn't matter too much, as the good news about African economies is coming from within Africa.

Matthew Partridge: In 20 years or so, once growth has started to feed through, how do you think the rise of Africa is going to reshape global politics?

Joe Studwell: In 2050, Africa is likely to have 2.5 billion people, up from 1.5 billion today. When we reach 2100, there will be four billion people in Africa, four billion people in Asia, and only two billion in the rest of the world. So, Africans will be demanding to be heard.

But I think what we need to recognise is that Africa is also going to take Asia's crown as the most diverse region of the world in terms of development. There is a huge difference today between the situation in Myanmar and that of Japan, Taiwan or South Korea. That's what we should expect with Africa in the future. We won't talk about Africa as a single monolithic entity; we will discuss it in the same way we tend to talk about East Asia or Southeast Asia.

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.

Chelvey Court, Backwell, Bristol

A Grade II-listed, 17th-century house currently arranged as two independent homes and a two-bedroom flat. It has a Jacobean staircase and carved stone fireplaces. 9 bedrooms, 4 bathrooms, kitchen, 2 receptions, study, barn, summer house, landscaped gardens, orchard, 5.53 acres.

Price: £1.95m+ Knight Frank 01173-171996

Carestown Steadings, Deskford, Buckie, Banffshire, Scotland

A large property close to the Moray Firth. It has vaulted ceilings and a conservatory. 3 bedrooms, 2 bathrooms, 4 receptions, kitchen, breakfast room, study, indoor swimming pool with sauna, 2-bed cottage, outbuilding with offices, 5.4 acres.

Price: £1.995m+ Strutt & Parker 01463-723595

North Pallant, Chichester, West Sussex

A renovated, Grade II-listed 15th-century townhouse with an extension to the rear adding a bespoke kitchen and living area with sliding doors leading onto a courtyard garden. The house retains its beamed ceilings and panelled walls, and has open fireplaces with wood-burning stoves. 5 bedrooms, 3 bathrooms, guest en-suite bed, 2 receptions, cinema room, roof terrace.

Price: £1.85m Fine & Country 01243-908077

The Grange, West Burton, Leyburn, North Yorkshire

A Grade II-listed, 18th-century house overlooking a river. It comes with three two-bedroom apartments in a converted Grade II-listed stable block, which are currently run as holiday lets. The house has open fireplaces and a large, bespoke dining kitchen with an Aga. 9 bedrooms, 7 bathrooms, 4 receptions, secondary kitchen, garages, mature gardens and pond bordering Walden Beck.

Price: £1.895m Savills 01904-617821

The Downs Barn & The Downs Barn Lodge, Frampton Mansell, Gloucestershire

A former barn with a 17th-century arched, panelled entrance. It has beamed ceilings, open fireplaces and comes with a detached, two-bedroom lodge. 7 bedrooms, 5 bathrooms, reception, 2 kitchens, 1-bed annexe, swimming pool, paddocks, woodland, 5 acres.

Price: £1.95m Murrays Estate Agents 01453-755552

The Old Vicarage, Tintagel, Cornwall

A refurbished Grade II-listed, mid-17th-century former vicarage and attached cottage on the edge of Tintagel. It has wood-burning stoves and a bespoke kitchen and conservatory leading onto landscaped gardens that include a kitchen garden and a stream crossed by a slate bridge. 7 bedrooms, 3 bathrooms, 2 receptions, gym, 17th-century gate house, deconsecrated chapel, 3 acres.

Price: £1.85m Rohrs & Rowe 01872-306360

Griffin House, Swerford, Chipping Norton, Oxfordshire

This 15th-century, Grade II-listed William and Mary house was rebuilt in 1691. It has oak mullion leaded-light windows, window seats, exposed timbers, flagstone floors, oak panelling and open fireplaces. The gardens include a range of outbuildings and a natural swimming pool with a pontoon. 5 bedrooms, 3 bathrooms, 2 receptions, breakfast kitchen, cinema and games room, triple garage with studio flat above, 1.2 acres.

