Market Review 10th November 2025
- Simplicity News Desk
- 3 days ago
- 4 min read
Everything you need to know, Simplified!
Summary
Rachel Reeves is signalling further substantial tax rises despite previous assurances, raising the risk that the UK pushes further onto the wrong side of the Laffer curve (an illustration showing the relationship between tax rates and tax revenue), depressing investment and long-term growth
Reform has shifted towards a more fiscally constrained, pro-growth stance, with proposals focused on reducing public sector bloat and deregulation rather than large upfront tax cuts
The US government shutdown is now the longest on record, but at last progress is being made as a group of moderate Senate Democrats backed a deal to reopen parts of the government
Markets paused last week, with growth stocks underperforming and some profit-taking in the previously best performing areas (AI and Japan) with the moves looking more like healthy consolidation than a shift in trend
Thursday’s UK GDP is expected to show only marginal growth at 0.2%, keeping the Bank of England (BoE) on track for a potential December rate cut
US consumer price index (CPI) on Thursday is expected to remain around 3% year-on-year, though data releases may continue to be disrupted by the shutdown.
Market Review
Celebrity Traitors
Never in a lifetime would I have thought to see such an epic showdown between Alan Carr and Joe Marler, the two standout players of the series. Betrayal is rarely as dramatic as it was for Joe Marler. Often, it’s incremental, rational, and framed as pragmatism. With Celebrity Traitors now over, attention turns to similar games elsewhere.
Fiscal faithful or betrayal?
Rachel Reeves is now signalling that further substantial tax rises are on the table, despite earlier assurances to the contrary. The UK is already at its highest tax burden since the 1940s. There is a growing case that the economy is sitting on the wrong side of the Laffer curve: higher tax rates risk depressing business confidence and activity, resulting in lower tax revenue and lower growth.
The government’s initial narrative was centred on growth, but policy actions now point to something closer to revenue extraction. Mark Dowding of BlueBay even suggests that Reeves may be prepared to “trash the economy” in the short term, to bring both inflation and government borrowing costs down. She may eventually claim that such economic pain was necessary.
Last week, in a speech in London, Reform leader Nigel Farage toned down earlier promises of large, immediate tax cuts, acknowledging the fiscal constraints as well as the need for growth. The Centre for a Better Britain, a Reform linked think tank, led by John Redwood and Mark Dowding, has begun outlining proposals to improve growth while cutting bloated public spending - reducing civil service headcount, tightening welfare eligibility, and prioritising a deregulatory agenda.
Tax rises without a credible pro-growth strategy risk embedding stagnation, and weaker long-term revenue. The UK does not need higher taxes - it needs higher output.
There is a growing political voice to shift away from short-term fiscal arithmetic towards rebuilding the productive base. Today’s politicians have been dealt a poor fiscal hand, but playing a poor hand well often matters more than the cards themselves.
An emerging deal
The US government shutdown, now the longest on record, is inching toward resolution after a group of moderate Senate Democrats backed a deal to reopen parts of the government. The proposal would restore pay for furloughed workers and fund some agencies fully, with others only through late January. There are no guarantees of success; a single senator can still slow the process, and the House needs to be recalled, but at least the stalemate is over and the ball is rolling.
Recent Democratic electoral momentum has reduced their urgency to compromise, with a sweep of state-level election wins in Virginia, New Jersey, and Pennsylvania – not to mention the rise of socialist Zohran Mamdani as New York’s mayor-elect. But the economic strain is becoming harder to ignore, with unpaid workers, pressure on food assistance, airport disruption and softer consumer spending. The emerging deal reflects a recognition that the political cost of further damage is now rising.
Market flutters
Markets took a pause last week, with US equities drifting lower as questions around stretched valuations and the sustainability of the AI investment cycle weighed on the same growth names that have driven the rally since spring. Growth equities underperformed value meaningfully and high yield bonds underperformed government bonds.
Overseas, European and Japanese markets also softened on similar profit-taking and valuation concerns, with the Yen firming as risk sentiment cooled and carry trades unwound. Overall, this felt like a rational exhale after a period of such strong momentum rather than anything more sinister; similar to what has happened in the precious metals market in the last few weeks.
The week ahead
Thursday: UK GDP growth
Our thoughts: Economic growth is expected to decelerate slightly to 0.2% in the third quarter. Speculation on further tax rises ahead of this month’s budget is likely keeping consumers and businesses cautious. Such tepid growth will likely keep the BoE on track to cut rates in their December meeting. The market is currently placing the odds of a rate cut at 71%.
Thursday: US CPI inflation
Our thoughts: The US government shutdown has delayed much of the official data. October inflation is expected to remain at 3% year-on-year.
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