The much leaked and much hyped Autumn Budget came and went this week and largely delivered what was expected from the Labour Government.
The Autumn Budgets Impact on Portfolios
For today’s update I will focus on the wider UK economic issues and how they impact our portfolios.
Equities
Despite holding almost three times the amount of UK equities versus the MSCI world index, UK equities still only make up around 10% of our overall equity holdings. With Nvidia worth more than twice the value of the entire FTSE 100 companies, you can see why we are not too concerned about the UK economy from an equity perspective. Of the UK equities we do hold, many will have international businesses and are held due to the great value they offer in an under loved market, rather than because of high expectations for growth in the UK domestic economy.
I don’t see any big catalyst from the Budget to reverse the UKs highly diminished status in global equities nor any commentator suggesting this was a Budget that will set off UK economic growth.
Fixed Income
The much bigger likely impact from the Budget will be in our fixed income investments which are very domestically focused to avoid currency risks.
Below, TS Lombard, our macro-economic advisers, chart the ‘forecast’ impact of the budget on spending, tax receipts and UK Government debt.
Source: TS Lombard 28th November 2025
Basically, not much is forecast to change in the imbalance between spending and tax collections for three more years, only in year four, if growth forecasts and tax collections are achieved will UK Government debt start to decline, and those are quite big IFs.
Almost exactly an hour before the Chancellor took to her feet, and as the OBR’s leaked forecasts were digested by markets, there was a minor tremble in UK gilt markets, still visible in the 5-day chart but not big enough to show in the one-month chart. For all the ‘prudence’ shown by the Chancellor and ‘extra headroom’ created by this budget, gilt investors were unmoved. It was just enough to keep the status quo.
Here is the UK Gilt Yield curve today (black) and a year ago (blue) it is virtually unchanged from a week ago.
Source Market Watch 28th November 2025
The picture is similar in other countries; the yield curves are steadily steepening with longer duration yields at a premium to shorter duration yields. This is generally a healthy sign. Whilst base rates are likely to come down further, longer duration yields remain elevated and the ‘kicking-the-can-down-the-road’ in this budget is unlikely to change this. In fact, there has to be a risk that budget deficits will not come down, and longer-term rates could go still higher.
As we have mentioned before, this steeper yield curve is good for our active fixed income managers. The 12 month returns from our fixed income funds are around 6% for our most cautious funds up to around 10% on our high yield funds. This will be the third year in a row of double digit returns from the high yield managers, now up around 36% and more in three years.
The availability of these relatively high, lower risk returns from fixed income is still getting through to investors. Conversations I have with prospective clients suggest they don’t know such returns exist. The focus still appears to be on higher risk equity markets and entirely speculative investments like gold and bitcoin. This is no doubt because the low bond yields created by quantitative easing made fixed income unattractive. We are a long way on from that today with clear evidence that active fixed income investments can and should continue to deliver high, single digit returns. Returns enough to beat inflation and enough for many more cautious investors.
The opportunity cost, now 7-10% p.a., of taking money out of well managed fixed income to invest in property, equity, private business, gold etc, etc, is still to be fully felt in many investment asset prices.
Bitcoin, Blockchain and Crypto Currencies
The realisation that the US’s Federal Reserve might not bring interest rates down much further increases the costs of holding assets generating no income. This was one reason held out for the big dive in Bitcoin this month.
Bitcoin fell around 30% in value in just a few days from its all-time high of $124,000 hitting $80,000 at one point before recovering to around $92,000 today. At one point I saw one (unverified but believable) stat suggesting that 70% of all Bitcoin investors were sitting on losses on their investments, suggesting most investors have bought Bitcoin above the $80,000 price.
Source: https://bitbo.io/
I have left the adverts in on this screen shot so you can see Cathie Wood’s target price of $1.5m per coin, this is typical Crypto messaging.
We have been told:
Bitcoin would be the new democratic currency; there are still very few legal goods and services you can buy with a Bitcoin, I think we can conclude it has failed on this.
Bitcoin is a hedge against inflation and the debasement of currencies; not in 2025 it isn’t.
Bitcoin is a leveraged ‘risk on risk off’ trade offering correlation to the Nasdaq; well this month it looks around 7 to 1 leveraged on the downside, which is extreme.
The answer is none of these, Bitcoin is a pure gamble, nothing more nothing less.
The swoon in Bitcoin did cause me to take a deeper dive into the crypto world last weekend to see just what was going on. It’s a murky world with everyone like Cathie Wood talking up their positions on social media and it is very hard to get a balanced view.
What did I learn? Well as ever you need to know what’s going on and the differences between:
‘blockchain’ the technology for holding registers of digital currencies,
entirely speculative digital currencies like Bitcoin with no underlying value,
Stable Coins like Tether which track a currency or asset value like the US $ underpinned by purchase of US treasuries. Some conspiracy theorists think Donald Trump’s Government is encouraging Stable Coins so that they can effectively circumvent the Federal Reserve and start printing money – we know Trump would like a lower Dollar and lower interest rates.
and
CBDC’s, not adult gummy bears, but Central Bank Digital Currencies. And yes the Bank Of England is looking into launching the digital pound for use on block chain registers, you can find more information here.
If all this starts to boggle the mind, I came across this note on the FBI being called in to investigate one block chain issue in the US:
On Nov. 21, Cardano’s mainnet bifurcated into two competing histories after a single malformed staking-delegation transaction exploited a dormant bug in newer node software.
For roughly 14 and a half hours, stake pool operators and infrastructure providers watched as blocks piled up on two separate chains: one “poisoned” branch that accepted the invalid transaction and one “healthy” branch that rejected it.
Exchanges paused ADA flows, wallets showed conflicting balances, and developers raced to ship patched node versions that would reunify the ledger under a single canonical history.
I speak English and I think this is written in English but beyond that I’m not very much the wiser other than it looks like a software glitch!
A glitch on a platform trading Stable Coins on October the 10th which were inadvertently valued at 65cents when they should have been valued at $1, reportedly caused a million or so leveraged investor accounts to be wiped out. This has also been cited as prompting the Bitcoin price collapse.
I like the concept that we might ultimately be able to get away from traditional banks as the ready reckoners for our cash balances, but the tech clearly needs more work.
For now, the risk of total loss from engaging with crypto seems extremely high. Whether from the collapse of valueless coins, from software malfunctions, hacking criminals or plain simple fraud from several individuals at the centre of the community with very dodgy backgrounds (step forward Strategy’s Michael Saylor), some big losses are surely coming.
My advice: stay well clear.
Finally, I wrote this on what we pay our Third Party fund managers and why, it is borne out of conversations with prospective clients and covers the whole active versus passive debate. Something you could refer to or forward on to anyone who challenges you on why you are paying for actively managed funds. Plus, guest writer Stephen O’Sullivan reflects on the Russian Ukraine Conflict and the thorny subject of frozen Russian assets.