Price: £1.95m Savills 01295-228000

Constance Close, London SW15

This house has been redesigned to include a Western Red Cedar-clad extension with an open-plan kitchen and living area with French doors leading onto the garden. The turret includes a bedroom with panoramic views over Richmond Park, and it has an office at the end of the garden. 4 bedrooms, 2 bathrooms, study, garage, air-source heat pump, solar panels.

Price: £1.9m Knight Frank 0203-8239255

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 first half of 2026 was disrupted by geopolitics. As we sweat through a sweltering summer, could the climate be the major driver in the second half?

Europe’s heatwaves have already had noticeable economic impacts. Barges transporting goods along the Rhine have had to reduce their capacity thanks to lower water levels, while France cut its nuclear power output because rivers were too warm to cool reactors.

And the brewing El Niño – a weather pattern characterised by rising sea temperatures, particularly in the equatorial Pacific ocean – could exacerbate these effects further.

“The macroeconomic impacts of El Niño are hard to both quantify and predict but affect everything from crop production and food prices to hydroelectric power generation and demand,” said Sophie Chardon, head of sustainable investments at private bank Lombard Odier in a research note.

“A warming world is thus raising long-term physical climate risks, with implications for infrastructure and security in sectors from power and mobility to natural resources and food production,” Chardon added.

With the earth warming up, what could the consequences be for your money and your investments?

Commodities could be set to rise

One effect of an El Niño weather system could be a rise in commodity prices, especially for certain agricultural products.

“The last time a major El Niño hit (2023–2024)... cocoa rallied 250%,” said Aneeka Gupta, director of macroeconomic research at asset manager WisdomTree. “Sugar hit its highest price in over a decade. Rice exporters shut their borders.”

While those events felt dramatic at the time, Gupta cautions that the impacts could be even greater this time around given the impact of the US-Iran war and the fertiliser crunch. More than a fifth of the world’s urea (a key ingredient in agricultural fertiliser) is sourced in the Middle East, so its supply has also been disrupted by the conflict.

Global baseline temperatures have climbed further since the last major El Niño, which could exacerbate the impact of this one.

The US National Oceanic & Atmospheric Administration (NOAA) is also predicting a 63% chance of a ‘very strong’ El Niño this year.

“On its own, that would already be worth watching,” said Gupta. “Layered on top of the Strait of Hormuz disruption, which has throttled fertiliser flows from the Middle East at precisely the moment farmers need to be securing inputs, this event arrives at a moment of unusual fragility for global food production.”

Lombard Odier’s Chardon added that the combination could have a particularly strong impact on wheat, corn, rice and soybeans, “with the risk of farming and power interruptions in many key emerging markets”.

This could see increases in food prices, especially for foods based on the products that are most heavily impacted by El Niño.

“Soft commodities have consistently been the strongest performers during El Niño episodes,” said Gupta. “Three of the five soft commodities (cotton, coffee, and sugar) moved to multi-year highs in 2022–23, and in late 2024 orange juice and cocoa reached record highs… Every strong El Niño in the past 55 years has reduced global cocoa production.”

How can you invest with climate change in mind?

Some of the economic impacts that El Niño and climate change are likely to cause will impact your finances, in ways you can’t control – for example, by potentially higher food prices. Higher food prices could have a knock-on effect on inflation.

But there are ways to invest so as to at least benefit from some of the responses and solutions to climate change.

You could, for example, invest in the energy transition commodities that are poised to see demand surge as governments reposition their power supply to reduce greenhouse gas emissions, or in funds that hold renewable energy suppliers. Investment trust Foresight Environmental Infrastructure (LON:FGEN) is a good example; it holds

Chardon talks about climate adaptation as an investment theme.

“Adaptations to improve the resilience of our economies’ infrastructure can enhance productivity, boost resource efficiency and create value, with opportunities in public and private markets,” she said,

One of the key pillars of this kind of investing is water. Climate change is increasing the prevalence of droughts, and of floods – which can be just as disruptive as droughts for water suppliers. Some experts see global water demand outstripping supply by as much as 40% by 2030.

Funds that capture this trend include Pictet Water, the Regnan Sustainable Water and Waste Fund or Allianz Global Water.

