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This podcast is for information purposes only and does not constitute personal advice. Investments can fall as well as rise in value, so you could get back less than you invest. Past performance is not a guide to future returns. This content is not a recommendation to buy, sell or hold any investment or security mentioned.
Full podcast episode transcript
Anna
Seven prime ministers in a decade. 11 in the 45 years since Hargreaves Lansdown was founded. It sounds chaotic and politically it might be, but for investors the question is not whether Westminster is noisy. It's whether that noise should change what you do with your money. Politics matters, and a new prime minister, a new chancellor and policy agenda can affect gilts, sterling taxes and confidence. But the bigger mistake is usually trying to trade every twist. Good companies, good fund managers and good investment plans can navigate uncertainty. And over time, diversified investors who have stayed the course have generally been better off than those who jump in and out.
Matt
So today we're asking, what does this new government mean for your money? And what, if anything, should investors do about it?
Anna
Hello and welcome to this investment edition of the Switch Your Money On podcast from Hargreaves Lansdown. I'm Anna Macdonald, Investment Strategy Director.
Matt
And I'm Matt Britzman, Senior Equity Analyst.
Anna
Before we get on to our take on Burnham and the cabinet, what else has caught your eye, Matt? You've been away getting married. Congratulations. So, you're back now after your honeymoon. What struck you as you've got your feet back under the desk?
Matt
Yeah. Thanks. So, yeah, few weeks off for me, back straight into the hot of earnings season and a turbulent time elsewhere in the market. So, the Middle East conflict has ramped back up. Oil prices are back pushing close to $100 per barrel. But markets have been, as we've seen from a large part of this year, relatively resilient in spite of that. We've also kind of said in the middle of the earnings season. So, it was a busy night last night as well.
Anna
Yeah, Tesla and Alphabet reporting in the after-hours the shares have traded down a little. Is this all still about AI momentum, and are investors still buying that momentum? Or they starting to ask a few tough questions about the level of investment, and so on?
Matt
Yeah. So, you're correct. They both traded down after hours. We tend not to think too much about those short-term moves and looking at the longer-term impact at the minute, but just to kind of go through one at a time, because AI is a big story for both of these names. Alphabet kind of gave both bulls and bears something to latch onto here. So I don't think that many minds are going to be changed based on results. Cloud growth on the one side, which is a kind of a good proxy for AI demand, extremely strong at 82% year over year, significantly higher than the 64% markets were expecting. So that was a massive beat.
Anna
That's a big beat.
Matt
Yeah, yeah. The flip side of that, another race to CapEx guide commentary for management. The margins in the second half of the year are going to come under a bit of pressure that gives the bears something to latch onto. So, this was a bit of a put-and-take set of results. Underlying though, this was a fairly strong results from Alphabet.
Anna
Okay.
Matt
It's just about whether as an investor you think that that investment is going into the right places and whether that returns are going to come through in the future for those. For now, we're cautiously optimistic that the investment is being made into the right areas, but time will tell on that front. Tesla was an interesting one because it headed into results having just had a really strong delivery number a few weeks ago. So, I think the expectations were a little bit higher than perhaps should have been. And we flagged in our Tesla preview last week in our week ahead article that we write that incentives and kind of pushing sales could mean that the revenue number was good, but actually it doesn't all drop through to the profit line. And that's exactly what we saw with Tesla. So, margins were a good clip lower than the market was expecting heading into these results. That meant that exactly like I said, that revenue was high, but it didn't fall through to earnings. Obviously with Tesla, the future story here is more about what comes next. So often the numbers play second fiddle to what's said on the earnings calls.
Anna
Okay. And I guess that there's more big tech results next week. And so, I’d urge our listeners to go to our News & Insights pages because Matt does post comments immediately after the results.
Matt
Yeah. So more to come next week. And again, I think kind of the key things that we'll be looking at there is going to be these CapEx guides really as a kind of proxy for the overall AI trade. So interesting to see how some of these other big AI spenders guide next week. Moving on from earnings. Anna, we're going to talk about politics now, a subject that you are very keen on. As you mentioned in the intro, we've got a new Prime Minister, Chancellor, plenty of questions I'm sure, from investors and listeners about what comes next. So, what really matters for investors?
Anna
Well, what matters for investors, as with all of us, I suppose as voters, is just seeing how different this government is going to be compared to the last one, because many of the same constraints still exist. Now we have seen yields increased, and what we do look at is the cost of borrowing on a ten-year basis. And that has gone up. It's 5.07% at the time of speaking. And it is still the case in the UK that we are paying a premium on our debt. And that's because the market is really very sensitive, I suppose since Brexit, since Liz Truss’ mini budget, markets watch us very, very carefully to see what the risks are around our net debt and our borrowing requirements. And it's a live issue. Public sector net debt is 95% of GDP. So, any promises to spend more, whether on defence, welfare, tax cuts or cost of living support has to be funded and not just announced. This week, we've seen quite a few small announcements that have been funded through slight cuts here and there. We've seen a cut, for example, to bus fares, and this morning we saw a 20% cut to business rates for pubs and live music venues for the year coming 2027/28. And so, these are all quite small beer, excuse the pun, but I think as we approach the budget, there's going to be more and more pressure on the Chancellor and on Burnham, and households and investors and businesses will all be clamouring to have a good outcome. And the main thing that we want to ensure for our clients is that we have a stable tax and policy framework, and there's an awful lot to think about. I think one of the key things I wanted to raise was around defence spending. Now, the Chancellor, John Healey, he has come previously from the position of secretary of defence. And he resigned that, saying that he did not agree with the Treasury's funding proposals for the defence budget and it was not fully funded. And he was very clear that in order for us to fully support our NATO commitments, we needed to increase our defence funding. Wes Streeting is the new defence secretary, and now John Healey is established in the Treasury. There was a lot of thought that, well, he wouldn't have taken that position unless he could fully fund the defence requirements that he set out when he was defence secretary. But it is interesting that that it does seem that there are some quite equivocal comments coming from Streeting and others. So, it's perhaps not quite so nailed on that we are going to get to that 3% spending. The background to all of this really is that the UK is not an island entire unto itself, to paraphrase John Donne. We are still working in a global context. And the Middle East escalation, and particularly the Houthi attacks in the Red Sea, could lead to some pretty nasty consequences until we can find proper pragmatic workarounds. So that's going to be something that might come to stymie all the efforts of Burnham and Healey and might keep that honeymoon to a mini-break, can I say. I think there's going to be lots to watch, and our clients and listeners should be aware that we are going to be advocating for them as much as possible in the run up to the budget.
