Personal Wealth Management Monday Espresso Podcast

Monday Espresso Podcast - 11th August 2025

[00:00:00] Nathan Sweeney: Good morning everybody. It is Monday the 11th of August. Hard to believe. So right in the middle of the summer. And today I'm really fortunate to be joined by Rory Dowie. So Rory is one of the portfolio managers on our personal portfolios and looking really to get some insight from Rory about earnings over the course of the last couple of weeks.

[00:00:18] Nathan Sweeney: But good morning, Rory. Good to have you on the show.

[00:00:21] Rory Dowie: Morning, Nathan.

[00:00:22] Nathan Sweeney: So Rory, I think we'll just kick off with how markets performed last week. Just give us a quick summary of what was really happening in markets last week.

[00:00:29] Rory Dowie: Absolutely. So equity markets were flat generally up last week. The US raised about 2% with Europe and Japan marginally ahead of that. I guess if there was one outlier within developed markets, it was the UK where equities were flat, and really that was on the back of the rate cut that we saw from the Bank of England on Thursday, actually, somewhat counterintuitive. Typically, when you get a rate cut, that's generally good for equities, you know, lower borrowing costs, lower cost of capital that's typically good for companies, but actually because the decision was not unanimous, it was a split decision, the market actually took that relatively poorly. And basically investors are interpreting that maybe needing a higher bar for future rate cuts, so they could be less aggressive with rate cuts down the line.

[00:01:11] Rory Dowie: So actually equities in the UK sold off on Thursday on that news, so I thought that was quite an interesting dynamic.

[00:01:18] Nathan Sweeney: Yeah, and obviously good to see markets generally on the way up over the course of the week following the sell off we had the previous Friday on concerns about job markets, but it just goes to show how quickly markets can get over things.

[00:01:30] Nathan Sweeney: I suppose the big news of the week was actually that Bank of England rate cut, so any insight into the Bank of England. Rate cut last week.

[00:01:38] Rory Dowie: There was a 25 basis point rate cut announced on Thursday, so that rate is now at 4% in the UK. So as I say, the UK, we're continuing to make progress on inflation. I think there have been some more recent concerns on the state of the economy.

[00:01:50] Rory Dowie: There's been some noise around potential increases to taxes in the budgets later on in the year. So as I say, that rate cut's coming at quite a good time for the UK economy.

[00:02:00] Nathan Sweeney: Yeah, and I suppose the key message there is really that, you know, obviously a lot of savers have been sheltering in cash, but you know, that cash rate continues to diminish because as interest rates come down, you're getting less return on that cash, and you always have inflation obviously eroding the value of your cash over time.

[00:02:17] Nathan Sweeney: So, you know, it's one of the reasons why a lot of people choose to invest because you tend to get a higher return over the longer term versus investing in cash. But I think one of the other big things which has been happening over the last couple of weeks is company earnings, and so how are company earnings shaping up?

[00:02:33] Rory Dowie: Yeah, absolutely. It's been a busy couple of weeks and last week was no difference. We didn't have any of the mega caps reporting last week, but still a lot of companies more across the rest of the market reporting numbers.

[00:02:44] Rory Dowie: And just to give you a bit of an overview in terms of how that's been evolving, firstly within the US we're about 75% of the way through now, and actually it's been pretty good in the USA two thirds of companies on the S&P 500. Those top 500 companies in America have been beating expectations. That's, you know, been ahead of what the market was expecting. So that's been quite positive.

[00:03:04] Rory Dowie: And within the markets, the Magnificent seven have obviously been a huge driver of market performance in the US over the past couple of years, and we've now had six out of the seven of them reporting.

[00:03:13] Rory Dowie: The earnings growth of these six companies so far has been stellar. They've
grown earnings 26% year on year and actually, quite interestingly, if you exclude those magnificent seven companies, the other 493 companies in the S&P 500 have only grown their earnings about 4% year on year.

[00:03:30] Rory Dowie: So there's a 22 percentage point difference between those seven companies and the rest of the market. So again, just highlighting how lopsided the market is at the moment, and there's a very divergent picture under the hood.

[00:03:41] Nathan Sweeney: Yeah, it just really shows you how exceptional these tech companies are because when you're that big and growing at that rate, it really is phenomenal.

[00:03:48] Nathan Sweeney: But, you know, are we seeing the same picture everywhere? So are we seeing any earnings results coming out across any other regions?