Or for exposure to the soft commodities that could be subject to price rises following El Niño, the WisdomTree Agriculture ETC (LON:AGAP) is an exchange-traded commodity (similar to an exchange-traded fund but for commodities) tracking a basket of agricultural futures contracts including for soybeans, coffee, sugar, cotton and cocoa.

Following a considerable run of strength, the price of gold began to settle as this year unfolded. The sudden rise in the price of crude oil and associated products drove the market to free up cash to cover increased costs and buffer against any further uncertainty. As a highly tradeable asset, gold hence fell victim to broad selling.

However, as the market stabilises, an opportunity could appear for those seeking to build up their gold exposure. Gold miners provide a way to leverage bets on gold. Their profits come from the difference between gold prices and the cost of extracting gold and, as gold miners invest in expanding their network of mines, new potential revenue sources appear. Material by-products of gold mining, such as copper, are also valuable and can provide a buffer against declines in the value of gold.

Three gold mining stocks for your portfolio

Barrick Mining Corp (NYSE: B) is a mining company producing gold and copper. Its operations span South and North America, Africa and the Middle East. Barrick was the world's largest gold-mining company until 2019, and its 2026 production guidance totals 2.9 million to 3.25 million ounces of gold and 190,000 to 220,000 tonnes of copper.

Following the broad shift in the industry to an increased focus on shareholder value, Barrick has been a leading example of the success of this move. The firm has strong policies to generate cash flow and a target dividend payout of 50% of free cash flows. A $3 billion share repurchase was authorised in May and the company is moving forward with plans to publicly list its North American gold assets, further strengthening shareholder value.

B2Gold (NYSE American: BTG) is a Canadian mining company operating across Mali, Namibia and the Philippines. It is focused solely on gold mining and produced just under 240,000 ounces in the first quarter of 2026. This smaller output means B2 cannot benefit from the scale efficiencies of larger mining operators, increasing its extraction costs and therefore the leverage of firm value relative to gold prices.

Despite this higher cost base, B2's all-in sustaining cost (AISC), a key metric for the industry, came in lower than predicted in the first quarter, which is particularly beneficial in the current environment of rising fuel costs. What's more, B2's strong financial and liquidity position means that the firm is well placed to deal with any further market shocks or uncertainty. The company's AGM in June revealed a strong commitment from B2's shareholders to leverage this strength to achieve growth and manage risk.

OceanaGold Corporation (Toronto: OGC) is a gold-mining and exploration company based operationally across Canada and Australia. Although costs exceeded expectations for the first quarter of 2026, the company reported strong operational performance. It posted record quarterly revenue and earnings, with a significant year-over-year increase. Furthermore, free cash flow surged by 271% when compared with the previous year.

Despite all this, over the same period, the stock price declined nearly 4%. The strong technical performance paired with observed price weakness suggests a potential buying opportunity. The company predicts a decline in extraction costs as production expands and access to high-grade ore improves. Its Haile mine project in South Carolina is expected to lead to a 35% rise in gold production, while reducing costs by about 25%.

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 London Stock Exchange recently celebrated 25 years of its FTSE4Good range of indices, designed to assess and boost corporate “sustainability”. Strictly excluded were firms involved in areas such as tobacco and weapons that were considered controversial. The restrictions quickly expanded to exclude the defence industry, fossil fuels and gambling.

The subsequent rush to ESG (environment, social and governance issues) saw the list broadened to include airlines, mining, alcohol and anything else that offended progressive sensibilities.

For a long time, this seemed to work as investment flows benefited the favoured areas, such as renewable energy. More recently, a heavy weighting in the tech sector – 44% in the FTSE4Good All-World series against 35% in the FTSE All-World index – has helped performance, even if overall the difference compared with broader indices has been negligible.

But the series for the UK, which has little exposure to technology, shows a worrying pattern for ESG devotees. The FTSE 100 has gained 70% in ten years and the All-Share index 67.5%, but FTSE4Good has managed only 57%. Over five years, FTSE4Good has gained 35% against 46.5% for the FTSE 100 and 38% for the All-Share.

