“It’s sad, so sad
It’s a sad, sad situation
And it’s gettin’ more and more absurd”
As DIY is an investment blog we start with markets……the S&P 500 will likely end the year close to 7000 having opened at 5880, and recovered from a presidential tariff induced drop to 4983 in April.
The FTSE 100 followed a similar pattern, opening at 8200 dropped to a low of 7679 in April, and looks like finishing the year close to 10,000.
The rise of the FTSE mystifies me, perhaps it’s the fear of missing out and the herd following America?
Closer analysis shows that we are firmly in bubble territory. The Magnificent-7comprise 35-36% of the S&P by market cap, a very significant concentration risk,
They dramatically outperform the remaining 493 stocks, as such the index resembles a giant bet on AI.
The entire bet looks more like a house of cards. AI investment now rivals consumer spending as the primary creator of American economic growth, accounting for C.92% of GDP growth in H1. Without it, US GDP grew only 0.1%.
‘we are firmly in bubble territory’
As such the AI bubble is making US growth look presentable, especially when compared to our own moribund economy. However, this is illusory, take away AI and the US looks no better.
Aside from the obvious bubble, there are external vulnerabilities over the AI bet. The usual cited issue is China, but there is also Holland. A Dutch company, ASML, holds a global monopoly on the microchip-etching machines that use light to carve patterns on silicon. These machines are essential for Nvidia.
This gives Europe a potential “trump” card; whist withholding these silicon-etching machines would be difficult for Europe, and extremely painful for the Dutch economy, it could be far more painful for Trump.
As ever the stockmarket is a measure of little other than the collective value of investors sentiments, whereas the bond market shows the real picture.
The US 10yr Treasury yielded 4.8% on Jan 10, shortly after Trump’s inauguration, and is currently around 4.2%, whilst inflation which, after dipping to 2.3% in April, is now back at 3%.
Again, the UK picture is broadly similar; the 10yr Gilt opened the year around 4.5%, and is back there. Inflation started the year at 3%, dipped to a low of 2.6% in March, currently it is 3.6%.
Both central banks are cutting rates, which, given the inflationary climate, might be seen as unusual.
In the UK there is a seemingly “try anything” to get people spending policy, whereas the US appears more politically motivated, with Trump desperate to keep markets booming as the mid-terms approach. Presumably he assumes that if the S&P is up everyone is happy?!
Perhaps the biggest economic story of 2025 has been Trump’s off, on, off, half-on tariffs.
There does seem to have been a fundamental misunderstanding of how tariffs operate. Basically, they increase the price of imports, meaning you are effectively importing inflation, which explains why, since their imposition in April inflation has steadily ticked upwards.
Trump’s obsession with rate cuts to juice-up the economy, will likely increase this inflationary trend, further inflation an unsustainable asset bubble, and exacerbating inequality.
Trump, of course, lives in his own bubble, as was once again proven with this week’s 20-minutes rant on national TV, telling voters how good the economy is. When the Wall Street Journal factchecked him 91% of his claims were bogus.
This only confirms what many already knew; Trump has no more idea, perhaps no intent of fixing the economic ills that have been growing in many major economies for years. Problems that have been laid bare by the GFC.
‘the majority have suffered whilst a small minority have reaped all the rewards’
In one word; inequality. Since 1980 this has been increasing, and the majority have suffered whilst a small minority have reaped all the rewards.
Populism has been the major beneficiary, not because it provides answers, but because it provides someone, or something for the majority to blame. That something is the “establishment, the dark state”, which, in the UK, manifested itself as the EU, with the someone being immigrants.
Populists paint pictures of too many people being forced to fight for too few resources. Put simply, they tell you that, if there is not enough to go around, why are “our” scarce resources being handed to migrants? De facto, by removing immigrants, who are portayed as the undeserving competition, the “indigenous” population will, once again, reap all the benefits.
This can be seen in France, where President Macrons’ proposal to increase the retirement age is deeply unpopular, and, in response, the far-right National Rally’s (“RN”) promise to “reserve social assistance for French citizens”, or to “make all French citizens privileged in their own country”. In Austria, as unemployment rises, the right claims that migrants steal jobs and drain social security. In Britain, labor argues that support for pensioners and disabled people can no longer be afforded, to which Reform tells the electorate that “Starmer is choosing migrant benefits over winter fuel for pensioners.”