Matt
I think it's also worth saying, Anna, that it's not all bad for UK markets, though, because I mean, you know, on the one side, UK markets, a lot of the companies in the FTSE 100 at least, they've got such a big overseas revenue base that actually UK economy, UK politics doesn't necessarily have the biggest impact on UK FTSE 100, FTSE 350 companies as perhaps it may have done in, you know, decades gone by.
Anna
That's a very good point. And there's lots of there are lots of energy stocks that are doing very well with the rising oil price. There are financials that are performing very well. There's a lot of heavy weighting to mining stocks, too. And interestingly, if you're looking for a non-AI, non-tech trade, the UK market is also quite a good one. Overall, the UK market does appear very cheap, though, and we've seen that with continuing mergers and acquisitions. Well, mostly acquisitions of significant companies at significant premiums, which means that a lot of UK companies are being seen as very attractive by trade buyers and private equity, which is something that is only continuing, has come at a pace now.
Matt
I think it's interesting as well because the markets, as mentioned, the start, have been relatively resilient as a whole. But you know, you mentioned some relief for pubs coming in the next couple of years. We had Mitchell and Butler's report today. We've had a profit warning from JD Wetherspoons recently as well. So, whilst as a whole market things are doing okay, there are definitely spots where we're starting to see some pressure pushed through and you know, higher energy prices for longer is only going to exacerbate that. So I think it's super important to watch what happens in the Middle East. I guess, more importantly, the effect of that has on oil prices to kind of take some kind of judgment as to what's going to happen with inflation moving forward. But I mean, you know, at the minute, especially in the US, the AI trade is effectively overarching everything right now. And, you know, we'll see when this earnings season happens. But we're expecting to have quite strong US earnings seasons over the next few weeks to kind of help counteract some of that. So, I guess the most important thing, Anna, and kind of thanks for giving that backdrop there. But if I'm an investor, if I'm a listener, what does this actually mean for me? You know, how do I position my portfolio? Do I make any changes to my portfolio with, you know, political changes that we're seeing?
Anna
For most investors, the answer is not to make a big portfolio bet on any particular outcome. In the past, it's been incredibly difficult to time these things. And, you know, if you'd sold down stocks and shares portfolios on the back of various things like Brexit or Covid, unless you got your timing absolutely, completely right, you would have actually lost money. So I would say the two things that do the heavy lifting in portfolios are diversification and time in the market. And that's the closest thing you're going to get as an investor to a free lunch. I mean, this doesn't mean you ignore politics. It means that you make sure you check the basics. Are you diversified? Are you using the right tax wrappers? Are you comfortable with your level of risk and are you investing for the time horizon you originally planned? I'd also like listeners to know that we really are going to be taking an important role at Hargreaves Lansdown in championing their interests, particularly ahead of the budget. We really want stability in the tax treatment of savings and investments. People need confidence that the rules aren't going to keep changing beneath them. So, we know this government wants us to carry on saving, but also to start investing, and we're really passionate that that delivers the best client outcomes. It gives you the best retirement. It gives you the best way of meeting your goals and looking after your family. So, we are really going to be trying to champion our client's interests and encourage the government to realize that, you know, the constant shifting of tax treatment of savings, investments, pensions and things like that. It is not helpful to really encourage that investing culture that we want to. I guess the takeaway is simple: politics can move markets, but it shouldn't knock investors off course. Next time, we'll be back with big tech results and the wider tech sector, including discussing perhaps some pretty wild moves that we've seen in the tech-heavy Korean market.
Matt
Yeah, exactly right. So, we mentioned earlier big tech results, a selloff in AI stocks over the past month or so that I've been looking into. So, there's an article coming out shortly on that and we'll be discussing that in the next podcast as well. Thank you all for listening. This session was recorded on the 23rd of July 2026, and all information was correct at the time of recording. Next week, Helen Morrissey and Clare Stinton will be back with a personal finance episode.
Anna
Nothing in this podcast is personal advice, and you should seek advice if you're not sure what's right for you.
Matt
Investments rise and fall in value, so you could get back less than you invest. And past performance is not a guide to the future.
Anna
This isn't a recommendation to buy, sell, or hold any of the investments or companies we've discussed. For the record, I don't have holdings in any of the names we've discussed.
Matt
I don't, either. So, it's a goodbye for me and thank everyone for listening.
Anna
And it's a goodbye from me. Thanks very much till next time.