A boom in unethical investing

Shares in British American Tobacco, for example, have appreciated nearly 70% since Bruce Packard wrote about them in MoneyWeek in October 2024, when, in addition, they yielded 9%. Smoking may be in decline, but BAT is moving rapidly into smokeless products, expected to exceed 50% of revenues by 2035.

Imperial Brands has performed less well, but its shares are still up nearly 60% since spring 2024 (when they also yielded 9%), despite a 20% fall since early February.

True, the oil and gas sector had a miserable few years – until the Gulf war pushed up prices. Shell's shares rose more than 30% in the first quarter and are now up 10% year-to-date. BP's shares rose 40% in the first quarter and are up 16% year-to-date. The shares of ExxonMobil, which never sought to reinvent itself as a renewables company, have more than doubled in the last five years and are up 20% this year.

Then the Russian invasion of Ukraine in 2022 caused an abrupt change in attitude towards defence. Since then, the share price of BAE Systems has trebled, although it has traded sideways for the last year due to doubts about the usefulness of much of its hardware in modern conflicts. Rolls-Royce's share price multiplied tenfold in the same time.

Babcock's shares didn't start moving until mid-2023, but are up 250% since. Since the end of 2022, shares in Palantir, hated by progressives for its links to Israel and for delivering strong efficiency gains to the NHS, has multiplied 20-fold in value, even though it is now down 40% from its late 2025 peak.

Gambling firms, on the other hand, have struggled with the transition from the high street to the highly competitive online market. Entain, owners of Ladbrokes and Coral, has fallen 75% since a peak in late 2021, Flutter Entertainment (Paddy Power, Sportsbet and Sky) prospered until a year ago, but has since fallen by two-thirds, while Rank Group (Mecca and Grosvenor Casinos) has been on a downward trend for ten years.

Miners are often excused criticism for the rare metals essential for technology and renewable energy that they extract, but this is only a small part of their business. Most of it is in the dirty business of mining iron ore, aluminium, precious metals and the no-go area of coal. Admittedly, Rio Tinto, up 75% in the last year, exited most of its coal business in 2018, but the proposed merger with Glencore, up 87% in a year and one of the world's largest coal producers and traders, would put it back in.

BHP (up 80% in a year) and Anglo American (up 84%) have significant coal interests, although Anglo American recently sold its Australian coal business. Net-zero evangelists also disapprove of airlines; yet despite the rise in fuel prices, International Airlines is up 51% in a year and 177% in two. EasyJet and Jet2 have traded broadly sideways.

The problem with ESG investing

The conclusion is not that ethical investing has necessarily reduced performance, as it depends on what was bought instead. If that was more technology, that would have concentrated any portfolio in a high-risk area. Opinions about what is and is not ethical vary and change over time, as they have for defence. Tobacco companies are moving to smokeless products; should that not be encouraged?

Mining is a dirty business, but it is an essential part of the global economy. The move to renewable energy, reducing dependence on imports of fossil fuels from some of the most unsavoury and corrupt countries in the world, is surely desirable, but is only possible at the pace allowed by economics, technology and adoption by consumers.

Gambling, whether online or in betting shops, is addictive and impoverishing, but could horse-racing survive without it? Lotteries, described by Samuel Johnson as “a tax on fools”, have paid for many good works.

Restricting the choice of investments available to fund managers makes it harder for them to perform and easier to excuse underperformance. Yet charity trustees who do so risk depriving good causes of much-needed returns. The damage to the businesses they won't invest in is, at best, marginal, but the damage to their cherished causes is very real. Is that really ethical?

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Taiwan Semiconductor Manufacturing Company (TSMC) (Taipei: 2330 and NYSE: TSM) may be the most important business most people have never heard of. Right now, you're probably carrying products that it has made. Most consumers recognise names such as Apple and Nvidia. Yet behind many of the products they sell sits a Taiwanese manufacturer responsible for turning their designs into reality.

Every day, billions of people rely on devices powered by chips produced by TSMC. The company's influence stretches far beyond smartphones. From artificial intelligence to consumer electronics, much of the modern digital economy ultimately depends on a business with headquarters on an island roughly 100 miles off the coast of China.

