The latest economic news and market highlights from the UK and abroad.
This week's headlines:
US Midterms – In a blue wave, Democrats took control of both the house and senate changing politics in the US.
BoE raises rates – On Thursday the Bank of England (BoE) increased rates by 0.25% to 4% - the first rate rise in three years.
Tech sells off – AI Stocks saw a steep fall this week in the US and Asia after the US midterms.
What this means for financial advisers and clients
Lame duck
Donald Trump is now in a curious position; he’s a lame duck president without power over congress. Whether he’ll use his veto to cause chaos or agree to work with the Democrats is hard to predict.
Vice President JD Vance has called out the war in Iran as the reason for the loss, which caused energy costs and inflation to spike worldwide pushing hard on the cost of living for billions.
Oil prices and bond yields dropped on the news while the S&P 500 rose on the day. But what could we see in the short and long term after these election results?
Read our take on the US Midterm Election results here.
Interest rates rise
Governor of the BoE Andrew Bailey also called out the US-Iran war as the main push behind hikes in energy costs. The BoE thinks inflation will peak next year at 4.9% though could get higher if things don’t improve.
Bailey said he doesn’t see this as the first hike of many, but that future ones could be possible if the war in Iran continues. Markets have priced in a rate increase as early as February 2027, which will weigh on the personal finances of many, especially those coming to renew mortgages or those on a variable rate.
AI sell off
Following Alphabet last week, over $2 trillion dollars has been wiped off the value of major tech firms around the world this week. The Tech heavy Nasdaq closed down by more than 5.5% on Thursday.
It seems the US midterm elections may have been a catalyst, with many Democrats running on platforms against building AI data centres and bringing in more regulation. But most companies have also been under scrutiny for a while now over their expenditure on AI and data centres and whether it’s worth it.
Is this just a readjustment or the start of a larger fall for AI companies?
Possibly too early to call. AI is a useful technology, but we should always remember that doesn’t mean that every company involved in it will be a winner and profitable.
We’ve previously taken steps with our asset allocation to avoid over exposure to AI stocks as markets have become increasingly concentrated towards a handful of names. Diversification is key when building portfolios, and this is a reminder of why we need to seek it out wherever possible.
AI politics
220 is the estimated number of US political ads that featured AI-generated or enhanced content up until 11th October. Around $137m was spent on the ads, up from virtually nothing in previous election cycles.
Chart of the week: market cap meltdown
Source: Bloomberg
Why’s this worth sharing?
Even though Halloween was last week, the scares keep coming. The Nasdaq recently experienced its biggest pullback in a long time, driven largely by a sell-off in AI-related stocks. While sharp falls can feel uncomfortable in the moment, they're a reminder that markets don't move in a straight line.
Importantly, the Nasdaq is still higher than it was a year ago and remains 4.6% above where it started the year. For investors, it's a good example of why focusing on long-term outcomes rather than short-term market swings is often the better approach.
The Markets
UK: A volatile week where stocks climbed following the BoE announcement but retreated sharply at the end of the week following news of the global tech-sell off. The UK however is less exposed to tech in its indices.
US: High volatility this week following the midterm elections. A sharp AI sell-off led to losses on the S&P 500 and Nasdaq
Europe (ex UK): A strong week this week led by falling oil prices and the initial outcomes of the US midterm elections.
Japan & Emerging Markets: A tough week for AI related companies globally caused tech stocks to fall in these areas too.
| Name | Weekly change | YTD change |
|---|---|---|
| FTSE Actuaries UK Conventional Gilts All Stocks | 1% | 0.06% |
| IA Sterling Corporate Bond | 0.89% | 0.40% |
| IA Global High Yield Bond | 0.18% | 0.20% |
| FTSE All Share | 0.60% | 11.73% |
| FTSE USA | -3.67% | 7.61% |
| FTSE World Europe ex UK | 1.50% | 7.75% |
| FTSE Japan | -1.62% | 15.27% |
| FTSE Asia Pacific ex Japan | -1.75% | 12.16% |
| FTSE Emerging | -0.15% | 4.35% |
Source: FE. GBP returns as at close of business on Thursday 5th November 2026.
This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity. Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.
