Financial Notes

Hey 👋

My investment portfolio just hit record highs 📈

But I’ll be honest, there feels like a bit of a disconnect right now, given the global economic mood feels pretty grim.

On both sides of the Atlantic, wages are under pressure, the cost of living is punishing, taxes are high, governments are borrowing at astronomical rates, and yet in my brokerage account, I’m not going to lie, i’ve been doing rather well… 🤔

Take a look at this chart of FTSE All World, a great representation of global equities.

It’s at all time highs.

The S&P500?

All time highs too.

Even the FTSE100 had a decent flurry to surpass 10,000 points for the first time ever in February (before a small pullback in recent months.)

It means if you have any exposure to global equities through a market tracking ETF right now, chances are you’re sat on some meaningful gains year to date.

So what’s going on exactly? Why does the economy feel so poor but looking at my portfolio tells a different story?

The economy measures how people are living, wages, employment, output.

In the UK, that picture looks kind of bleak right now.

Wage growth is at the lowest for more than five years at 3.8% (BBC) and barely keeping up with inflation.

Employment is at 75%, but unemployment is at 5.2%, the highest in 5 years.

90% of people are worried about the cost of living according to a new survey by PwC (they surveyed 2,068 consumers so make of that what you will)

GDP growth was 0.6% in Q1, outperforming the G7 which is positive!

But, consumer sentiment is at its lowest point in over 2 years 🙁

So if thats the economy, let’s talk about what the stock market measures, which is the expected future profits of large, publicly listed companies.

And due to globalisation, none of the largest companies of the planet are solely reliant on the economies of the respective countries they are listed in to continue to be profitable.

Take the FTSE100 for example, roughly 75% of its revenues come from outside the UK, meaning the domestic economy, and what us consumers feel within it, is mostly irrelevant to its performance.

I guess thats the beauty of buying a market tracking index fund, you're not buying your country's economy.

You're buying a slice of the world's most profitable businesses, most of which operate globally, meaning they can thrive even when the country they're listed in is struggling.

Hence the disconnect between what feels like a flat lining economy, yet the stock market is near all time highs.

Markets don't just go up or down purely on sentiment, earnings matter too, and the numbers say they’re holding strong.

🇺🇸 In the US, 84% of S&P 500 companies reporting Q1 2026 results beat analyst estimates the highest rate since 2021, with earnings growth running at 27%.

Full article here: (https://insight.factset.com/sp-500-earnings-season-update-may-1-2026)

The story we’re all getting familiar with now, is that a huge driver of such growth has been AI, the seven largest tech firms alone invested an estimated $437 billion in capital in 2025, thats some serious cash! 💰

That wave of spending has lifted not just tech stocks, but everything in the supply chain around them. 

🇬🇧 In the UK, FTSE 100 companies have also been on a strong run in the last 12 months, with financials, energy, and miners doing much of the heavy lifting.

Its been a positive run aided by the higher interest rate climate, high energy prices driven by supply disruptions in the Strait of Hormuz and commodity prices rising too.

And in truth, these sectors continue to generate cash regardless of how squeezed the average British consumer feels.

If anything, it feels like they make more cash despite us feeling more squeezed than ever before?!

We are seeing a divergence of wealth between high income and low income earners, also known as the K shaped economy.

Its the case of “the rich get richer, and the poor get poorer.”

There is a general consensus right now, on both sides of the Atlantic, that higher income individuals are propping up consumer spending while poorer consumers are having to make cuts.

I couldn’t find a stat for the UK, but I suspect its broadly correlated, but the top 10% of U.S. households (those earning roughly $250,000+ annually) account for nearly 50% of all consumer spending.

And look its easy to see why, those with assets, like property, equities and commodities, are seeing their wealth increase massively, and so have more money to spend.

Whilst those who don’t own assets, are feeling the pinch more because their pounds / dollars aren’t going as far as they once did, as everything else becomes more expensive around them, with what feels like no way to keep up.

Hence the divergence of wealth and the K shaped economy, I hope i’ve explained that well, but incase I haven’t here is a picture!

So should you be worried?

There are legitimate reasons to feel cautious about the economy and the stock market.

The S&P 500 is trading at around 22 times forward earnings, well above its 10 year average, and the Middle East conflict has complicated the rate cutting picture for the Bank of England with inflationary pressures now coming back into play.

Although inflation did drop to 2.8% last month, but economists still think it will rise again…

And to compound this, Bank of England Deputy, Sarah Breeden, came out with a warning saying that the stock market is too high and is set to fall.

But regardless, none of this means you should be rushing to the exit your portfolio, especially if you’re a long term investor.

A recent CNN article summarises the noise perfectly “economists have been predicting or warning about a recession every single year for the past eight years, and they were only right once – kinda.”

I don’t know whats going to happen in the stock market, or the economy this year, or next year, or the year after.

All I do know is that when the storm comes for both, i’ll being doing my very best to be in a position to weather it.

Ultimately, understanding the distinction between the stock market and the economy though, is what separates the successful investor from the one who panic sells over a headline.

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