08/09/25: Bond market moves, US jobs data & Tesla’s pay proposal

Monday Espresso Podcast - 8th September 2025

[00:00:00] Nathan Sweeney: Good morning everybody. It is Monday the 8th of September, and today I'm pleased to be joined by Rory Dowie, Global Equity Portfolio Manager here in the Multi-Asset Solutions Teams at Marlborough. Good morning, Rory.

[00:00:12] Rory Dowie: Good morning, Nathan.

[00:00:14] Nathan Sweeney: So Rory, can we just get a quick recap on what was happening in markets last week?

[00:00:18] Nathan Sweeney: So how did markets perform?

[00:00:20] Rory Dowie: Yeah, so markets last week were fairly uneventful across the board. They were flat to marginally up across major regions. US was leading the way. That was up about 1% with most other regions hovering around flat. It was a fairly data heavy week, but nothing too wild. We had retail data in the UK and payrolls in the US.

[00:00:40] Nathan Sweeney: Okay. And I think one of the, kind of the key focuses last week was around the UK economy, so we did have some news there. So did that shed any light on the direction of travel for the UK economy?

[00:00:52] Rory Dowie: Yeah, the UK was a bit of a mixed bag last week. We had retail sales for July and they were given a boost by the women's Euros, which were going on over the summer, of course.

[00:01:00] Rory Dowie: And retail sales in the UK came in at 0.6% up for the month, and that was ahead of expectations of 0.2%. So really that was a strong rebound from the 0.3% increase we saw in June. Though on the flip side, we had some Bank of England data, and that was showing firms are cutting jobs at the fastest pace since 2021.

[00:01:19] Rory Dowie: And then of course, at the end of the week, we saw Deputy Prime Minister Angela Rainer resign over the stamp duty scandal, which had been ongoing over the past couple of weeks. And what that led to was long-term government borrowing costs in the UK, hit a 27 year high as investors are remaining concerned around the state of the UK economy and the fiscal backdrop.

[00:01:39] Rory Dowie: So to put that into perspective, the yield, so the cost of borrowing for the UK government on 30 year debt, so 30 year government bonds, that yield reached 5.7% over the week. And that led to the pound weakening and now trading at 1.35 versus the dollar. So quite a lot going on in the UK.

[00:01:57] Nathan Sweeney: Yeah, so we did see Rachel Reeves announced the date, for the Autumn budget. So that's for the end of November. And I think the announcement of that is obviously to provide some clarity to the markets about their plan going forward, so giving them a firm date, which should help ease markets concerns. But ultimately what you're seeing here is that we do have higher inflation in the UK than other G7 countries.

[00:02:22] Nathan Sweeney: And if you look into that inflation, you can see that some of that inflation has been driven by seasonal factors. As in airfares, a lot of people going on holiday, higher airfares, so we're not as concerned about what's happening within bond markets at the moment because we can see that, look, this inflation factor is likely to be seasonal.

[00:02:42] Nathan Sweeney: And then for the government specifically, the key thing there is for them to drive productivity. So to drive more growth in the economy, which will help with the concerns that we have, as in markets have about bonds at the moment, and the pricing of those government bonds. But yeah, so possibly a bit of an overreaction in markets there at the moment.

[00:03:05] Nathan Sweeney: So if we look at the US, was there any kind of big news coming outta the US on the week?

[00:03:10] Rory Dowie: Yeah, the US had some jobs data last week. Earlier on in the week, we saw reports on private sector hiring and jobless claims, which came in slightly worse than expected, but really the one that everyone was waiting for was on Friday where we saw the US non-farm payrolls that was being a source of softness in the US over the past couple of months.

[00:03:28] Rory Dowie: And on Friday they came in at 22K versus expectations of around 75,000 jobs that were to be added for the month of July. So again, softer employment data there. Ironically, this sent some optimism through financial markets. We actually saw the US rebound on Friday on the back of that news. Why did that happen?

[00:03:46] Rory Dowie: That really comes down to interest rates and their future pathway. Essentially it places greater pressure on the Federal Reserve to cut rates, as it essentially implies that employment is weakening and they need to kind of stimulate the growth.

