Consumer Outlook Sours As Inflation Expectations Rise, New York Fed Survey Finds

Kemi Badenoch will vow to cut the UK deficit if the Conservatives win the next general election, as she seeks to recover her party’s claim to sound stewardship of the economy.In a speech to her party’s annual conference in Manchester on Wednesday, Badenoch will say that half of all savings identified by a future Tory administration will be used to reduce Britain’s deficit, after the national debt soared to almost 100% of the size of the UK economy in recent years. Under her new “golden rule,” the other half will be directed toward tax cuts or spending.

“We have to get the deficit down — and we must also show how every tax cut or spending increase is paid for,” Badenoch will say, according to lines pre-briefed by her party. “Every pound we save will be put to work.”The Tories are trying to restore their reputation for economic competence after the damage wrought by Liz Truss during her brief tenure as prime minister. Truss proposed an unfunded package of tax cuts that sent the pound to a record low against the dollar and forced the Bank of England to prop up the gilts market.

Budget surpluses are rare in Britain, with the last one logged in 2000-01. As a result, the national debt has crept upwards, reaching 96.4% of economic output in August, up from 64.7% in 2009-10, the fiscal period before the Tories took office for what would be 14 years.The Conservatives managed to reduce the deficit to £44 billion ($59 billion) in 2018-19 from almost £160 billion in 2009-10. But it later soared to more than £300 billion in 2020-21, as Boris Johnson’s administration supported workers and businesses during successive coronavirus lockdowns. Under Labour Chancellor Rachel Reeves, the Office for Budget Responsibility forecasts a deficit of £118 billion this fiscal year.

“It is stealing from our children and grandchildren,” Badenoch will say. “And Conservatives will put a stop to it.”

Badenoch secured her party’s leadership almost a year ago, in the wake of an electoral wipeout in which it lost two thirds of its seats in the House of Commons. With her party struggling for relevance amid stagnant poll ratings and a surge in support for Nigel Farage’s populist Reform UK — which announced the defections of 20 former Tory councilors on Tuesday — Badenoch’s leadership has been questioned in some quarters of her Party.

At the conference this week there were words of support from Shadow Justice Secretary Robert Jenrick, who she defeated in the contest for party leader last year and who’s seen as a potential challenger. A series of announcements on the economy, energy, immigration and justice appear to have shored up Badenoch’s position in the party, after she faced criticism for being slow to announce policies.

These proposals “are the route” back into government, Shadow Business Minister Harriett Baldwin said in an interview, identifying a promise to eliminate business rates for shops and pubs, and plans to slash energy bills. “They really are good retail policies.”Badenoch’s pledge comes two days after Tory Shadow Chancellor Mel Stride announced plans to save £47 billion ($63 billion) by cutting a quarter of civil service employees, halving international development aid and finding £23 billion of savings from the welfare bill.

A measure of how difficult that could be is that Stride was himself head of the Department for Work and Pensions from 2022 to 2024 under the previous Conservative administration, when its spending rose by tens of billions, according to official figures.In an indication of how they intend to fight the governing Labour Party and Nigel Farage’s insurgent Reform UK Party, the slogan of this year’s Tory conference is “stronger economy, stronger borders.” Achieving the former is the key to meeting promises on the latter and in other policy areas, Badenoch will say.“Securing our borders, getting people into work, policing our streets, defending the nation: None of it is possible without the money to pay for it,” she’s due to say. We are going to get our economy growing again. And bring down the taxes stifling our economy.”

Source: Bloomberg Europe

Tuesday marks the grim two-year anniversary of the Oct.7 terror attack by Hamas which targeted southern Israel, including the Nova music festival and several Kibbutzim, as well as Israeli military border outposts.Coinciding with the anniversary and memorials being held across the country, Yemen's Houthis have been launching drones throughout the day on the southernmost Israeli city of Eliat, on the Red Sea.



"Yet another drone launched by the Houthis in Yemen at Israel’s southernmost city of Eilat was shot down by air defenses, the military says," reports Times of Israel.The drone was intercepted outside Israeli airspace while it was still inbound, and so there were no public alert sirens activated. "It marks the fourth Houthi drone shot down in the Eilat area within an hour," the report indicates.The Houthis have vowed to continue such attacks so long as IDF forces continue their operations in the Gaza Strip, even though urgent peace talks are currently underway in nearby Egypt, based on President Trump's 20-point peace plan.

Trump envoy Steve Witkoff is expected to join the talks Wednesday, which are happening 'indirectly' between the Israeli and Hamas sides. Hamas has said it is ready to release all remaining 48 hostages (dead and alive) - but significant hurdles remain over an array of conditions.Meanwhile, at a moment of national mourning in Israel, hostage victims' family members are still looking for answers as to why police and military intervention took so long during the attack of Oct.7"Where were the rescue forces? Where was the state? How come you were here for hours and no one saved," the families said in a statement, Kan public broadcaster reported.

