Global stock markets: gold prices, tariffs, US government shutdown

Use the player icons above to listen on your favourite podcast app, or read the full transcript below.

Investments can go up and down in value, so you could get back less than you invest.

Full podcast episode transcript

[0:10] Sarah Coles: Hello and welcome to Switch Your Money On from Hargreaves Lansdown. I’m Sarah Coles – I’m Head of Personal Finance.

[0:15] Emma Wall: And I’m Emma Wall – I’m Chief Investment Strategist.

[0:18] Sarah Coles: And we’re looking, this week, at Investment – so this is our Investment Special – we look at factors moving the markets around the world – and, obviously, we’ll be back to the Personal Finance update next week.

So, we’re looking at whether the equity markets are right or whether the gold price is right. Now, that’s a very strange question – can you explain a little bit about what that means, Emma?

[0:35] Emma Wall: Well, in short, one is linked to the challenges that we’re seeing on both sides of the pond in terms of economic outlook – we can come onto that – and the other one seems to be completely disconnected. And, in fact, today – at the time of recording – the FTSE 100’s an all-time high., European markets are an all-time high – and it looks as if the US is gonna open at an all-time high – if the futures are anything to go by. So, in short, d’you believe the gold price – which has rocketed in response to negative economic news – or d’you believe the equity markets, which seem to be saying, ‘Everything is absolutely fine?’

[1:06] Sarah Coles: Yeah, it doesn’t feel like everything’s fine – give that the US Government is actually in shutdown – but I’m sure we’ll come into all that later.

So, one of the things that we talk about when we look at things like equity – and we look at things like gold – is we talk about things being either a ‘Risk-on’ or a ‘Risk-off’ factor. Can you just explain what we mean?

[1:22] Emma Wall: In short, ‘Risk on’ means optimism. It means that the outlook for risk assets – that is equities – is positive. Now, this usually means a reasonably benign backdrop in terms of the economy. It means lower inflation – it means lower interest rates – and it means the type of market, where businesses can be well-run – consumers are spending money – ensure everyone feels pretty positive.

‘Risk off’ is environments which can be short-lived or long-lived, where we expect things to not be so positive.

Now, some of the longer-term risk-off environments – things like a recession – but it could be an economic shock – a datapoint – inflation that has come in above expectation – or a US shutdown, as we’re experiencing at the moment.

So, ‘Risk on,’ equities do well – ‘Risk off,’ gold does well – or strange amalgamation of the two – the environment we’re in at the moment, where both seem to be doing well.

[2:14] Sarah Coles: And we’ve talked a little bit about this US shutdown – can you just explain what on earth has happened?

[2:19] Emma Wall: In short, it means that the US does not have a budget that’s approved – and so, therefore, public sectors are not getting any money flowing through them – and this has happened a couple of times in history. We are now entering day three of the current US shutdown – and it’s a bit like in the UK, where, when you pass a law, you first have the House of Commons that approves something – and then you have the House of Lords.

Well, in the US, they also have two House systems – and within these Houses, you have both Republicans and Democrats, who both have seats in these Houses – and that means, often, however, things don’t get passed because they have difference of opinions. In this case, it’s the Budget – and it’s to do with support for those who are less fortunate in society. It’s to do with things like healthcare and backup – and, in short, Republicans want to remove funding from some of those healthcare initiatives, and the Democrats don’t want them to.

And there was hope, actually – at the beginning of this week – that they’d be able to pass an interim solution that would buy them some time – and, indeed, fund some of those public sectors – but they haven’t been able to do that. And, when I think about public sectors that aren’t getting money, this is really everything that relies on the public sector. So, things like airports – security guards aren’t coming into work, which means the queues at airports are considerably longer.

If you’re thinking about anything like... you know, your local authorities aren’t coming into work. Lots of people have been put on furlough – so aren’t coming into work and not being paid. Now, what’s concerning about this is, actually, Donald Trump is seeing this as an opportunity to permanently cut some of those services – and that, for me, is the more worrying point in terms of the economic outlook – because a number of these services need to be properly starved in order to have a well-run and functioning economy and state.