What makes TSMC remarkable is not simply its scale, but the way it achieved it. Unlike most technology giants, it did not become dominant by creating the best consumer products or developing a monopoly over software. Instead, it positioned itself as a neutral supplier to an industry filled with fierce competitors. In effect, TSMC became the Switzerland of the semiconductor world, doing business with everyone and doing so in secrecy.

How Morris Chang founded TSMC

That strategy was the brainchild of Morris Chang, a veteran semiconductor executive who spotted a flaw in the industry's business model and built an entire company around solving it. Nearly four decades after it was founded, his insight sits at the centre of the global technology industry.

Chang never set out to build one of the world's most important firms. For 25 years, he worked at Texas Instruments, rising high to run its global semiconductor business. During those years, Chang noticed a problem. Brilliant engineers regularly designed innovative chips, but turning those designs into products required vast sums of money.

In the 1970s and 1980s, semiconductor firms were expected to do everything themselves. Designing chips was only half the job. Companies also needed expensive factories, specialised equipment and the expertise to run them. The result was an industry dominated by a handful of large, vertically integrated firms.

Then Chang's own career took an unexpected turn. In 1983, aged 52, he was passed over for the top job at Texas Instruments and left the company. After a brief spell in a senior role at another American chip company, he received an unusual offer. The Taiwanese government wanted to build a domestic electronics industry and was looking for someone with Silicon Valley experience to lead the effort. Chang accepted.

He arrived in Taiwan with decades of semiconductor experience and a conviction that copying America would be a mistake. Taiwan lacked the design expertise, customer relationships and global brands needed to compete. But Chang had spent years watching another problem unfold. The industry was full of talented chip designers who could not afford to manufacture their ideas. What if somebody built the chips for them?

That simple question led to the creation of TSMC in 1987. At the time, the idea looked absurd. Bringing a chip to market required access to a fabrication plant, or “fab”. The industry believed serious companies should own these factories themselves. In practice, that meant chip designers relying on one of the industry giants.

That created another problem. The company manufacturing your chip was often also a competitor. Handing over your most valuable intellectual property required a leap of faith. Chang's solution was that TSMC would make chips for anyone willing to pay, but would never design products of its own.

In 1987, that sounded like madness. When Chang went looking for investors, many of the industry's biggest names rejected him. Texas Instruments and Intel both declined his offer. A factory without its own products looked like a recipe for bankruptcy. How could a manufacturer survive without guaranteed demand?

In the end, Chang persuaded the Dutch electronics group Philips and several wealthy Taiwanese families to back the venture. Even then, enthusiasm was limited. Philips largely viewed the investment as a way of supporting the Taiwanese government's ambitions rather than as a compelling commercial opportunity. It intended liquidating its investment early. Potential customers were hardly more enthusiastic. Many designers saw little reason to outsource manufacturing. A company that only made chips for other people seemed unnecessary.

By now, Chang was a 56-year-old executive pitching an untested business model in an industry convinced it could never work. Then, fortune presented an opportunity. In 1988, Intel found itself short of manufacturing capacity. Faced with the prospect of disappointing customers, it reluctantly turned to TSMC for help. Intel's engineers arrived in Taiwan expecting a low-cost, unsophisticated subcontractor. Instead, they found a world-class operation run by one of the industry's most experienced executives. Passing Intel's quality standards was not easy, but once TSMC secured the American giant's approval, attitudes across the industry changed quickly. If Intel trusted TSMC, others reasoned, perhaps they could too.

That endorsement transformed the trajectory of the company. Designers no longer needed to spend billions building factories before launching a new product. Instead, they could focus on what they did best – designing chips, and letting TSMC handle the rest. Without TSMC, it's unlikely that Nvidia could have existed, nor could a host of other chip companies.

A new generation of semiconductor firms emerged, freed from one of the industry's biggest barriers to entry. While rivals competed to design better chips, TSMC focused on becoming the best manufacturer in the world. By choosing not to compete with its customers, the company turned neutrality into a competitive advantage. That decision would prove far more powerful than anyone imagined. But the success of TSMC's model created an obvious question: if it was such a good idea, why didn't somebody copy it?