Populism enables all manner of charlatans to flourish. There is the ever needy Liz Truss, who now has her own YouTube show, aimed at revealing “the evil-doers” attempting to bring down Britain, the US and Europe. These evil-doers we are told are part of an “international network of leftists working to subvert democracy and the will of the people”.
Her inspiration, if that’s the right term, is Trumps’ America: “We’re going to look at the Trump revolution and see how this can be achieved in Britain. We’ll be talking to the leading lights of the Maga movement.”
The Maga movement is akin to our red wall; towns and cities that suffered from the deindustrialisation of the 1980s, and were left behind by progressive politics.
The movement is Trumps’ powerbase, primarily because they believed he would make them better off.
‘towns and cities that suffered from the deindustrialisation of the 1980s, and were left behind by progressive politics’
These are the people I referred to last November in “Darklands”:
“Economic reality for voters is simple, do they feel wealthy, better off than before? The answer is binary; yes or no.
“Since 1980 the answer has, for the majority, become more and more, no. For the few, it is clearly yes.
In theory, in the US, the answer, looking at traditional measures, should be yes. As Mark Zandi, the respected chief economist at Moody’s, recently wrote “But … there is no denying it: this is among the best performing economies in my 35+ years as an economist.” Growth: up. Jobs: up. Wages: rising. The value of your home: up. Share prices: booming. Inflation: falling. Borrowing rates: dropping.”
“Yet, today, even as economic powerhouses such as Germany and Japan face recession, magazines toast the US economy’s “superstar status”. Yet, still most Americans don’t feel better off.
“And the numbers confirm this; for teachers, clerical workers, sales reps and the great bulk of US employees, whether white or blue collar, wages have flatlined for most of the past half century. Strip out inflation and average hourly earnings for 70% of 10 US employees have barely risen since Richard Nixon was in the White House”.
There we are, it’s that word again, inequality.
Has Trump delivered on his pledges to protect blue‑collar workers? No.
What he has done is cut their Medicaid, increased inflation, instituted tax breaks for the richest, and given the disappointed someone to blame: Immigrants.
As the title suggests, 2025 has been the year that racism became acceptable.
‘There we are, it’s that word again, inequality’
Trump plans to export his racism to Europe to support the local populists in order to control immigration and halt “civilizational erasure.”
Domestically, Trump has his own racism enforcers, ICE, whose snatch squads have become a regular presence of US streets, something I covered in “Things Will Only Get Worse Part II – RACISM!”
I came across the following on the Homeland Security website. The wording could have come from any totalitarian state.
“Since January 20, 2025, DHS enforcement operations have resulted in more than 605,000 deportations. DHS has prioritized removing the worst of the worst criminal illegal aliens as part of the Trump Administration’s efforts to return law and order to the United States.
“Additionally, thanks to the comprehensive efforts of DHS law enforcement, 1.9 million illegal aliens have voluntarily self-deported since January 2025. We encourage all illegal aliens to use the CBP Home app to get a free flight home for Christmas and $1,000.
“The Trump Administration is shattering historic records with more than 2.5 million illegal aliens leaving the U.S. DHS has deported more than 605,000 illegal aliens and another 1.9 million have self-deported. Since January 20, DHS has arrested more than 595,000 illegal aliens,” said Assistant Secretary Tricia McLaughlin. “Illegal aliens are hearing our message to leave now. They know if they don’t, we will find them, we will arrest them, and they will never return.”
One of the most impacted cities is LA, and three institutions have teamed-up to launch a response to ICE raids in the city, projecting illuminated images of everyday LA residents in support of the thousands of community members who have been detained this year.
‘2025 has been the year that racism became acceptable’
Part of a protest art project entitled “Am I Next?”, are the black and white images tht began appearing nightly on 6 November on the facades of the downtown buildings of the California Community Foundation, LA Plaza Cultura y Artes and the Japanese American National Museum in objection to the undermining of democratic norms and attacks on civil liberties.
Along with projecting portraits of Angelenos, Am I Next? highlights brief stories of people, including US citizens, accosted and snatched out of homes, cars, workplaces and the streets by federal agents, under the word “Taken”:
- Mauricio, waiting for a bus.
- Rosalina, at home with her children.
- Juan, on lunch break from his construction job.
Overseas, aside from curing Europe civilisation erasure, Trump’s main foreign policy aims appears centred around being awarded a Nobel peace prize, which has included claiming to ending wars that even the participants were unaware of.