[4:02] Sarah Coles: It’s definitely one of the weird quirks about this – that there’s no ‘Given’ when it comes to the US Budget. So, it’s not that it’s all the changes that don’t get implemented if we get a shutdown – it’s literally everything, isn’t it? It’s like the day-to-day spending of the Government – that’s not set in stone to happen regardless of how this works out – it’s actually waiting until the decision is made about the Budget.

[4:22] Emma Wall: Absolutely. You have BAU functions within the public sector – like I say, like airports... We’re not talking about changing a policy or a law to do with airports – we’re talking about just the general running of them – and also the fact that it’s on such a rolling process. As you say, these things don’t get approved for 10, 20 years – they need to be consistently reapproved, and they failed to do so this time.

[4:46] Sarah Coles: But, in the short-term, how have markets reacted to the shutdown?

[4:49] Emma Wall: Well, they’ve reacted positively because, in short, they’re ignoring it – and the reason why they’re ignoring it is because there are other factors at play that is driving up the stock market at the moment.

You know, we’ve talked a lot – in the past – about some of the other concerning elements of what’s going on in the US. Now, things like tariffs, for example – ‘Will that have a positive or a negative impact on the US economy?’ The inflation – ‘Will that have a positive or negative impact on the economy?’ The outlook for interest rates... you know, the fact that jobs data seems to be looking a little bit week – and we are expecting some jobs data from the US today.

But that’s the macro picture. The ‘Micro picture’ – as we call it – which is stocks- specific stuff within the stock market – has been really positive. So, earnings outlooks have been upgraded, for example, and the theme that has dominated stock markets for the last 18 months... AI continues to be on a tear.

So, I saw some data the other day which suggested that, actually, the balancing effect – or AI productivity – supporting the US economy – and supporting the outlook – versus some of the factors that are dragging down the economy – like persistent inflation, for example... that’s balancing it out. And, ultimately, at the moment, the stock market is more heavily-weighting the benefits of these micro stories – like the AI productivity boom – than it is the macro stories. But, at some point, that might flip – and that’s why the gold price – and, indeed, bond markets are really interesting to people like me – nerds, who look at this stuff! – because that is saying a very different indication of what the outlook is, actually, for the US economy versus what the equity market is saying.

[6:24] Sarah Coles: So, when we look at the big picture – so the macro, as you say – there’s some good signs about growth – the more recently.

[6:30] Emma Wall: Yeah, that’s true. I mean, GDP figures show that, actually, the US continues to expand – it continues to be, of the G7, the fastest-growing nation. That said, GDP figures are backward-looking.

So, if you look at things like jobs data, that has started to weaken – and that’s more of a forward-looking indication. Some more things in the ‘Positive’ camp though... the Federal Reservice has cut interest rates by 25 basis points – and, actually, the outlook for the Federal Reserve – you know, our equivalent of the Monetary Policy Committee – suggests that there are four more cuts coming in the next 12 months – which, again, would be positive for the economy and, indeed, positive for the stock market.

One word of caution with that, though... Often, these forecasts are overly optimistic. So, if we look back to the winter of 2023 – and the forecasts for 2024 – the market was expecting between four and six cuts from the Federal Reserve and they didn’t materialise. So, some of this optimism may be fair and some of it may be overly-done.

[7:30] Sarah Coles: So, in terms of the optimism – presumably, that feeds through into the decisions that businesses are making – so we get this Global Purchasing Managers Index data that comes out. How are businesses feeling? How willing are they to spend money and to invest?

[7:42] Emma Wall: Yeah – PMI is really interesting. It’s a single-data point – and anything above 50 suggests optimism about the future.

It’s made up of a few different questions – so it has things like, ‘D’you expect to be spending more or less on your business over the next quarter?’ ‘Do you expect to be doing M&A over the next quarter?’ ‘D’you expect to be launching new products lines – you know, expanding innovation?’ And, actually, PMI has been coming down – and we’ve actually had data out this morning for UK PMI – if we can jump this side of the pond – that has been downgraded – and a lot of that is because of the ‘B-word’ – we talk about it a lot – the upcoming Budget – which is suggesting, actually, that senior managers within businesses are concerned about the economic outlooks. And, as I said at the top, that is the case on both sides of the pond. When it comes to the stock market – optimism – but it comes to the economic outlook... actually, not so much optimism – in fact, some pessimism.

[8:35] Sarah Coles: We’re seeing quite a lot of negatives here. The gilt yields are interesting to look at, aren’t they?

