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When President Trump announced eye-watering reciprocal tariffs back in April, it caused a sudden stock market crash. Since then, though, major US indexes have bounced back very strongly.
On this side of the pond, we have our own big political/economic event coming up in the shape of Chancellor Rachel Reeves’ Autumn Budget. On 26 November, she will set out how the government plans to raise money (taxes) and what it will spend it on.
Speculation is rife and there’s a lot of uncertainty. But we know that economic growth is weak, government spending is high, and the books need balancing. So taxes are probably going up and some sectors could be hit with levies.
To try and get a better view on how the market might react, I turned to AI oracle ChatGPT for its take.
Potential impact
The first thing the bot said was that the forthcoming budget is unlikely to crash the market. It points out that FTSE 100 firms get about 75% of their revenue from overseas, so are much less impacted by domestic policies.
On the other hand, some domestically focused FTSE 250 stocks could take a tumble if higher household taxes are announced. Retail shares, for example.
ChatGPT also warned that “any move on capital gains tax alignment, dividend tax increases, or abolishing ISA benefits would slam retail sentiment and outflows could follow”.
It mentioned that bank profits might be hit with higher levies. While this might go down well with some voters, it should be noted that the UK banking sector tax rate is already above the US and most major EU financial centres.
| Financial centre | Total tax rate (2025) |
|---|---|
| London | 46.4% |
| Amsterdam | 42.2% |
| Frankfurt | 38.9% |
| Dublin | 28.9% |
| New York | 27.9% |
Squeezing banks even more risks choking off lending, and therefore any hopes for economic growth. So it’s no surprise that the Financial Times just reported that banks are set to be spared in the Budget.
For balance, ChatGPT said that certain stocks might benefit from a government growth drive, including cybersecurity play Darktrace. However, the bot is using outdated info here because Darktrace was taken private in 2024. This shows how important it is to confirm everything that ChatGPT comes up with!
One FTSE 100 stock it failed to mention is Ladbrokes owner Entain. I think it’s possible that gambling companies and their profits could be in the firing line, and this might spark a sell-off in Entain’s shares.
Keeping an eye on the bond market
Finally, if the Budget isn’t received well, there’s always a chance UK government bonds could sell off.
So, one stock I own and will be keeping an eye on is Legal & General (LSE:LGEN). The pensions giant is tightly linked to the bond market. After the mini-budget debacle in 2022, it bombed around 15% in a week. So there’s risk here.
That said, the company’s exposure is diverse and complicated, meaning it’s hard to know for certain how the stock would react.
Currently, Legal & General carries the highest dividend yield in the whole FTSE 100 (8.9%). The forward yield stands at a whopping 9.2%, so a sharp share price pullback would quickly push that towards 10%.
I doubt we’ll see a repeat of 2022. But if there is, I’ll probably buy more shares. In my eyes, Legal & General’s strong income credentials will remain intact, especially as it’s targeting a significant uplift in operating cash generation over the next few years.