[00:03:59] Rory Dowie: Recall over, you know, the Fed's been in a bit of a tug of war. Obviously on one side it wants to keep inflation low and on the other side it wants to keep the economy healthy and employment high. So really kind of that employment side or the unemployment side is kind of winning that tug of war at the moment. And now markets are expecting kind of with certainty that the Fed will cut rates in September.

[00:04:18] Rory Dowie: So as I say, we'll be waiting for that 17th of September Fed meeting to, to see if we do get that rate cuts given these jobs numbers that we had.

[00:04:25] Nathan Sweeney: Yeah, that's a really astute you kind of observation there. It's around the fact that, you know, sometimes what you can have in the headlines, as in what's reported in the headlines, you can see an opposite reaction in markets.

[00:04:38] Nathan Sweeney: So we often say in investing that the economy is not the market, and this would be a good example of that. Where you are seeing the fact that you have weaker jobs data, and you might perceive that as being bad, but the market is saying, actually, look, that's gonna lead to interest rate cuts. And that's actually good for company profits.

[00:04:55] Nathan Sweeney: And so the market can react differently to how you might expect it to with the anticipation from reading the headline. So it's always something to be conscious of that markets tend to be thinking in different ways. Was there anything else on your radar for the week?

[00:05:09] Rory Dowie: Yeah, perhaps just mentioning Elon Musk not spoken about him for a few months following the kind of government efficiency at the start of the year.

[00:05:16] Rory Dowie: And actually we saw on Friday, Tesla proposing new compensation agreement for Elon Musk potentially worth around $1 trillion. Yes. 1 trillion US dollars. Absolutely huge potential there. But really that proposal was designed to incentivise Musk, to continue to lead Tesla for a number of years. Within that agreement or within, if it goes through, within that agreement, there's a series of benchmarks that he must meet in order to earn that full payout.

[00:05:41] Rory Dowie: For example, one of those is actually growing the company's market value to at least $8 trillion over the next 10 years. Just to put that in perspective, Tesla today is valued at 1 trillion, so to get that full payout, he needs to make Tesla eight times larger than it is today. Obviously, this comes after Musk's been somewhat distracted or viewed as distracted by shareholders.

[00:06:01] Rory Dowie: His involvement in the Department of Government deficiency earlier in the year, and obviously he's still heavily involved in companies like X and SpaceX. Tesla shares rose on Friday as a result. Investors hoping that he'd be more aligned with Tesla as a company and to kind of drive that into the future.

[00:06:16] Rory Dowie: And you know, that was much needed. Tesla shares remain down 16% this year. So huge, huge pay packet potentially for Elon Musk. I think that'd be comfortably one of the largest ones in corporate American history, and I thought it was worth mentioning.

[00:06:28] Nathan Sweeney: Yeah, no, that's a, yeah, a huge pay package. And I suppose if there's anybody who can do it, it's Elon Musk, obviously he's got a great track record of running phenomenal companies but that would be a huge valuation. But it is important to remember that, you know, assets do rise over time, so you may not get there, but he certainly should be able to increase the company from where it is today with their move into automation and robotics, which is a key theme for them.

[00:06:52] Nathan Sweeney: And obviously driverless cars as well. Also robo taxis, if you will. What have we got to watch out for the week ahead?

[00:06:58] Rory Dowie: Yeah, so this week we have a flurry of economic data. In the US we have inflation data, so CPI or consumer price index, and we also have some sentiment data around inflation expectations.

[00:07:09] Rory Dowie: And then in EU, again, we have a number of countries reporting inflation data, including Germany. So you know, as a team, we'll be all over that again this week.

[00:07:17] Nathan Sweeney: Yeah. Perfect. Rory, really insightful stuff there. Thank you for joining us today on the show. As I always say to our clients, if you've got any questions at all, please do send them in.

[00:07:27] Nathan Sweeney: We'd love to bring them up on the show. But thank you for listening in and have a great week.