I was completely wrong on the choice of UK Chancellor. Nonetheless, UK stock market indices edged up a little, much as last week with most global indices lower. This was despite Andy Burnham going for silly headlines on bus fares and pub VAT – small initiatives but unfunded, which isn’t a great early sign.
For his own well-being it was encouraging when he proclaimed “I’ll end rough sleeping” - though he might want to check the No. 10 beds first, or it could be his first U-turn. Less encouraging is the priority given to a Cabinet of regional accents rather than talents. This is the Silly Season, so he does have some slack, but it will run out within weeks.
Of much greater immediate investor concern is the day by day escalation of Trump’s war in the Near East. The big change is the intervention of the Houthi’s, Iran’s allies in Yemen. Situated at the southern end of the Red Sea, they attacked two Saudi oil tankers in the Bab El-Mandeb Strait on Wednesday. This Strait is a choke point between the Suez Canal and the Indian Ocean. It is not just an alternative route for the Saudi’s to ship their oil and avoid the Strait Of Hormuz, but also a crowded maritime artery and vital gateway for container shipping between Europe and Asia.
No wonder Brent crude is up 10% over the week, at $93, and looking like it has momentum to spike through $100 USD any day. Research outfit BCA theorise that this shouldn’t happen. Why? Because the US and Iran and financial markets and the global economy can cope with the oil price swinging around in the $70-$90 range, but as they get towards the top of the range Iran’s negotiating team will be under growing pressure to talk turkey, while the approaching midterms will increase pressure on Trump to engage brain (sic).
The weakness in this argument is probably that it assumes two rational parties. With prices now above $90 the BCA theory is about to be tested. To this point prices have been remarkably well behaved, surprising many. But strategic oil reserves around the globe are now extremely low. Once that buffer disappears history informs us that what follows is seldom orderly – if this was reflected in prices they would already be much higher, and this complacency also ignores moves in recent days by the US military to escalate the conflict, possibly this weekend.
Back on 28th November I asked the question “Oil or Gold?” and said:
“It is fashionable to be negative about oil. Yet inventories are falling relative to seasonal requirements, while demand continues to trend higher… Another case of falling supply, rising demand, and complete lack of investor interest.”
This contra view for the oil price upside was before the Strait Of Hormuz closed. Then on 12th December I suggested:
“Use iShares Oil Gas Exploration (SPOG) as a benchmark for the energy equities… and Guinness Global Energy has a forecast dividend of 4.5%, decent compensation for the risks.”
These have gained 18% and 27% respectively from that date, with gold and gold miners down between 7% and 15%. Our analysis implies more upside for the former and more downside for the latter.
Back on 29th May I set out “5 Steps To Oil Catastrophe”. You might wish to have another look at these because, absent a remarkable change of heart by both parties to this conflict, these might be your best guide to oil-induced turmoil in the days and weeks just ahead.
Behind the apparent calm in financial markets for a couple of months there is a lot of damage. The headlines are all about AI. But they don’t tell you that the shares of the Mag7, the huge companies spending vast sums on AI, have lost the equivalent of $4.55 trillion since their respective peaks – that’s equivalent to 98% of all stock market listed companies in the UK. SpaceX alone has lost $1.1 trillion of market value.
Tesla is down 35% since its December 2025 peak. The $670 billion loss in its market value is equivalent to the combined valuations of Toyota + BYD + General Motors + Hyundai + Ferrari + Ford + Mercedes-Benz. Crazy.
Does anyone remember crypto? Since the peak, Bitcoin and Ethereum have lost $1.68 trillion in market value, equivalent to the German stock market losing nearly 60% of its value.
Few are talking about this damage, and its scale, because they have moved to place their bets on a different roulette table – the investor mania is alive and kicking. I guess at least these guys and gals have adapted. The same cannot be said for some extraordinarily well-paid fund managers.
In the last couple of weeks you might have read that Terry Smith, of FundSmith fame, has capitulated. He now acknowledges that he has to adapt because his performance has been terrible. For example, since the start of 2022 the fund is barely changed, up 2.18%, whereas the iShares World Value has gained 78% - remember, he is a “Value” man. Yet, as I said back on the 2nd March:
“Many of you might have been invested in Fundsmith, which has now underperformed for a number of years. It’s not his fault. I know that sounds strange, but he is simply applying his style. It worked brilliantly in a period such as 2010-2020 – that period has been behind us for a number of years.”
Terry didn’t adapt in the years after 2020, despite clear signs that the world was moving on. Many investors and journalists will point the finger at him, but he isn’t holding a gun to anyone’s head to stay in the fund. I believe Fundsmith Equity fund enjoyed a peak value of around £26 billion in April 2022. There is still an extraordinary £12.3 billion in the fund. Why? Because so many investors (including those in my industry) are complacent and have no process, and will be quick to lash out at fund managers, when the investor themselves should have been in control and take responsibility.
I have one thing to say on process, and one on adapting.
Our “Vintage Funds Report 2026” is out today, download here (please note the website figures will be updated early next week). It presents an alternative process to our unique Dynamic Fund Ratings for those who would only wish to review their funds once per year, but for stop-losses being triggered. Sadly 94% of funds fail what I regard as a basic and undemanding test of longer term quality. Nonetheless, it does leave some fantastic funds out of the 2,439 we reviewed. One other stat worth sharing – our analysis means that there is £2.9 trillion invested into funds which are mediocre or worse – that’s what I call complacency.
On adapting, next Friday is the latest FundExpert webinar and you will receive an invitation on Sunday morning. This webinar will cover:
How did the Dennehy Wealth portfolios shape up over the last 12 months? What we owned, what we avoided, and including more adjustments which are taking place as I write this.
I will explore rising investment risks, and how you can adjust your portfolios and still make money.
And a bit more time will be given to the elephant in the room for many – tax – and how you can substantially reduce your prospective CGT and IHT bills.
There is no cost. It could be the most valuable hour you give up in 2026.
Lastly, if you do nothing else this weekend, try The Overnight Test:
Assume someone sold all of your investments tonight without your knowledge, and tomorrow you woke up with 100% in cash.
Here's the test…
You can re-purchase the same investments at no cost.
Which would you re-purchase? What changes would you make?
Now ask yourself the question, why aren't you making those changes now?
There will not be a note next week as the webinar will be live on Friday.