Many tried, but almost all failed. For years, Samsung looked like the most credible challenger. The South Korean giant had deep pockets and decades of manufacturing experience. The problem was that Samsung was also a competitor. Unlike TSMC, Samsung sold smartphones and consumer electronics under its own brand. That created a dilemma for customers. Why hand your most valuable chip designs to a firm that might one day compete against you? No customer wrestled with that question more than Apple.

During the early years of the iPhone, Samsung made many of Apple's processors. The arrangement worked, but it became increasingly awkward as the two companies emerged as fierce rivals in the smartphone market. By the early 2010s, they were fighting a series of patent disputes. Apple found itself in the strange position of relying on one of its biggest competitors to make some of its most important components.

TSMC offered an escape route. With the launch of the A8 processor in 2014, Apple shifted production to Taiwan. The move was risky, but Apple concluded that the benefits outweighed the costs. TSMC's neutrality had become one of the most valuable assets in the technology industry. Today, many of Silicon Valley's biggest rivals manufacture their chips at TSMC. Apple, Nvidia, AMD and Qualcomm all rely on the same company, despite competing aggressively in their own markets.

Samsung's problem was a conflict of interest; Intel's was something different: success. For decades, Intel dominated the semiconductor industry. Its factories were among the most advanced in the world. However, the company became increasingly focused on its own products. When Apple approached Intel in the mid-2000s about supplying chips for what would become the first iPhone, Intel declined.

Management believed the opportunity was too small to justify the investment. It was one of the most expensive misjudgements in the history of the technology industry. By the time Intel recognised its mistake, Apple had moved on and TSMC was becoming the manufacturing partner of choice for a new generation of chip designers. When Intel later attempted to open its factories to outside customers, its manufacturing systems had been built around Intel's products, not the needs of third-party designers.

Other competitors couldn't keep up with the investment needs. GlobalFoundries, an American rival, spent years trying to keep pace before effectively giving up on leading-edge manufacturing in 2018. The company concluded that each new generation of chip technology required so much investment that the returns no longer justified the risk.

China's national champion, SMIC, faces a different challenge. Western export controls have restricted access to advanced manufacturing equipment, making it difficult to compete at the industry's frontier.

TSMC's greatest advantage

TSMC's greatest advantage is not its technology, because that can be copied. Its real advantage is the business model Morris Chang created nearly four decades ago. The company sits at the centre of the semiconductor industry, serving customers that often compete with one another. That position generates enormous scale, which in turn funds the next generation of factories and equipment.

The most advanced chips require ultraviolet lithography machines built by the Dutch company ASML. Each cost more than £275 million. A state-of-the-art fab may contain dozens of these machines, helping to push the cost of a new facility beyond £15 billion before production even begins. That creates a problem for potential rivals.

Customers will not trust an unproven manufacturer with their most important products, especially if they don't have advanced fabs. Yet building a state-of-the-art factory requires billions of pounds before those customers appear. Having already achieved enormous scale, TSMC now largely escapes this trap. The company controls roughly 92% of advanced chip manufacturing and generates the cash needed to fund the next generation of technology.

In 2026 alone, TSMC expects to spend nearly £45 billion on new factories and equipment. Few companies in the world could contemplate spending that much. None can do so with the same confidence of earning a return. The result is a powerful feedback loop. Scale attracts customers. Customers generate cash. Cash funds new factories. New factories attract even more customers.

Every year that cycle turns, TSMC becomes harder to catch as the price of entry rises ever higher. That scale gives TSMC another advantage: it allows customers to help fund its expansion. Most manufacturers have to build factories first and hope demand follows. Today, TSMC often works the other way around. Some of its largest customers commit billions of pounds years before new facilities begin production, effectively helping to finance the next generation of capacity.

At the end of 2024, TSMC held more than £7.3 billion of customers' deposits. As production ramped up on newer technologies, some of that money was recognised as revenue, but the balance remained substantial. Technology companies are willing to tie up enormous sums because access to TSMC's manufacturing has become critical to their own growth plans. This arrangement shifts much of the risk away from TSMC.