[00:03:53] Rory Dowie: Yeah, absolutely. I guess I'd also want to mention Europe, within Europe, that's been a little bit soft, to be honest.

[00:03:59] Rory Dowie: So, you know, quite divergent from what we've seen in the US. Companies have been beating estimates, but only by about 1%, and actually, if you look historically, typically companies in Europe have beaten expectations by about 3%.

[00:04:11] Rory Dowie: So yes, companies are posting better than expected earnings, but the better than expected earnings are, you know, not as good as they typically have been, and actually if you lift the hood, it's really been a story of European banks.

[00:04:23] Rory Dowie: European banks have grown earnings 7% year on year and actually, if you were to take banks out of the equation, so just to look at the rest of the European markets, not with banks in it, earnings growth actually been negative 5% year on year.

[00:04:35] Rory Dowie: So as I say, Europe's not been looking so good as the US. It's really just been a story about financials.

[00:04:42] Nathan Sweeney: Yeah, and Europe is actually one of the areas which we have been cautious on, so it's all kind of adding up on that side.

[00:04:47] Nathan Sweeney: Are there any individual companies worth mentioning at all?

[00:04:50] Rory Dowie: Yeah, just for those of you that you know, look after single stocks and think about single stocks in ISAs etc., Palantir one of the stock market darlings over the past couple of years, it was the best performing stock on the S&P 500 last year, and also so far this year.

[00:05:03] Rory Dowie: They reported very, very good numbers earlier on in the week, and that was on very, very high expectations, and I think what was stellar there was in their corporate segment. I think they grew revenue 94% year on year, so really gaining momentum. Corporates are investing in AI software and AI solutions.

[00:05:18] Rory Dowie: Another company I just wanted to mention was Eli Lilly. I'm sure a lot of you have probably heard of Ozempic, the weight loss drug. Eli Lilly are basically the creators of Ozempic and actually, despite beating estimates, the stock fell 15% and really that was down to slightly disappointing results in one of their drug studies about the efficacy of kind of future drugs.

[00:05:35] Rory Dowie: S o that was kind of worth mentioning as well.

[00:05:38] Nathan Sweeney: There's always a balance within markets. Sometimes you have stocks doing well and others doing less well, which really underlines the importance of kind of doing that research.

[00:05:46] Nathan Sweeney: Another thing worth mentioning is obviously we've gotta talk about the gold price, so what's happening with gold?

[00:05:51] Rory Dowie: Gold, obviously the safe haven asset. It's been a stellar run over the past kind of year or two you know, the uncertain macroeconomic backdrop we've had with the tariffs. But actually gold was in the firing line on the tariff front.

[00:06:01] Rory Dowie: Trump announced the imports of one kilogram and a hundred ounce gold bars would now be reclassified under a customs code, and that would've made them subject to the 39% tariff imposed on imports from Switzerland. Switzerland being a big export of gold.

[00:06:14] Rory Dowie: And actually quite interestingly, if you look at the gold futures market, you know the gold price surged in New York to a record high, but actually you didn't get that same surge in gold Futures in London.

[00:06:24] Rory Dowie: And that's essentially because traders were concerned about potentially having a supply shortage in the US given this new tariff that they've imposed on kind of gold coming into the US from Switzerland. So I thought that was quite an interesting market nuance.

[00:06:36] Nathan Sweeney: Yeah, so never a dull moment when it comes to tariffs, really is there, so what's up for the week ahead?

[00:06:41] Nathan Sweeney: What should people be watching out for this week?

[00:06:43] Rory Dowie: Lots of things going on, I think for me the most important thing is continuation of company earnings. We'll be watching them very, very closely.

[00:06:50] Rory Dowie: But then also on the economic data side of things, we have inflation data in the US and obviously I think two weeks ago we had, the jobless claims numbers and the non-farm payrolls, they were, you know, revised downwards, that was quite disappointing, and people started to get a bit concerned around, you know, what's going on in the economy.

[00:07:06] Rory Dowie: And we'll be watching that inflation data and what that might mean for the expectations around future rate cuts. So yeah, those are the two things really that I would highlight.

[00:07:13] Nathan Sweeney: Excellent. So a lot happening over the course of the week, a lot to look out for next week. So thank you for listening and have a great week everybody.