The Changing Landscape of Global Markets
Gervais Williams, the chair of equities at Premier Miton, highlights a significant shift in global economic dynamics. In the era of globalization, mainstream party policies often appeared similar. However, with the rise of nationalism, these policies have started to diverge significantly. Rachel Reeves’ Budget serves as a prime example, where a second tax grab has been implemented, while other approaches could have been taken.
The debate surrounding the budget proposals risks missing a crucial point: many governments across Europe are struggling to balance their budgets. Previous assumptions about economic growth have proven overly optimistic. In the absence of sustained growth, the challenge of maintaining fiscal balance becomes more pronounced each year. This is evident in Belgium, where the budget has led to a general strike, signaling a structural change in economic conditions. As a result, global stock market trends are expected to undergo fundamental transformations.
The Era of Strong Stock Market Returns
During the globalization period, stock market returns were consistently strong, decade after decade. Open borders facilitated a plentiful labor supply, which prevented manpower costs from rising as quickly as company sales. Consequently, corporate profit margins doubled over the years. This trend was not limited to healthy companies; even “zombie companies”—those barely able to cover operational costs and debt interest—managed to survive. The global stock market experienced extraordinary returns during this time.
Despite growing wealth inequality, governments appreciated certain aspects of globalization. Tax revenues increased, and like corporations, they became reliant on near-unlimited low-cost debt.
Rising Costs and Profit Pressure
Following the pandemic, governments have struggled to maintain balanced budgets, with growth stalling and tax revenues declining. One-off projects, such as HS2, have provided some momentum for now, especially as interest rates remain low. So far, governments have been fortunate with capital expenditure (capex). Extra spending on government projects coincides with a surge in data center investments globally. While we’ve avoided a major slowdown, the US stock market continues to rise.
However, new data centers cannot be built any faster, and immigration restrictions are starting to impact labor costs. Additionally, tax grabs are increasing corporate expenses. A new trend is emerging: global profit margins are beginning to come under pressure. Currently, profits are maintained through staff redundancies. For instance, companies like UPS, Novo Nordisk, and Nestle have announced job cuts. Unfortunately, this could lead to a surge in unemployment during the next downturn.
Unemployment benefits will likely consume most government spending, forcing cuts in other areas. I fear the next recession could be particularly severe.
Saving More in Times of Uncertainty
During the pandemic, people saved more due to lockdowns, as illustrated by the chart below. Now, there’s a growing sense that the current status quo is unsustainable. People are saving more for precautionary reasons, becoming more cautious in their financial decisions.
This trend is also visible in global stock markets. While headlines focus on the growth of companies like Nvidia and Amazon, it’s the slower-growing companies that generate surplus cash which are outperforming in terms of share prices. During downturns, companies with surplus cash have a distinct advantage. The UK stock market, which mainly consists of such companies, has outperformed despite the political and economic noise.
As of 25 November 2025, the UK stock market, measured by the FTSE 100 Index, has outperformed the large US technology companies, represented by the Bloomberg Magnificent 7 index. Importantly, this outperformance isn’t driven by the UK economy itself but by the characteristics of the UK market, which contrasts sharply with the US market.
The Rise of Savings Nationalism
Nationalism will extend beyond immigration controls and trade tariffs. In time, we may become nationalist about our collective savings as well. By keeping savings within the country, local companies can benefit, leading to enhanced skilled employment and productivity. Politicians may start using slogans like “UK savings for UK jobs.”
Don’t be distracted by the second tax grab. The Chancellor hopes markets won’t notice the elephant in the room: government spending exceeds the rate of saving. During globalization, this imbalance was possible, but with nationalism, the unsustainability will eventually become apparent.
This is not a partisan issue. Persistent government overspending has real consequences. When the road runs out, it ends in corporate insolvencies and higher unemployment.
A Positive Outlook for the UK Market
Despite these challenges, there is good news. Companies that generate surplus cash have the potential to outperform. In my view, the UK stock market is poised for a new supercycle. Better still, the UK market should return to its core purpose—not just generating premium returns compared to international markets, but also benefiting non-savers.
By boosting skilled employment and driving productivity improvements, successful companies can offer wage rises above inflation. With many of them being local, the Exchequer can benefit from increased tax revenue when they succeed.
Overall, when the UK stock market functions well, the use of collective savings locally can enhance the wellbeing of the entire electorate. That’s something we can all support.