One of the great consolations of financial news is that, as with sport, it’s normally good news for someone. When you’re writing about business, one person’s capsized sausage lorry is another person’s impromptu roadside barbecue. This is particularly true when you’re writing about investment.
With the obligatory proviso that this is not real financial advice, there is a case to be made that the very best day to invest in company shares is any day on which the front page of the Times carries a picture of an equities trader holding their head in their hands.
The last time this happened – during the market crash that accompanied the spread of Covid-19 and the prospect of lockdowns – central banks reacted by making debt very cheap indeed, and despite the human and economic disaster, capital markets boomed. The FTSE 100 index of the UK’s biggest companies has gained more than 63 per cent in value since the low of March 2020; the Nasdaq index of American tech companies has almost trebled in value.
On a much smaller scale, you may have seen a lot of headlines about the distortions created by America’s overstuffed financial sector. Two markets in New York are worth roughly as much as all the other stock markets in the world combined. This critical mass of money draws everything else towards it. Last year the London Stock Exchange shrank at the fastest pace since the 2008 financial crisis as 88 companies delisted. Many of these moved their listings to the US (where they will attract higher values and therefore be able to raise more money for each share they sell) or because they were bought by American companies.
This has been happening for a long time. The most engaging picture of America’s gradual acquisition of Britain is Angus Hanton’s book Vassal State, an eye-opening picture of a country in which it’s possible to spend all of one’s money engaging with what you thought were British things (Weetabix, Mars bars, Andrex) sold by British companies (Morrisons, Majestic, Waterstones, Gail’s) but which are, in fact, all owned by American private equity firms.
This isn’t great for actual British companies that have to compete against rivals backed by American financial giants, but as with most investment issues, it can also be an opportunity. Take Darktrace, the cyber-security firm founded in 2013 by a group of maths nerds in Cambridge. Darktrace pioneered the use of machine learning to keep hackers at bay, and was often cited by politicians as a great example of the type of company you can produce in a country with very good universities and a strong financial sector. Then, in October last year, Darktrace stopped being a British success story and became yet another American success story, having been bought by a private equity firm from Chicago. This might not be great for Britain, but it certainly wasn’t bad for shareholders – someone who bought at the right point the previous year would have doubled their money.
Our government isn’t exactly averse to such acquisitions. When the Business Secretary, Jonathan Reynolds, spoke about his ambitions for growth recently, he used the examples of the Royal Mail (being taken over by a Czech billionaire), shipbuilder Harland & Wolff (being sold to the Spanish state) and the Port Talbot Steelworks (owned by an Indian company). His enthusiasm for foreign direct investment is doubtless shared by the investment minister, Poppy Gustafsson, who was the CEO of Darktrace until her company was acquired and she was given a seat in the House of Lords.
It’s perfectly rational to feel one way about what this means for the economy, and another way for what it means about how you invest. If you’re interested in picking companies – and you should only do this with money you can afford to lose – then one question to ask could be: who’s getting poached next?
[See also: Keir Starmer in Trumpworld]
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This article appears in the 26 Feb 2025 issue of the New Statesman, Britain in Trump’s World