In Gaza, he did bring about a sort-of ceasefire, but only after Isreal had been allowed to starve the local population,
In Ukraine he has been less successful despite doing his best to humiliate their President on live TV. Trump’s negotiations appeared centred around how much of Ukraine Russia will be allowed to keep as a reward for their aggression. Clearly, he is confusing peace with appeasement.
Trump, in-common with all populist, aspires to be strong leader. Unfortunately, this appears to be only an aspiration, as the leaders of Israel, Russia and China have all run rings around him. Like all bullies, when someone stands-up to him, there is little of substance.
‘Clearly, he is confusing peace with appeasement’
Perhaps, this is why he sought-out a new victim; step-forward Europe.
The new US national security strategy, or “NSS”, warns that Europe faces economic stagnation, “censorship of free speech and suppression of political opposition, cratering birthrates” and above all, migration, raise “the stark prospect of civilizational erasure”.
The paper is based on US fears that some European countries “will become majority non-European”, or, more accurately, non-white. In a recent speech Trump highlighted this, complaining that the US only takes people “from shithole countries” such as Somalia, asking: “Why can’t we have some people from Norway, Sweden … from Denmark?”
The Trump administration has decided that migration, DEI and “woke” policies have enfeebled societies that were stronger when they were solidly white and Christian.
To enforce this strategy, the Trump administration says it will not stand idly by as Europe allows itself to become “unrecognizable in 20 years or less”, and plans to support the far-right, ultranationalist parties it lauds for their “resistance”, and views “the growing influence of patriotic European parties” with great optimism.
Put simply, Trumps’ America is prepared to undermine local democracy to support regime change in Europe, to government’s more in-keeping with their views, such as the Germany’s AfD, France’s NR and, our own Reform.
‘Trumps’ America is prepared to undermine local democracy to support regime change in Europe’
Trump maybe surprised to see that some of his chosen ones, such as Frances’ RN, may not want his help. As I wrote in “The Return of the Never Ending Story?”, Jordan Bardella responded saying: “…I don’t need a big brother like Trump to consider the fate of my country.”
Part of the US strategy is centred around divide and conquer, with the Trump administration seeking to undermine the EU and hoping for its eventual collapse, allowing them to chip away at individuals states rather than the collective. Individually, as Britain is learning, states become isolated and vulnerable, whereas a block has collective strength.
This is in-line with Russia hopes, as Putin, has long regarded the weakening or breakup of the EU as a strategic aim. Small wonder the Kremlin praised the NSS as being aligned with “our vision”.
Europe’s leaders, including ourselves, have to make a decision on where we stand vis a vis the US under Trump.
Within this lies a multitude of challenges, including war in Ukraine, maintaining the momentum of the green transition, addressing demographic change and developing economies that are less vulnerable to bullying by Mr Trump and China. All of which comes at substantial cost; the Brussels-based Breugel thinktank estimates an additional €250bn in annual EU defense spending alone.
The UK, no doubt conscious of the historical special relationship, is stumbling around like a spurned lover, unable to quite take-in what has happened and longing for a reconciliation. This is evident in our dealing over Ukraine, Starmer prides himself on his solidarity with Zelenskyy, but remains silent as Trump demonstrates his solidarity with Putin.
If we are to stand firm behind Ukraine, we will need to work with Europe, combining our collective military capabilities. Despite this need to be joined-up, a plan for the UK to join a major European rearmament effort collapsed because we couldn’t afford the joining fee of the €150bn (£130bn). |The scheme would have significantly boosted our defense industry.
Equally, any hope of rejoining the EU customs union has been ruled-out, with the PM wanting to avoid unravelling the US trade deal he secured earlier this.
‘any hope of rejoining the EU customs union has been ruled-out’
We continue to be deluded in the belief that there remains a special relationship with the US, failing to accept that it is a one-way street that finishes with a dead-end.
Just how one-way the relationship is was confirmed recently, with the much vaunted £31bn “tech prosperity deal”, a part of the overall US trade deal, now threated with the US citing a lack of progress from us in lowering trade barriers in other areas. Specifically, the Trump’s administration is reported to be unhappy about our continued levying of a digital services tax on American tech companies and our food safety rules, which bars them from exporting certain agricultural products.
The PM had described the deal as “a generational step-change in our relationship with the US”; he might be right albeit for the wrong reasons.