"And yet two years later, we still have no answers. All the investigations they have presented to us are rubbing salt in the wounds and sand in the eyes of the families," they said.Various political leaders in the West offered their condolences marking the day, including US Vice President JD Vance, who stated on X, "On this second anniversary of the terrible terrorist attacks of October 7, we remember all of the innocent people brutally murdered by Hamas."

"And we continue to work towards President [Donald] Trump’s plan to bring the remaining hostages home and build a lasting peace for all," he wrote further.Hamas and Palestinian Islamic Jihad (PIJ) had killed about 1,200 people and took 251 hostages on that day two years ago. The brazen and well-planned attack even featured paragliders flying into the Nova festival grounds, where a massacre ensued in what some eyewitnesses said felt "apocalyptic". Later analysis indicated that some Israelis may have been killed by 'friendly fire' during the chaotic Israeli military response, which included deployment of helicopters and tanks.

Israel's military response in Gaza has itself been brutal and overwhelming. Well over 60,000 people have died, including many tens of thousands of civilian men, women, and children. But Israel says a significant bulk of this figure is Hamas militants. Wars on other fronts have since raged - including in Lebanon, Iran, Syria, and Yemen - with the whole geopolitical landscape having shifted dramatically since Oct.7.

Source: Zero Hedge

Protesters in Ecuador hurled rocks at the motorcade transporting President Daniel Noboa, angry over his government’s decision to end a diesel subsidy last month, but he was not harmed.Noboa’s damaged black SUV also came under possible gunfire during the incident, according to his office, which took place in Cañar province, north of Ecuador’s third-largest city of Cuenca. The province has been a hotspot for protests since the 37-year-old leader eliminated the fuel subsidy that cost around $1.4 billion last year.

In a post on X, his office defiantly insisted the government won’t buckle under the pressure and that Noboa will continue to travel “to every corner of the country.” It added that an unspecified number of individuals detained will face terrorism and attempted murder charges.Tuesday’s incident marks the second time Noboa has come under attack since Indigenous organization Conaie declared a national strike late last month to protest the end of the subsidy.Since the start of the unrest, businesses in northern Imbabura province, also targeted by protesters, have reported millions of dollars in damages.

Previous governments attempted to end the diesel subsidy in both 2019 and 2022, triggering even larger protests.Last weekend, Noboa expanded states of emergency to include 10 of the Andean nation’s 24 provinces after the head of Conaie threatened to take the protests to the capital Quito.Noboa’s decision to end the subsidy caused the price of the key industrial fuel to jump by more than half. It was also accompanied by social measures worth close to $1 billion, including a pledge to freeze bus fares.

Ecuador’s bonds fell after the subsidy cut before later recouping losses, as investors feared the spread of street protests.Since the controversial measure was announced on Sept. 12 , around 110 protesters have been arrested while one person was shot and killed, allegedly by soldiers. Interior Minister John Reimberg has pledged an independent investigation into the killing.

Source: Bloomberg Europe

Doesn’t this seem an odd time for companies to be repurchasing their own shares? By many measures, the broad US stock market looks pricey. My favorite indicator, Morningstar’s market-level fair value, which aggregates company-specific valuations assigned by our equity analysts, shows US stocks trading at a premium.Despite elevated prices, companies in the Morningstar US Market Index have spent more than $1 trillion on stock buybacks for the trailing 12 months through September 2025. Meanwhile, they’ve only devoted $740 billion to dividends. Shouldn’t companies only use excess cash to repurchase shares when they’re trading at a discount?

What’s Fueling the Stock Buyback Boom?

Corporate America splurging on buybacks is nothing new. Share repurchases eclipsed dividends as a means of returning cash to shareholders 20 years ago in the US and have mostly led ever since. According to Aniket’s research, roughly two thirds of the 1,202 current constituents of the Morningstar US Market Index repurchased shares over the last year. Twenty years ago, just 22% of companies in the index did buybacks.

Stock Buybacks Have Overtaken Dividends in the US Market

Why has this happened? One answer lies in the adage: “Buybacks are like dating; dividends are like marriage.” Repurchasing shares isn’t the same commitment as a quarterly cash payout to shareholders. A company can buy back its shares when it sees them as offering good value and/or when it’s feeling flush. By contrast, the market typically punishes the stocks of businesses that reduce, suspend, or eliminate dividends.

Tax efficiency is another commonly cited advantage of buybacks. Dividends are taxed, whereas the shareholders of buyback stocks only pay tax if they sell. Another factor related to policy and regulation was a 1982 Securities and Exchange Commission rule that softened restrictions on companies purchasing their own shares.Skeptics, for their part, see buybacks as lacking the cash-in-hand appeal that dividends offer. Irregular share repurchases don’t instill discipline on corporate management like the pressure of delivering a quarterly payout. Some question the motives behind buybacks, speculating that managers and directors are just trying to enrich themselves by boosting earnings per share. Buybacks have even come in for criticism from politicians who say cash should be spent on reinvestment, such as research and development.

