Monday Club – 01/09/25: Your weekly Wealthwise digest

Investment round-up

Targeted support regime

The FCA’s proposed ‘targeted support regime’ has been broadly welcomed by industry participants – though some have warned the rules will need to be refined if the framework is to work in practice. The new regime is designed to address the ‘advice gap’, sitting between factual guidance and full personalised advice.

Baillie Gifford joins boutique group

The Independent Investment Management Initiative (IIMI), a think tank and advocacy group for independent asset management firms, has added Baillie Gifford to its network. IIMI is primarily focused on boutiques but Baillie Gifford has been allowed to join because it is independently owned.

W1M Wealth hires ex-Rathbones director

W1M Wealth Management – the newly merged entity of Waverton Investment Management and London & Capital – has appointed Jake Lewis as business development manager for adviser solutions as it looks to build its IFA-focused business.

Aegon launches green fund

Aegon Asset Management has launched a green investment fund focused on decarbonisation. The group said its Investment Grade Climate Transition fund is “designed to support the global transition to a low-carbon economy while delivering attractive, risk-adjusted returns”.

Evelyn Partners AUM at ‘all-time high’

Evelyn Partners’ assets under management (AUM) stood at an “all-time-high” at the end of the second half of 2025, with “strongly positive” net inflows, according to the group’s latest results. The group’s AUM for the half closed at £64.6bn – up from £62bn at the same point last year.

UK investors trim cash

UK investors are reducing their cash allocation, according to HSBC’s Affluent Investor Snapshot. The survey suggests cash allocations have halved over the past year in the average portfolio, falling from 38% to 19%, while over the next 12 months, 18% of UK investors aim to decrease their cash allocation further.

In focus: Independence fray

The independence of the US Federal Reserve is under fresh assault. After his sustained campaign against Fed chair Jerome Powell, president Trump appears to have switched tactics – now looking to stack the monetary policy committee with dovish governors in an attempt to force through rate cuts. Not for the first time in this administration, investors will need to work out whether the threat is real or illusory.

Trump’s attacks on Powell had become commonplace – among other things, apparently, he was a “loser” and a “numbskull” with the “personality of a chair”. Now, though, the mysterious early departure of Adriana Kugler, who resigned as a Fed governor six months short of the end of her term, suggests a change of tactics.

Trump has since nominated Stephen Miran, a longstanding supporter of his economic agenda, to replace her. As things stand, it is unclear whether this appointment will be permanent or temporary but there has been considerable speculation Trump is keen on having a ‘shadow chair’ in post.

Then, last week, came the sacking of Fed governor Lisa Cook, with unsubstantiated allegations of mortgage fraud cited as the reason. There is likely to be a lengthy legal battle here as it is not clear the president has the authority to fire Federal Reserve governors – or indeed that she has done anything wrong. Either way, it has created wobbles in financial markets, with investors seeing it as an attack on the long-established principle of US central bank independence.

The pressure points so far have been in long-dated bonds, gold and the US dollar. Gold hit a five-week peak, while the dollar resumed its downward trajectory and long-dated bonds sold off. “Investors are extremely worried that politicisation of the Fed and too-cheap money will stoke future inflation,” explains David Roberts, head of fixed income at Nedgroup Investments.

“They will likely continue to chase shorter-maturity bonds but, where possible, avoid the ever-increasing risk of Trump-inspired boom-and-bust economics. Technically, that is known as a curve ‘twist’, with prices rising in one part of the market and falling in another. Transferring policies that have made private sector equity investors rich and lenders poor into public finances seems insanely short-sighted.’’

There has to be a question, of course, as to whether a plan to lower borrowing costs by stacking the Fed with rate-cut-friendly governors will actually work. Trump may get the rate cut he wants, and thus lower short-term rates, but then long-term rates risk spiking higher.

In the near term, the Federal Reserve could borrow at shorter-dated rates, but it would be a very short-term fix – a glut of issuance will ultimately push up rates there too. Then again, perhaps that’s a problem for the next guy?

Many commentators believe Trump will back away. Markets appear to believe this too – otherwise the reaction might have been more extreme. “The chances of a direct challenge to the Fed’s autonomy are unlikely, in our view,” says Kurt Reiman, chief investment strategist at UBS. He goes on to argue this challenge would likely cause a backlash in financial markets, calling into question the long-term outlook for price stability and adding a risk premium to US treasuries.

“Our view is the White House would be unwilling to take this risk,” he says. “As such, we do not expect the appeal of US treasuries to be undermined by worries over Fed independence and we continue to view quality bonds as attractive.”

For his part, Anthony Willis, senior economist at Columbia Threadneedle, notes: “In the past we have seen the Fed is acutely aware of any stresses in bond markets and will intervene if necessary so that a bond crisis does not become a financial crisis.

“The bar for intervention is high, however, and beneath that we may well see some volatility. Yields rising slowly over time are much easier to digest than a sudden spike, but the news backdrop lends itself to swift changes in market mood and the kind of spikes in yields that cause fall-out across risk assets.”

A Financial Times survey of 94 economists showed many believe financial markets are underestimating the threat, however, and the attacks could lead to “a permanent shift at the Fed” towards prioritising jobs and lowering government-borrowing costs once Powell’s term as chair ends next year.

Nevertheless, beyond all these longer-term concerns, the changes at the Federal Reserve may tip the balance in favour of a rate cut in September. The decision on interest rates is complex and finely-balanced.

The assumption has been that tariffs will create higher inflation because companies will be forced to put up prices to maintain profitability. While the final tariff rates have been under negotiation, companies have generally held off raising prices – but, now they can better quantify the impact, they may start to do so.

“There is constructive internal tension within the Fed’s rate-setting policy committee, much of which stems from the Fed’s confused dual mandates, which currently are pulling in opposite directions,” note the Jupiter Merlin team in their latest outlook.

“While headline inflation, as measured by the Consumer Prices Index, is stable but higher than it should be at 2.7%, core inflation – which represents the official technical mandate in the inflation target and excludes food and fuel – has just risen from 2.9% to 3.1%.

“This is its highest level for five months, which suggests keeping rates on hold is appropriate. On the other hand, the Fed is obliged to maintain as close to full employment as the economy can support – hence the concern about that weak employment data.”

Even if the latest attacks on the Federal Reserve’s independence do not significantly change the immediate trajectory of interest rates and/or US borrowing costs, they may still contribute to a gradual erosion of the US’s credibility. The US has enjoyed lower borrowing costs than its fiscal position merits as a result of its position as the world’s reserve currency.

As Claudio Wewel, FX strategist at J. Safra Sarasin Sustainable Asset Management, notes: “The euro is emerging as a credible alternative to the dollar and the European Central Bank’s independence, along with the rule of law, may provide the currency with an edge over the dollar over the longer term.”

Trump may well succeed in packing the Federal Reserve with cronies but whether that will have the desired outcome is open to debate. At the same time, it could further dent the US’s credibility in international markets – and, as the UK has learnt to its cost, once that is gone, it is very difficult to restore.

Read more on this from the FT here and from Reuters here