When companies such as Nvidia sign long-term agreements worth billions of pounds, they provide “visibility” – confidence in management forecasts – that few industrial businesses can match. New factories can be built with a high degree of confidence that demand will be waiting when they open. That helps explain why TSMC can continue investing through industry cycles.

AI is a game-changer for the semiconductor industry

For years, Apple was the company's most important customer. The iPhone generated the predictable demand that allowed TSMC to refine successive generations of manufacturing technology and steadily expand its lead. Now a new force is reshaping the industry. AI has become the biggest driver of demand for advanced semiconductors. Training and running large AI models requires vast quantities of computing power, creating an arms race among technology companies desperate to secure enough chips.

The biggest beneficiary has been Nvidia. In 2025, Nvidia overtook Apple as TSMC's largest customer, generating more than £18 billion of revenue for TSMC and accounting for roughly a fifth of total sales. The shift says a great deal about how quickly AI has altered the economics of the technology industry, but the opportunity extends beyond chip design.

Producing cutting-edge AI processors is one of the most demanding manufacturing tasks in the world. The chips themselves are larger, more complex and more difficult to assemble than those used in smartphones. As demand has exploded, bottlenecks have emerged throughout the supply chain. For TSMC, that has translated into even greater pricing power.

The world's largest technology firms are competing for a limited supply of advanced manufacturing capacity. Many have little choice but to accept TSMC's terms because there are few credible alternatives. AI has reinforced the advantages of specialisation. Developing a leading-edge AI chip already costs hundreds of millions of pounds. Building the factory to make it would require billions more. As AI pushes the technological frontier forward, the advantages of specialisation are becoming even more pronounced.

But TSMC's dominance creates a problem. Most of the world's most advanced semiconductor manufacturing remains concentrated in Taiwan. That has become a concern for governments, particularly as tensions between China and Taiwan have intensified. A disruption to TSMC's operations would ripple through the global economy.

Smartphones, data centres, AI systems and countless other technologies depend on its chips. Under pressure from the US and other governments, it's begun expanding overseas. The largest investment is a vast complex in Phoenix, Arizona. Similar projects are underway in Japan and Europe.

Building advanced factories in the US is estimated to be roughly 50% more expensive than doing so in Taiwan. Labour costs are higher, experienced engineers are harder to find and supply chains are less developed. TSMC has reportedly had to transfer experienced staff from Taiwan and create thousands of new operating procedures to support its US operations. Yet even these higher costs have not weakened the company's position.

Customers are willing to pay a premium for chips manufactured on US soil. For many, securing a politically safer supply chain is worth the extra expense. In an ironic twist, efforts to reduce dependence on TSMC have largely demonstrated how dependent the world has become on its expertise.

The future looks bright for TSMC

Whether the company can maintain its current position forever is another question. The semiconductor industry has a long history of dominant firms losing their edge, while geopolitical tensions surrounding Taiwan remain an ever-present risk. Governments are spending heavily to build alternative sources of supply and rivals continue searching for ways to close the gap.

However, history suggests writing off TSMC would be unwise. For nearly 40 years, the company has repeatedly adapted to changes in technology, customers' demands and the structure of the industry. It has survived downturns, outlasted competitors and continued strengthening its position at the heart of the digital economy. The story of TSMC is ultimately the story of how a company became indispensable. In an industry defined by relentless change, that may be its most remarkable achievement.

None of this means TSMC is a bargain. Investors are well aware of the company's strengths and the shares have performed exceptionally well over the past decade. As a result, the stock trades on a valuation that reflects high expectations for future growth. Still, TSMC has qualities that are difficult to find elsewhere. It occupies a dominant position in one of the world's most important industries, enjoys deep relationships with many of the largest technology companies on the planet and continues to invest heavily to maintain its lead.

Most importantly, investors do not need to predict which company will ultimately win the AI race. Whether the future belongs to Nvidia, AMD or some future challenger, there is a good chance that their chips will still be manufactured by TSMC. That does not guarantee attractive returns from today's share price. But betting against the company has rarely been a profitable strategy. For investors seeking exposure to long-term growth in technology and AI, TSMC remains one of the highest-quality businesses in the market.

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