Based on average salaries, it would take a US worker more than 615 million years to earn the equivalent of America’s $40 trillion national debt, which itself has doubled in a decade. That debt figure is merely the principal: the interest bill alone now runs to around $1 trillion a year.
This week’s intervention by the US Treasury to bring down yields on long-term US government bonds may have had the desired effect in the short term. However, the US national debt reaching such eye-watering levels will concentrate minds on deficit risks in the world’s largest economy.
It’s particularly important given the ongoing ructions in the Middle East as Donald Trump took to Truth Social to threaten economic D-Day against Iran and action against any party which provides it with help or support.
Brent crude oil prices continued to tick higher, moving close to $93 per barrel, as the prospect of a lasting agreement between Washington and Tehran feels as remote as ever.
The moves in the US Treasury market helped support gains across Asia and saw a steady start in Europe, with gold consolidating yesterday’s gains to trade within touching distance of the $4,500 per ounce mark.
In London, there was profit taking in the mining sector after yesterday’s gains, with a number of the stodgier, defensive names on the FTSE 100 in demand with investors.
JD Sports
JD Sports picked the wrong time to go big in America. The acquisitions of Finish Line, Shoe Palace and DTLR between 2018 and 2021 were designed to supercharge its footprint in the US, and the group now derives 40% of its sales from the region.
Unfortunately, this positioned JD in the crossfire of Trump’s punishing tariffs which pushed up the cost of the multitude of shoes made in Asia.
A more cautious consumer has also weighed on sales, and the trend for people rushing to buy high-end footwear has lost momentum. Limited edition trainers used to be all the rage, but demand has now slowed.
The obvious response in these situations is to slash prices and accept a lower profit margin. JD talks about price investments in its trading update which is corporate speak for discounting. If the broader retail market is running money-off promotions, then JD would run the risk of losing out on sales if it didn’t also run deals and stay competitive on pricing.
JD’s UK performance was more resilient, helped by a trend for replica football shirts. Fundamentally, Asia Pacific was the only real bright spot for the group.
The trading update amounts to yet another setback for JD. There is only so long that shareholders will stay patient, and time is running out for chief executive Regis Schultz to whip the company back into shape. JD’s share price has fallen by 27% since he began as CEO in September 2022 versus a 50% rise in the UK’s FTSE 100 index. That’s a significant level of underperformance.
The Rubin family-owned Pentland Group is the majority shareholder in JD, and one can imagine it is frustrated at the retailer’s progress. However, a lot of the problems facing JD are not of its own making, so Pentland might want to choose constructive discussions on strategy rather than simply calling for leadership change.
Dan Coatsworth: Head of Markets
Dan Coatsworth is AJ Bell's Head of Markets. Dan has been with the company since December 2012 and has more than 18 years' experience in the industry, following the markets and all things investing. He...