[8:39] Emma Wall: Yes. So, what was really interesting... If we can cast our minds back to the Liz Truss ‘Mini-budget’ – as we called it at the time... the guilt market absolutely exploded at that point because the market was so concerned about underfunded expansion – and we thought that was an absolute one-off. We thought, ‘Gosh, the gilt market will never go that high again.’ Well, actually, gilt yields... and that’s a really good indication of how optimistic people are feeling about the economic outlook – because, basically, long-dated gilt yields suggest that you think interest rates will have to be higher in the future – and they’re showing at levels that have not been seen for nearly 30 years. So, the gilt yields very much screaming concern about funding in the UK – and how we’re gonna balance the books. And the gold price is saying similar – and, in fact, it’s only the equity market that has that optimism.

[9:30] Sarah Coles: And then, there’s been some broader figures on business confidence as well – that’s not looking terribly robust either, is it?

[9:36] Emma Wall: No – I feel like a doomsayer today, Sarah – you’re just pulling me to trip off the tongue all the negativities! – but there is quite a lot around when it comes to the economy.

So the Institute of Directors came out with their survey for business confidence earlier this week – and they actually show that it had dipped significantly. This is looking at the UK Business Confidence here now – and, again, the ‘B-word’s’ coming up. Individuals are feeling much less confident about the possibility of business expansion over the next year because they just don’t know what’s in the Budget – and the expectation is that they’ll be able to spend less on the stuff that delivers good things for business – shareholders, consumers – because they’re expecting to be paying more on tax and things like energy bills.

[10:17] Sarah Coles: So, the Budget looming large, as ever. So, we, obviously, covered the Budget in detail last week – we are keeping on top of all the potential changes and what they might mean for you on our website – so it is worth having a look at the HL website, just to have a little explore about the latest Budget rumours and what they might mean.

So, that’s almost all for this week – but, before we go, we should do the stat of the week – which, obviously, is a cruel thing to throw at you right at the very end! – but there’ve been four US government shutdowns since the start of the millennium. Historically, they’ve only tended to last up to about three days, but there are exceptions – and some recent ones have been a lot longer.

So, how long was the longest?

15 days – was it 25 days – or was it 35 days?

[10:57] Emma Wall: I should know this, but I don’t – so I’m gonna do that typical thing of splitting the difference – I’m gonna say 25 days.

[11:03] Sarah Coles: It’s a good guess, but it’s actually... believe it or not, it’s 35 days. So, you talk about all the things that are on hold for this whole period – that’s over a month of things being on hold, which is quite a difficult period.

My other supplementary question – which his even crueller – is, ‘Can you guess which president that was under?’

[11:19] Emma Wall: Ooh... since the millennium.

[11:21] Sarah Coles: Yes – it absolutely was since the millennium – in fact, it was the last Trump presidency.

You could read all sorts of things into whether or not we’re gonna get it again, but let’s just hope for the best and just assume that positivity of the markets is there – and that it’s all gonna go fine!

[11:33] Emma Wall: Well, I might not know who the president was – or, indeed, how long it went on for – but I can tell you, I did do my analysis on what happens in former shutdowns to asset classes. So, I can tell you, if it continues to go on, it does actually just mean bad news for bond prices, the dollar – and it does, eventually, catch up with equities... it’s bad news for the stock market too.

[11:53] Sarah Coles: Oh, it’s nice to finish on a high note – so, obviously, continuing that doom-mongering all the way along!

So, that’s all from us – but, before we go, we should say this was recorded on 3^rd October 2025 and all information was correct at the time of recording.

[12:04] Emma Wall: Nothing in this podcast is personal advice – you should seek advice if you’re not sure what’s right for you. Investments and income they produce can rise and fall in value, so you could get back less than you invest – and past performance is not a guide to the future.

[12:16] Sarah Coles: This is not advice or a recommendation to buy, sell, or hold any investment. No view is given on the present, or future value, or price of any investment – and investors should form their own view on any proposed investment.

So, all that’s left for us to do is to thank our Producer, Elizabeth Hotson.

[12:29] Sarah Coles: And, of course, thank you very much for listening – we’ll be back again soon. Goodbye!

[12:33] Emma Wall: Goodbye!