It should be noted that buybacks can be accompanied by new share issuance. Such dilution undermines the benefits of increasing shareholders’ fractional ownership. According to Aniket’s research, 9% of US companies that bought back their own shares over the past year also issued new ones.

Implications of the Stock Buyback Boom

Do buybacks signal anything about stock prices? In theory, share repurchases are a sign of confidence from those most intimately familiar with a business. Corporate managers and directors possess inside information by definition and seem well-placed to value their own shares. A spate of buybacks after the October 1987 “Black Monday” crash and in the wake of the market downturn following the Sept. 11, 2001, attacks suggests that managers took advantage of selloffs to scoop up their own shares on the cheap.

My colleague Aniket has surveyed the academic literature (including this piece from the Handbook of the Economics of Finance) and has also run some tests of his own. He found that the shares of companies conducting buybacks have outperformed companies that don’t repurchase their own shares. This makes sense given their financial strength. But on whether companies buying back shares consistently outperform, the overall market is less clear. They did over some time periods but not others.

When I look at the market-level data over the past several years, no clear trend emerges. I see buybacks surging in 2019, which is curious from a timing perspective because the Morningstar US Market Index rose 31% that year. More understandable is the decline in share repurchases amid 2020’s “pandemic panic.” Companies can be forgiven for hoarding cash in uncertain times. That year also brought lots of dividend cuts. Another surge in buybacks came amid the buoyant market of 2021. Then, buybacks rose in 2022, while stocks plunged, which could be seen as taking advantage of a pullback. To me, buybacks look more like cash burning a hole in companies’ pockets than valuation calls.

The most obvious consequence of the buyback boom is a decline in dividends. Before the 2000s, the broad US stock market’s dividend yield ranged between 3% and 6%. It is now well below 2%.Meanwhile, in Europe, dividends remain more popular than buybacks. Outside North America, dividends are often paid out opportunistically, and cuts in payouts aren’t punished as severely. In Europe, buybacks don’t enjoy quite the same tax advantage they do in the US. For equity-income investors interested in international dividend funds, my colleague Todd Trubey highlighted some high-yielding picks. Just be mindful of their tax implications.

The Total Shareholder Yield Concept

Academic theory teaches that investors should be agnostic as to how cash is returned. In any case, buybacks versus dividends is something of a false dichotomy. Many companies do both.The concept of “total shareholder yield” recognizes the new reality. Given the rise of buybacks in the US, yield metrics and valuation tools that consider dividends alone could be obsolete. My colleague Philip Straehl of Morningstar Investment Management has done work on using a total payout model to value the market.

The Morningstar US Dividend and Buyback Index includes both kinds of yielders. Compared with a dividend-only index, it broadens the opportunity set and more closely resembles the broad US market. Its performance has certainly been more marketlike over the past five years, in contrast to most dividend indexes, which have underperformed. Including tech companies that are dividend-light but buyback-heavy has been a winning strategy.

Dividend Stocks Have Underperformed; Adding in Buyback Stocks Has Improved Performance

What Does the Stock Buyback Boom Mean for Investors?

Capital allocation is arguably the most important task facing corporate management. Should a company be successful enough to earn profits, it must answer a key question: How should cash on the balance sheet be deployed? The optimal mix of growth-focused reinvestment, acquisitions, saving or debt reduction, dividends, and share repurchases is a holy grail pursued by executives and directors.

“When stock can be bought below a business’ value, it is probably the best use of cash,” says Warren Buffett. That’s a key condition, though. Buybacks taking place amid stock market rallies raise eyebrows. So do companies with systematic buyback programs that don’t seem to consider valuation at all.Dividends, on the other hand, maintain their loyal following, in large part because of their regularity. They are treasured for reasons that go beyond income. To some, they represent the most tangible link between a share of stock and an underlying business’ cash flows.

But market dynamics have changed. Aggregate buyback dollars in the US are on track to exceed dividend dollars for the fifth straight year in 2025. The new paradigm even prompted me to ask: Does Dividend Investing Still Work?That remains an open question. What’s clearer is that equity-income investing has become more challenging from an income perspective. It’s also a real bet against the broad stock market. “Total shareholder yield” is a useful concept for understanding cash redistribution holistically.

Source: Morningstar

Source: Reuters

A7A5 dominates ruble-to-crypto rails

Garantex, Grinex, and A7 connected

Ruble flow fraction of EU Bitcoin volume

What EU Sanctions Mean for Bitcoin Markets

Source: Cryptoslate