A statement from a UK government spokesperson highlights our continual foolishness: “Our special relationship with the US remains strong and the UK is firmly committed to ensuring the tech prosperity deal delivers opportunity for hard-working people in both countries.”
The governments approach to dealing with Trump’s law suit against the BBC will tell us much about how they intend to deal with the US going forward.
The broadcaster, a nation champion, has admitted its mistake and apologized, but this isn’t enough for Trump, who has previous for suing broadcasters. He settled for $15m from ABC owned by Disney, as part settlement over a defamation lawsuit. More recently, he received $16m from Paramount, the parent of CBS News, over what he claimed was false editing of a pre-election interview with the Democratic candidate for president Kamala Harris.
Stephen Kinnock, a health minister, said it was “right that the BBC stand firm” against Trump’s claims of defamation and that he hoped “they will continue to do so”. He went onto say: “The government is a massive supporter of the BBC. The labor party will always stand up for the BBC as a vitally important institution.
It will be interesting to see what, if anything, Reform, the Tories and the right-wing media have to say. On the one hand they appear to dislike the corporation, but, as nationalists, should be seen to defend them.
In the UK, 2025 saw an upsurge in nationalism, especially flags. There was a series of anti-migrants demonstration as racism became normalised, with mainstream parties championing what would previously been unacceptable proposals.
‘quite how the premeditated, industrialised extermination of 6m Jewish people is funny escapes me’
Reform, obviously, are the leaders here, and special mention must go to their leader, Nigel Farage whose did he didn’t he taunting as a schoolboy still goes unanswered. He did say that his comments were merely “banter”, although quite how the premeditated, industrialised extermination of 6m Jewish people is funny escapes me!
The complainants from his schooldays have sent an open letter to Farage, asking that he apologizes, but, as the song says: “Sorry seems to be the hardest word.”
It really is beyond ironic that, at the same time as parliament is condemning the attack on Jews in Australia, that the party leading in the polls is led by a person who stands accused of once having said: “Hitler was right.”
Next-up is Sarah Pochin, the Reform MP, who agreed with a caller on TalkTV who complained about the “demographics” of advertising, saying the viewer was “absolutely right” and “it drives me mad when I see adverts full of black people, full of Asian people”.
‘we are alone looking to our former lover for help, and ignoring the solution that is across the channel!’
Bringing up the rear with a late challenge was deputy leader, Richard Tice, who refused to condemn Reform UK mayoral candidate for saying David Lammy should ‘go home to Caribbean’. His defense was that he already answered this, when he hadn’t.
For the Tories, Rober Jenrick was determined not to be left out, stating Britain must “unashamedly put British interests first” and that “at the extreme levels, a lack of integration leads us into a very dark place”, and not seeing “another white face” in Handsworth
As the pressure mounted on the government it was their turn to enter the contest. PM Starmer was first out-of-the-blocks with a speech where he said: “In a diverse nation like ours … we risk becoming an island of strangers, not a nation that walks forward together.”
“In a diverse nation like ours … we risk becoming an island of strangers, not a nation that walks forward together.”
Later in the speech he claimed that mass immigration had done “incalculable damage” to the British economy.
In a nasty, desperate last roll of the dice as the government attempted to head-off Reform, the home secretary, Shabana Mahmood, proposed that migrants who are in the UK legally could have to wait up to 20 years before they can settle permanently, a move that would impact the estimated 2.6 million who arrived since 2021.
Currently, the qualifying period for indefinite leave to remain is five to 10 years.
Mahmood asserted that settling in the UK is “not a right, but a privilege” that must be earned, as she pledged to “do whatever it takes to secure our borders“.
Previously, when in opposition, Mahood seemed much more relaxed about immigration, but her conversion is such that she now views illegal migration as a “moral mission“.
In summary, Reform, the right-wing media, and, to a lesser extent, the Tories have championed anti- immigration policies. As a result there has been a race to the bottom to see who can be the most hardline. All they have achieved is making the subject and increasingly extreme solutions acceptable, and, by default, bringing extremist politicians in from the cold.
So what might 2026 bring?
In the UK, the PM has been able to restrain public borrowing, which should give him room for manoeuvre down the line. According to the IMF, next year the UK will be the second strongest growing economy in the G7 after the US.
