Client Update - 19th September 2025

Donald Trump is back in the UK. At the state banquet he announced - “The bond of kinship and identity between America and the United Kingdom is priceless and eternal. It’s irreplaceable and unbreakable,” the US president said, before declaring, “We’ve done more good for humanity than any two countries in all of history together.” Shame he didn’t remember this during the tariff negotiations.

According to a YouGov poll, 16% of British voters have a positive view of Donald Trump, as against 70% who dislike him. Whilst the general public may understand that the state visit was required to encourage favourable terms for the tariff negotiations, it probably is another thing that is adding to Sir Keir Starmer’s problems in the popularity stakes.

This doesn’t appear to bother Nigel Farage, the leader of Reform UK, who makes regular trips to see Trump in Washington as he seeks to garner support for his election hopes in 2028 / 2029. Britain’s next general election could take place as late as August 2029. Even if it happens in 2028, Prime Minister Farage — if that is what voters choose — would overlap with President Trump for a matter of months. In all likelihood, the two will never hold office at the same time. (Assuming the 22nd Amendment holds that a president can only sit for two terms in office.) Assuming JD Vance replaces Trump the Farage has probably been quite clever, however what if the Democrats win the next election. That wouldn’t bode well for UK led by Farage. Democrats only last week called him a “Putin-loving free speech imposter” of all things.

This week saw the US Federal Reserve cut rates by 0.25%, with employment weakening and inflation remaining elevated. Remember the Fed have a dual mandate to support employment and manage inflation, so both readings are going in the wrong direction for the Fed, and they have evidently placed employment over inflation in importance by cutting rates and signalling further rate cuts moving forwards. This was backed up by comments from the Fed Chair Jerome Powell, who stated that the weight of risk was on the employment side, so a 0.25% cut was justified. Powell said more than once that the decline in job creation was not only down to labour supply: underlying economic demand is an equally important cause. Furthermore, he argued, the base case is still that higher inflation is down to tariff-driven goods inflation, which will probably prove to be a one-time event. This looks a little like 2021 when we were told inflation was transitory. We shall see.

Fed independence was discussed again, as Trump has “planted” an ally in the Federal Reserve. It was clear from the data, that whilst most voting members thought that rates would not drop too much further this year, one member thought they would fall another 1.25%. This view was clearly from the committee’s newest member and staunchest Trump ally, Stephen Miran. The Fed Chair was asked several good questions about whether the presence of Miran, who is on loan from the White House, and whose views are clearly in lockstep with the president’s, is consistent with Fed independence. Powell’s only substantive answer was that one vote cannot control a committee with 12 voting members. Miran alone cast a dissenting vote for a 50bp cut in Wednesdays meeting.

Nonetheless, cutting rates to support the economy, especially in advance of a significant downturn, is normally positive for markets, especially when added to the Fed committees’ views that growth rates will be higher in 2026, whilst interest rates will be lower. Should this be the case, the scene is set for further market progress from here. Do have a good weekend.