One Knightsbridge Capital Monday Espresso Podcast

Monday Espresso Podcast - 29th September 2025

[00:00:00] Nathan Sweeney: Good morning everybody. It is Monday the 29th of September, and today I'm really pleased to be joined by James Athey, Global Bond portfolio manager here at Marlborough. Good morning, James.

[00:00:10] James Athey: Hey Nathan. Thanks for having me back. Good to be here.

[00:00:13] Nathan Sweeney: Not at all. Always a pleasure and I think ultimately we're kind of moving away from the summer months and now getting into the business end of the season.

[00:00:21] Nathan Sweeney: So how are markets holding up? How did markets perform over the last week?

[00:00:25] James Athey: Yeah, I can definitely say that my morning journey to work is confirming that it's not summer anymore, it was absolutely freezing this week.

[00:00:32] James Athey: But markets have been pretty choppy again, you know, you've seen equity markets up and down really without any obvious anchor or driver.

[00:00:40] James Athey: You've definitely seen some weakness in bond markets, so yields drifting higher. There's some good reason for that, which we can get into and that rise in yields driven by the US really has also pulled the US dollar higher, which of course is something which most investors have not been expecting.

[00:00:57] James Athey: You know, most people are expecting the dollar to decline, including ourselves. So yeah, some interesting moves. Nothing massive, but still quite choppy and directionless.

[00:01:04] Nathan Sweeney: Yeah, so we did kind of point out on last week's pod that basically was a relatively light week in terms of data. So often when that happens, market tends to move a bit sideways, and we did see that this week really.

[00:01:15] Nathan Sweeney: But we did have a couple of announcements and we were talking about this just before we jumped on the pod and we thought we were clear of tariffs, but tariffs are back

[00:01:23] James Athey: Just when you thought it was safe to get back in the water, right?

[00:01:26] Nathan Sweeney: So yeah, with new announcements on drug imports coming through.

[00:01:30] Nathan Sweeney: So what's your take on that?

[00:01:31] James Athey: Yeah, so it's obviously something that the president has mentioned in the past. I think , we expected that he was going to turn his attention to drug prices, to pharmaceuticals in general at some point. But like you, I think many of us had sort of felt that we'd got some relief from tariffs that had gone quiet on that front, and it did feel a bit out of the blue that some fairly large tariffs were announced on branded drugs coming into the US.

[00:01:57] James Athey: I mean, it's not had a massive impact, again, healthcare has been underperforming quite consistently of late anyway, because again, it's been an area of focus.

[00:02:04] James Athey: T he health secretary is a somewhat controversial appointment and there has been concern there, broadly speaking, and in a macro sense, I think most investors are just somewhat fatigued with respect to tariffs.

[00:02:16] James Athey: It's still not clear just exactly the direction or the magnitude of the impact of tariffs on prices and growth and employment.

[00:02:24] James Athey: And so until we get obvious clarity, I think investors will try and ignore these things if they can.

[00:02:31] Nathan Sweeney: Yeah, and it's something we actually talking about as a team. There was this report that came out from Goldman Sachs and was talking about the unreliability of the data now because you've just had so much chopping and changing and these big policies coming through.

[00:02:43] Nathan Sweeney: And it's creating a lot of noise within the data and so that could be the case for, we've saw us GDP coming out and the number much larger than people thought.

[00:02:54] Nathan Sweeney: So what's your take on GDP? So we saw a big number coming through over the week.

[00:02:58] James Athey: Yeah, noise is exactly the word. I mean, this is something which has been
obvious and a frustration for us, particularly in the bond market. Obviously, we look more closely a lot of these economic stats in the bond market.

[00:03:09] James Athey: And we've seen this pattern really throughout the post COVID period where you have a few months of data pointing in one direction and then seemingly out of the blue it sort of jags in the opposite direction, and then you follow that trend for a few months.

[00:03:22] James Athey: Of course, it's been further complicated this year because of the tariff announcements in April. That was sort of well known in advance that this liberation day was likely to see tariffs being implemented, and so you've got this pulling forward of demand, which straddled Q1 and Q2.

[00:03:37] James Athey: So we had a very weak looking Q1 in US, GDP, and then we've had a bounce back as things just normalised in Q2.

[00:03:44] James Athey: As you say, the revision, this was the second cut of Q2 GDP and it pushed consumption and headline GDP quite significantly higher. And of course the market has responded to that.

[00:03:55] James Athey: We've reduced the pricing of Fed cuts a little and pushed yields higher, and that's understandable.

[00:04:00] James Athey: I think if you take the two quarters in aggregate though, you're still talking about sub trend growth and for us trying to sort of filter the signal from all of this noise, that's still the message that we would take is that as it stands, there still seems to be a little waning momentum in terms of US activity.

[00:04:18] Nathan Sweeney: Yeah, I suppose that's why the market is a bit more optimistic about the potential for those rate cuts to come through and is looking at that as a potential driver of earnings, particularly as we move into next year.

[00:04:29] James Athey: Yeah, absolutely. Again, the equity market, if it thinks there's no recession, but it's getting Fed rate cuts, it's generally gonna enjoy that.

[00:04:35] Nathan Sweeney: Lots of interesting things happening, and even for a quiet week, obviously US administration can always keep things interesting for markets.

[00:04:42] Nathan Sweeney: Speaking of which, is there anything that you'll be looking out for over the course of the week?

[00:04:46] James Athey: No, again, nothing massive and I mean, it's month end, isn't it?

[00:04:49] James Athey: So we sort of straddle the month end. As we get to the end of next week, you start to think about the payrolls report, because of course, always, that's the most important data item in the calendar.

[00:04:59] James Athey: But particularly right now, we would put huge weight on the employment data in general, and specifically the non-farm payrolls report because the way the Fed has sort of set itself up now, it seems very prepared to look through some of these inflationary pressures that we're seeing at
the moment on the basis of really slowing momentum in the jobs market.

[00:05:23] James Athey: If we were to see job growth stabilising, or if we were to see an upside surprise, suddenly that higher inflation becomes much more of a concern, and you could see a more significant reaction in terms of taking out some of these Fed cuts that have been priced.

[00:05:39] James Athey: And as you've said, that has been bullish for the equity markets and maybe you get a little weakness in the equity markets. So it does feel like there's a lot riding on payrolls.

[00:05:47] Nathan Sweeney: Okay. It's an important statistic, obviously, you know how the job market is holding up, but the data to date, as you said, it's been a little bit mixed and some of that unreliable data coming through.

[00:05:57] Nathan Sweeney: But yeah, we'll just have to wait and see. We'll be focused on that.

[00:05:59] Nathan Sweeney: Outside of markets, are you happy with your start to the season so far?

[00:06:03] James Athey: In terms of football? Yes, very much so. As much as it was brilliant last season to win a European trophy, I have to say, as a as a Spurs season ticket holder, it was pretty painful to watch week on week.

[00:06:14] James Athey: We suffered some pretty embarrassing defeat and leaking goals, right, left and sideways so to see us looking solid at the back and picking up results. I'm worryingly bullish as a Spurs fan, the minute you start to feel confident is the point of maximum risk. So yeah, long may it continue.

[00:06:31] Nathan Sweeney: Okay, so looking forward to a good season.

[00:06:33] Nathan Sweeney: Thanks for joining me on the show and thanks to all our listeners for dialing in.

[00:06:36] Nathan Sweeney: If you have questions, send them in, we'd love to bring them up on the show and have a great week everybody.