IPE Expectations indicator – August 2026: the British exception

Political risk 

In the UK, Labour and Conservatives are now both at par with Reform, doubtless because of Farage’s financial scandals. YouGov found that 70% of British voters think Farage is “sleazy”. Financial markets are wary of the large possibility of political instability. If “Count Binface” pulls off a credible performance in the Clacton bi-election, or even if a significant number of voters do not vote, Farage’s fall from grace will persist, making the British political situation more stable. In view of Reform’s and Farage’s character, it seems unlikely that Farage will follow Starmer’s example to restore faith in the party.  

As one journalist put it: Trump is bored with Iran, so now he picks up his tariff wars again. The point of the new set of tariffs is unclear. The legal basis looks as shaky as before, which means that the decision to institute new tariffs will soon be challenged by the US Supreme court.

Meanwhile, the repayment of amounts levied under the old tariff structure is a boon for companies concerned, in particular those that increased the price of its exports to the US to cover the border tax. This month, Pew reports that China is preferred over the US in a large majority of countries. In the EU, support for the US over China is minimal and this appears to be based on a pragmatic, rather than emotional, view. 

In Japan, the US is strongly preferred to China, according to Pew’s report. An increased role of China at the expense of the US at the time of increasing US isolation and a beginning of a shortage of ballistic rockets in the US is very bad news for Taiwan and more generally for geopolitical stability.  

Asset allocation 

Most net equity statistics remain closely bunched together.  The exception is the UK, trailing below the others with a continued significant distance in almost every month since last November. All curves still signal faith in future economic growth. 

Most net bond indexes went down again, being still positive only in the UK. However, even there equity is now favoured with a small margin. The UK figures seem more dependent on inflation expectations, in particular the lack of faith that any UK government can control the budget in the face of a budget situation that already leaves little room for uncontroversial change. 

Country allocation 

All analysts favour equity over bonds by a large margin, except in the UK, where equity wins by the smallest margin in the UK. Timelines are typically sideways lately. The level of uncertainty is relatively stable in all regions. It is highest for UK equity, lowest for US equity. 

Peter Kraneveld, international pensions adviser, PRIME bv

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