Despite this, the PM’s position remain shaky. Replacing him would see a continuation of the recent trend of short-serving PM’; David Cameron was the last one who managed a full parliamentary term.
There has been ongoing voter dissatisfaction since the GFC which created an economic malaise that has been driving public discontent. People have been working harder, without a proportionate rise in their standard of living. We can add to that the black swan events Covid, war in Ukraine and Brexit.
Stagnant wages, a high cost of living and self-imposed fiscal rules have turned policymaking into an exercise in shuffling scarce resources, with successive chancellors robbing one departments budget to prop up another one, and taxing one group of people to spend on their neighbors. This zero-sum politics has generated a resentment that has allowed extremist politicians to use scapegoats such as the EU and migrants to further their political ambitions.
‘Stagnant wages, a high cost of living and self-imposed fiscal rules have turned policymaking into an exercise in shuffling scarce resources’
The government appeared to be setting the scene when the chancellor addressed the country, warning of the need for broad-based tax rises to fund public services. However, the courage of their convictions failed them. Rather than breaching a manifesto commitment, they kicked the can down the road, turning to stealth taxes, improbable spending projections and wishful thinking about future economic growth.
There has been some small steps towards reversing the Brexit disaster, most recently in reopening the Erasmus student exchange, as we continue to edge closer to Europe.
Despite pro-European statements from the PM, and also senior government figures such as chancellor Reeves, Wes Streeting and David Lammy, the PM’s insistence on ruling out rejoining the EU customs union, and staying with the US trade deal shows that we are merely tinkering around the edges.
This might prove costly at the polls, as both the LibDems and Greens continue to be pro-Europe. In spite of what the right-wing media might think, twice as many labor voters are considering fleeing to them rather than Reform.
Turning to Europe, EU leaders have pledged a €90bn loan for Ukraine to meet urgent financial needs, but failed to agree on the preferred option for many of securing that loan against Russia’s frozen assets in the bloc.
‘The US seems likely to continue its descent into totalitarianism’
After talks ended in the early hours of Friday, the president of the European Council, António Costa, told reporters: “We committed and we delivered.” He said EU leaders had approved a decision to make a €90bn loan to Ukraine for the next two years backed by the EU budget, which Kyiv would repay only once Russia pays reparations.
Costa added: “The union reserves its right to make use of the immobilised assets to repay this loan.”
The German chancellor, Friedrich Merz, a strong advocate of the reparations loan, said the agreement was “a decisive message because [Vladimir] Putin will only make concessions once he realises his war will not pay off”.
I would suggest that this means the continuation of the war, as Ukraine are rightly not prepared to cede territory, and Russia wont settle for anything less.
The US seems likely to continue its descent into totalitarianism.
‘Ukraine are rightly not prepared to cede territory, and Russia wont settle for anything less’
The latest signal being the FBI launching “criminal and domestic terrorism investigations” into “threats against immigration enforcement activity” in at least 23 regions across the US.
There are reports that some of the investigations are related to the “countering domestic terrorism” memo issued by Trump in September, after the killing of Charlie Kirk.
The memo, known as NSPM-7, called for a “national strategy” to thwart “violent and terroristic activities” associated with “anti-fascism”. It described “anti-Americanism, anti-capitalism and anti-Christianity” as threats and cited “riots” in Los Angeles and Portland, referring to protests against Immigration and Customs Enforcement (ICE), as examples of “political violence”.
Overseas, Trump has said he was leaving the possibility of war with Venezuela on the table: “I don’t rule it out, no,” he told NBC News in a phone interview.
Trump had previously accused Venezuela’s president, Nicolás Maduro, and his government of using “stolen” oil to “finance themselves” as well as “Drug Terrorism, Human Trafficking, Murder, and Kidnapping”.
Whilst there is much to fear and little to look forward to, life goes on.
‘Whilst there is much to fear and little to look forward to, life goes on’
The new elected NYC mayor, Zohran Mamdani, perhaps represents a beacon of hope, and the beginning of opposition against Trump. In this he is joined by the Pope.
Europe, with its back to the wall seems to be wanking-up to the threat posed by authoritarian leader such as Trump and Putin. The bloc is collectively strong enough to form an effective opposition.
As for the UK, we are alone looking to our former lover for help, and ignoring the solution that is across the channel!
“There’s a world outside your window
And it’s a world of dread and fear”
Philip Gilbert is a city-based corporate financier, and former investment banker.
Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s
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