On paper, last week looked steady.
The Bank of England held rates.
The ECB did the same.
US manufacturing ticked back into expansion.
If you’re scanning headlines, you’d think things are settling down.
But in the conversations I’ve had with advisers this week, “calm” isn’t the word anyone is using.
What I’m hearing instead is caution. Selectivity. A sense that this market is rewarding precision, not optimism.
And I think that’s exactly right.
Central Banks: Steady, But Not Settled
The Bank of England held at 3.75 percent. The ECB held at 2 percent.
Technically uneventful.
But the BoE vote split was tighter than many expected. That matters. When committees start to show internal divergence, markets notice.
We are in what I’d call the messy middle.
Many households still assume rates will either fall sharply or stay high indefinitely. There’s very little appreciation for the reality in between. A slow glide path. Conditional moves. Policy shaped by incoming data, not ideology.
For advisers, this is less about predicting the next cut and more about reinforcing allocation discipline.
Rate stability does not equal certainty.
It simply means the margin for error is narrow.
For those who want the detail, the latest Monetary Policy Summary from the Bank of England is here:
https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes
The US: Resilient Data, Rising Politics
US manufacturing sentiment improved, with ISM moving back above 50. Growth expectations remain intact.
That resilience continues to surprise.
But politics is re-entering the conversation.
President Trump has indicated Kevin Warsh as his preferred replacement for Jerome Powell as Fed Chair. Warsh has previously been seen as hawkish, though recent commentary suggests a softer bias.
Important context: even as Chair, he holds one vote among twelve FOMC members.
Markets may react to headlines. Policy remains committee driven.
There are also Supreme Court rulings on tariff cases due shortly, alongside shifting electoral sentiment in traditionally Republican districts. None of this is immediately market breaking, but it does add to a rising political risk backdrop as the year progresses.
Fidelity’s European open summary last week captures how markets are digesting this balance between resilience and uncertainty:
https://www.fidelity.co.uk/shares/stock-market-news/market-reports/europe-open–stoxx-hits-record-high-as-earnings-boost-sentiment/
AI: Same Spending, Very Different Outcomes
This is where divergence becomes obvious.
Alphabet is guiding towards 180 billion dollars in capital expenditure for 2026. Meta is forecasting between 125 and 135 billion.
Those are enormous numbers.
And yet Microsoft fell more than 15 percent after earnings, with investors underwhelmed by Azure revenue outlook and continued supply constraints.
This is the shift.
Twelve months ago, “AI exposure” was enough.
Now, markets want proof.
Spending alone is no longer the story. Returns are.
I would be very cautious about anyone claiming they can identify long term winners at this stage. The dispersion between companies investing at similar levels tells us we are still early in the cycle.
AJ Bell recently explored how different ways of tracking the market are delivering very different outcomes compared to the S&P 500 headline narrative:
A different way to track the market is beating the S&P 500
Broad beta is not doing the heavy lifting here. Selectivity is.
Alternatives: Volatility Hasn’t Gone Anywhere
Gold and silver experienced sharp volatility late last week, largely driven by leveraged retail participation, particularly in Asia. The CME’s decision to raise margin requirements amplified the moves.
When this happens, it’s rarely about long term conviction. It’s about positioning.
And this is usually the point in a client review where someone says, “Should we increase exposure while it’s moving?”
That is when discipline matters most.
The long term strategic case for precious metals may still stand. But they are not immune to sharp, sentiment driven swings.
Bitcoin drifting below 70,000 from highs above 120,000 is another reminder. ETF driven retail demand has faded, and highly leveraged corporate buyers may now face pressure as valuations retrace.
Volatility is not a flaw in these assets. It is part of their design.
The only meaningful question is whether that volatility aligns with the client’s objectives, time horizon, and capacity for loss.
The Bigger Theme: Dispersion
If I had to summarise this environment in one word, it would be dispersion.
Central banks are steady, but not aligned in tone.
US growth is resilient, but political risk is rising.
AI investment is enormous, but performance is uneven.
Commodities and crypto remain reactive rather than directional.
This is not a market for autopilot.
It is a market that rewards clarity of thinking, disciplined allocation, and honest conversations.
A Communication Opportunity
@Professional Paraplanner recently highlighted that many Brits remain confused by fundamental financial concepts.
That confusion shows up most clearly when markets become nuanced.
Clients simplify. Sometimes too much.
Your role is not just portfolio construction. It is translation.
A few questions I’ve seen advisers use well recently:
🟠 What would need to happen for us to change course?
🟠 Does this volatility alter your long term objective?
🟠 Are we reacting to noise, or responding to evidence?
Simple prompts. Powerful reassurance.
For context on the UK’s modest December GDP growth, which feeds directly into client sentiment, Investing.com’s summary is here:
U.K. economy registered modest growth in December; GDP grew 0.1%
Final Thought
I’ve always believed the real value of advice becomes most visible in markets like this.
Not when everything rises together.
But when dispersion forces decisions.
Clients do not need us to predict the next headline. They need us to interpret it.
If this mirrors the conversations you’re having in review meetings right now, I’d genuinely be interested to hear how you’re framing it.
Markets are nuanced. Good advice should be too.
