Welcome to this week’s Market Pulse, your 5-minute update on key market news and events, with takeaways and insights from the Sidekick Investment Team.
Today, we’re looking at Christine Lagarde signalling an early exit from the ECB to outmanoeuvre the far right, Apple breaking the mould to avoid AI-fuelled volatility, and Keir Starmer seeking creative financing to fund the UK's defence uplift.
But first, our number of the week…
$1.55 trillion
That’s the net amount of US financial assets purchased by overseas investors in 2025, up from a net $1.18 trillion the previous year. The influx was led by massive demand for US equities and Treasuries.
Sidekick Takeaway: This data serves to rebut the growing ‘Sell America’ narrative, showing that global capital still views the US as a premier investment destination. However, that may not be true for all countries: China actively sold over $200 billion in US long-term financial assets, bringing its Treasury holdings to the lowest level since 2008.
Only have a minute to read? Here’s the TL;DR:
- Christine Lagarde is reportedly considering an early exit from her role as ECB President, aiming to step down before the French presidential election in April 2027. The controversial move would pre-empt potential far-right influence over her successor if Marine Le Pen’s National Rally wins power.
- Prime Minister Keir Starmer is pushing the Treasury to accelerate plans to increase UK defence spending from the current 2.6% commitment by 2027. However, strict fiscal constraints and borrowing limits are forcing the government to consider alternative funding methods, potentially including joint debt with allies.
- Last week, Apple’s correlation with the Nasdaq dropped to 0.21, its lowest level since 2006. While Big Tech rivals are spending enormous amounts on AI infrastructure, Apple’s strategy is based on hybrid data centres and third-party model licensing, mitigating the stock’s AI-driven volatility.
It’s important to note that the content of this Market Pulse is based on current public information which we consider to be reliable and accurate. It represents Sidekick’s view only and does not represent investment advice - investors should not take decisions to trade based on this information.
Early Exit: ECB Weighs Future as Lagarde Signals Departure
As President of the European Central Bank, Christine Lagarde leads one of the most powerful financial institutions in the world.
Yet recent reporting indicates that she’s considering making an early departure from her position.
Lagarde’s eight-year mandate is not due to conclude until October 2027. However, the impending French presidential election – scheduled for April next year – has altered Lagarde’s political calculus.
An early exit would allow French President Emmanuel Macron and German Chancellor Friedrich Merz to coordinate on selecting her successor.
That would pre-empt election results expected to favour the far right.
Lagarde seeks to avoid the far right
Lagarde’s political manoeuvring is driven by the surging popularity of Marine Le Pen’s National Rally party:
- If the far right wins the French presidency, they would have a significant say in appointing the next head of the ECB.
- National Rally figures, including Jordan Bardella, have considered pushing the ECB into restarting quantitative easing to tackle France’s heavy debt burden.
- Such a move would directly breach existing rules that prohibit the central bank from directly financing governments.
While the ECB has officially stated that Lagarde remains ‘totally focused on her mission,’ the mere prospect of a tactical resignation has already sparked succession debates.
Sidekick Takeaway: Le Pen’s potential influence over the ECB is a genuine concern for financial stability, but replacing Lagarde early sets a risky precedent. If the ECB allows its succession timeline to be dictated by a desire to dodge democratic outcomes, it could undermine the very political independence that it’s trying to protect.
Call to Arms: Starmer Seeks New Money to Accelerate Defence Uplift
This week, UK military chiefs urged Keir Starmer to speed up the pace of the country’s defence spending.
Former defence leaders warned that the UK faces a ‘1936 moment,’ calling for the military budget to reach 5% of GDP.
In response, Starmer is pushing the Treasury to accelerate plans, going beyond the current commitment of 2.6% of economic output by 2027.
However, finding the money to fund this military uplift could be challenging in its own right.
Fiscal rules force creative financing
Due to self-imposed fiscal constraints, Chancellor Rachel Reeves faces strict borrowing limits.
That’s led to the search for creative financing methods to fund defence spending increases:
- Research economists have emphasised that the scale of expenditure required will be challenging to find within the existing budget. Doing so risks cannibalising public services.
- Instead, the Treasury is looking at ways to jointly borrow with European allies, as well as incentivise private capital to fund a portion of the expenses.
- Nonetheless, Reeves has indicated resistance to significantly scaling up defence spending, highlighting the financial challenges involved.
Few doubt that rising global threats call for a greater investment in national security – but funding that investment needs to be done in a sustainable and realistic way.
Sidekick Takeaway: While the UK’s financial challenges are real, Labour should remain flexible in its approach. Unlike other forms of state expenditure, defence spending typically involves substantial physical investment and job creation, which can act as a powerful source of growth.
Breaking the Mould: Apple Offers Haven From AI Volatility
For decades, Apple has been a quintessential Big Tech investment. But now, the firm is quietly untethering from the pack.
Last week, Apple’s 40-day correlation to the Nasdaq 100 Index tumbled to 0.21 – its lowest level since 2006.
As other Big Tech firms pour hundreds of billions of dollars into data centres and models, investors have found themselves caught in a cycle of AI-driven volatility.
But Apple has been a notable exception, reflecting the firm’s unique approach to the AI arms race.
Apple is largely sitting out of capex
Apple’s decoupling is largely due to its refusal to participate in the industry’s massive spending spree:
- While rivals like Amazon, Alphabet, Meta, and Microsoft all spent record sums on property and equipment last quarter, Apple was the only Big Tech firm to see its capex decline.
- Rather than spending huge sums on infrastructure directly, Apple has opted for a hybrid approach, relying on a mix of first- and third-party data centres.
- By licensing top-tier models like Google’s Gemini for a reported $1 billion a year, Apple is accessing cutting-edge technology for a fraction of what rivals are spending to make it.
Apple’s stock has also seen its fair share of volatility this year. But compared to Big Tech peers, the firm’s cautious approach has made it an unexpectedly diversified play.
Sidekick Takeaway: While Apple has been criticised for being a laggard in the AI race, the firm’s strategy could turn out to have long-term benefits. By adopting a hybrid model and licensing third-party technology, Apple gets to avoid the staggering infrastructure costs required by its peers.
Notices
Please remember, investing should be viewed as longer term. Your capital is at risk - the value of investments can go up and down, and you may get back less than you put in. Past performance is not a reliable indicator of future results
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