Susannah Streeter, head of money and markets, Hargreaves Lansdown, has shared her thoughts on the US debt.
The growing mountain of US debt is causing ripples of worry across financial markets, with signs investors are baulking at financing the Trump administration. These concerns have hit sentiment in Europe, given the repercussions that financial difficulties in the world’s largest economy would have on the global economy. The FTSE 100 is set to open lower, as the focus shifts to trepidation about how planned tax cuts will worsen the US outlook. It comes after steep falls on Wall Street about what could lie ahead for the economy.
It seems that every time Trump heralds a policy as ‘beautiful’ it has an ugly effect on financial markets. First it was tariffs, now it’s the huge tax and spending bill. Bond investors are far from impressed by the proposals which would extend Trump’s 2017 tax cuts and boost military spending but cut welfare payments. The congressional Budget Office has forecast the proposals would add $3.8 trillion to the US’s $36.2 trillion debt mountain over the next decade. An auction of 20-year Treasuries saw very weak demand, indicating the wariness about White House policy.
It comes after ratings agency Moody’s stripped the US of its AAA credit rating, due to concerns about the fiscal position. The bill has cleared a crucial committee stage hurdle and a vote on the bill’s passage through the House of Representatives is due later. The falling appetite for US debt can be seen in the spike in Treasury yields, with the 30-year note surging to more than 5.1% before retreating slightly, but it’s still hovering near highs not seen since October 2023.
While the tax and spending predicament of Rachel Reeves isn’t sending investors into a tailspin, the UK’s fiscal position leave little room for manoeuvre. The government borrowed £20.2 billion in April, higher than the forecast £17.9 billion. Even though tax receipts were boosted by higher National Insurance contributions, it wasn’t enough to offset higher spending commitments, partly because benefits are linked to inflation. The more encouraging start to the year for the economy isn’t expected to last, which could see the tax take weaken as the year progresses. All in all, it puts Rachel Reeves, the Chancellor, in an even tighter spot. She’s expected to have to increase taxes in the Autumn to stick to her fiscal rules.
Bitcoin’s rise to fresh record levels marks a collision of factors but appears to have been prompted by fresh worries about the growing US debt pile. As the dollar has weakened, amid concerns about the US fiscal position, Bitcoin has flexed even more muscle, as investors appear to be looking for alternatives to the greenback. Investors have also recently taken on more risk as relief still washes through financial markets that the trade war between China and the US has receded, for now. This has led to renewed enthusiasm for riskier assets like crypto. Plus, there’s more optimism sloshing around about the future of crypto, after progress through the Senate of the Genius act – legislation to regulate stable coins. Bitcoin is also seen by some as a hedge against inflation, even though it hasn’t historically always moved in such a way. However, with the risks of inflation rising due to the effect of Trump’s tariffs, there also appears to be more appetite for the cryptocurrency due to its scarcity and decentralised nature. Nevertheless, investors should be wary about jumping onto the crypto rollercoaster, as Bitcoin has a tendency to fall sharply following rapid ascents. So, people should be cautious and only invest at the fringes of their portfolio with money they can afford to lose.
‘To let’ signs may litter office districts in many cities, but British Land’s update shows that if the space is attractive enough, tenants will come. Crucially, the company is focused on higher-end campus style office developments, in central London locations, with excellent public transport links. It’s also zoned in on popular retail parks, where the ease of shopping attracts both big names and customer footfall. Its underlying profits were up by 4% and it has benefited from above-inflation rental growth. It’s also said that occupancy levels mid-week have returned to pre-pandemic levels, with an overall portfolio occupancy running at 98%. Nevertheless, British Land still flagged ongoing macro volatility, and investors seem a little nervous about the path ahead, with significant development activity planned. It says it expects underlying profit growth of 2% for the 2026 fiscal year, below forecasts. As clouds still gather, obscuring the outlook for the global economy, there is concern about weakness creeping into demand.
Oil prices have dropped back as concerns about the US debt pile added another layer of wariness about the outlook for the global economy and energy demand. This is colliding with expectations that OPEC+ members may opt for another large production increase, increasing the amount of crude washing around world markets. Traders already had an eye on the extra supplies around given that there was a larger than forecast increase in US crude stockpiles last week.
easyJet is flying into brighter skies, as passenger numbers increased in the first three months of 2025 compared to last year. But investors appear disappointed the airline didn’t power ahead to a better performance than expected. Pre-tax losses, as forecast, widened in the first half by 13% to £394mn, but its full-year guidance was maintained, with pre-tax profits of £703mn expected.
Aarin Chiekrie, Equity Analyst, Hargreaves Lansdown, added:
“easyJet has shown markets it’s on the right flight path, with first-half losses landing in line with market expectations. Losses over this period aren’t surprising given the cyclical nature of easyJet’s business. Much more important was the outlook for the all-important summer season, and on that front easyJet delivered.
“Bookings for the second half are flying high. They’re running ahead of last year’s pace, and solid demand means pricing is holding up well. easyJet’s doing a great job of growing its fleet, and on average, more of the available seats are being filled too. Given the high fixed costs associated with flying planes, keeping them as full as possible is key to profitability. Lower oil prices are also helping to keep full-year profit guidance on track, given that they account for such a significant chunk of airlines’ costs.
“The package holiday arm is also seeing impressive growth. Revenue and profits grew at high double-digit rates in the first half, albeit from a small base. Performance is set to pick up further in the second half, and the segment is on track to deliver its medium-term pre-tax profit target of more than £250mn ahead of schedule.
“All in, underlying performance is pleasing – the group’s doing a great job of growing its fleet, stimulating demand, and keeping costs under control. But investors should keep in mind that tariffs could bring new turbulence to the industry, and if that happens, consumer demand could come under pressure.”
