WeeklyWatch – Assessing the market trigger points

19^th May 2026

Stock Take

There was a continued rise in UK government bond yields last week, thanks to investor concern over challenges to leadership and international questions.

UK gilt behaviour explained

In the UK, 10-year gilt yields stayed above 5% for the last few days, finishing the week above 5.1%. For perspective, 10-year gilt yields haven’t breached 5% since 2008. The 30-year gilt concluded the week incredibly close to 6% – its highest levels since 1998.

Since Covid, yields have been trending up, but recently the increases have been influenced by specific triggers.

Sir Keir Starmer’s position as prime minister has been the topic of much public conversation, creating uncertainty across domestic bond markets. There are several candidate names in the ring to possibly fill the role, should Starmer resign; however, there are also concerns that the candidates will resort to opening the purse strings in order to secure their position. UK government finances are tight, and news of further increased spending will not be favoured by markets.

The UK is also highly vulnerable to external energy shocks. As the Iran crisis continues, it’s likely that higher energy costs will remain the norm for a while. The International Energy Agency (IEA) has said the market will remain ‘severely undersupplied’ until October, even if the conflict came to an end in June.

On the positive side

The irony of the current struggles is that the UK economy performed quite well in the first quarter.

The Office for National Statistics (ONS) revealed that the UK economy (as measured by GDP) rose 0.6% in the first quarter of 2026, which was the strongest of any G7 nation.

Over the period, it was services that emerged as the big winners – particularly vehicle sales and the repair trade. The Society of Motor Manufacturers and Traders (SMMT) said that UK new car sales for March were the highest since 2019, breaking 380,000 units sold. Furthermore, electrified vehicles celebrated their best-ever month for sales, reaching 196,000 units sold and accounting for over half of all new cars sold in March.

But there are some caveats to these Q1 GDP figures. The UK economy has grown at its quickest rate in the first quarter of the last few years, and then growth has slowed as the year has gone on. Additionally, the current political uncertainty could have a very negative impact on near-term growth, having already made government borrowing more expensive.

And then there’s the elephant in the room: the Iran conflict. First-quarter figures mostly predate the impact of the conflict, which started at the end of February, and inflationary effects will have gradually become more prominent. Growth will inevitably be impacted by this, with manufacturing costs and increased selling prices putting pressure on both businesses and consumers.

The inflation picture for the US

While we await the ONS’s inflation figures for the UK in April, US data could give an indication of what can be expected.

CPI inflation figures for April were released last Tuesday by the US Bureau of Labor Statistics (BLS) and showed that inflation hit 3.8%, which was above expectations and hit the highest level since May 2023.

The Iran conflict can be pinpointed as the reason for the rise, as the high oil and gas prices are the main contributors. The BLS identified that core inflation (for all items except food and energy) was only at 2.8%. Air fares have surged and petrol pump prices are at their highest levels since the post-Covid inflation shock – for consumers, this won’t have come as a huge surprise.

Despite this, the figures will certainly cause some discomfort for Republican politicians who are mindful that inflation is often a significant issue for the electorate. Midterm elections are coming up in November, which could see the Republicans potentially lose control of both houses in Congress, where they currently only have a small lead.

Another individual who will find little joy in the figures is Kevin Warsh, Trump’s nominee to succeed Jerome Powell as chair of the Federal Reserve, who was confirmed by the Senate last week. Trump has publicly advocated for interest rates to be decreased, but with inflation on the rise, his wishes are unlikely to come to fruition.

On the move for US treasuries

Even though they remain below gilts, the latest developments have put US Treasury yields under more pressure. Although the US is an energy exporter, the resulting inflationary impact of the Iran conflict takes partial blame.

The Fixed Income Strategist at St. James’s Place, Greg Venizelos, said:

“We’re seeing the market say, ‘even if everything goes back to normal now, we are past the point of no return for inflation’. Reserves won’t be replenished before autumn, and a lot of inventories that need to be in place, including by-products like fertilisers, neon, argon and so on, will take a while to replenish. So, we’re seeing that inflation shock feed through, and now it’s a question of how quickly it can recover, or whether it might get even worse.”

Pressure in the fixed income market gave investors a scare in the latter part of last week. It was a record high on Thursday for the S&P 500 but then a sharp drop the next day reversed a lot of the gains from the week.

Wealth Check

FCA reviewing investment firms’ support of bereaved customers

How investment companies treat bereaved customers is being looked into by the Financial Conduct Authority (FCA), assessing whether they’re receiving the right support.

The review will involve the regulator examining customer experience, starting from when a death is reported until when a settlement is reached or investments are transferred.

Starting this month, selected investment firms, including advisers, platforms and wealth managers, will be contacted by the FCA. They’ll need to demonstrate how they communicate with and support their vulnerable customers. The FCA will also be conducting assessments on service standards and how firms handle fees on bereaved accounts.

These actions follow similar reviews that the FCA have undertaken in retail banking and the insurance market. They revealed that bereaved customers often faced unclear processes, repeated information requests and delays that could be avoided. Good practice was found, but it was determined by the FCA that it was inconsistent.

National Savings & Investments (NS&I) found themselves paying out millions in compensation to bereaved families towards the start of the year, following a series of administrative errors that resulted in lengthy delays in payments. As a government-backed savings provider, NS&I doesn’t fall within the scope of the FCA.

The published findings of the review will come out later this year and will highlight good practice and areas for improvement.

More government details for IHT on pensions

A technical note from the government sets out further details on how inheritance tax (IHT) will be applied to pensions. This includes most unused pension funds and pension death benefits.

Published on 11^th May, the note outlines the thinking behind the changes, who and what’s in scope, and how the rules are to work in practice. Changes will apply to deaths on or after 6^th April 2027.

More details on the role of personal representatives (PRs) are also included in the note. They’ll be responsible for identifying, reporting and ensuring payment of any IHT due on the deceased’s notional pension property.

Notional pension property usually includes uncrystallised defined contribution pension funds, crystallised drawdown funds, most lump sum death benefits and pension benefits where the member had control over benefit destination.

Pension scheme administrators will be more reliant on the information that’s provided by PRs to determine:

• If IHT is payable
• How much tax applies to the pension element
• If benefits can be paid out in full

Previously, pension providers have usually largely assessed death benefits independently of the estate. Under the new system, they will need confirmation from the PRs concerning the overall estate position.

This will increase the administrative burden on PRs, who will be required to provide pension schemes with the death certificate and confirmation of whether IHT is payable on the estate, as well as other information.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

In the Picture 

The fifth Financial Health Report, carried out by Opinium, has been published by St. James’s Place. It reveals that financial resilience has decreased since 2025 amid the increased pressure from the cost of living. One in three is making a lifestyle changes to deal with their stretched financial situation.

But for those who have a financial plan, are investing and have received professional advice in the past 10 years, the outlook is more optimistic. Those with a financial plan were three times more likely to say their financial situation had improved in the past year.

Find out more in the report’s findings here: Financial Health Report 2026.

The chart below reveals how average household wealth climbs significantly among those who have a financial plan, are investing and are receiving ongoing financial advice.

The information contained is correct as at the date of the article. The information contained does not constitute investment advice and is not intended to state, indicate or imply that current or past results are indicative of future results or expectations. Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.

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SJP Approved 18/05/2026