What you may find of interest (and which isn’t being publicised to any great degree) is the fact that the UK FTSE100 company share index is now within 1% of it’s all-time highest level, which was back in mid-2018, so things are recovering well in this area of investment and this hopefully reflects the resilience of our larger companies, albeit testing times are still ahead!

Whilst the issues we have looked at previously are now being laid bare, namely the rising cost of energy, the cost of living and the impact of high inflation and also now, the concern about future job losses, which tends to go hand in hand with a recession, such as we have now entered, there may be some room for cautious optimism from an investment perspective.

So where does this take us? Well we are starting to see inflation falling back, with suggestions that it may be at a sharper rate than previously predicted (I always thought that this may prove to be the case and have probably bored a few of you by rattling on so much about it!) and, as such the Bank of England has adjusted its predictions for where the base interest rate may peak, which is around the 4% mark by mid-2023, as opposed to the Summer 2022 prediction which suggested it may peak at above 6%; so this is good news and hopefully a theme which will factor back into investment sectors in a positive way, such as we are seeing so far this year (early days I know, but I’m an optimist!). What I do expect to see though, is an increase in job losses within the private (and possibly public) sector, as companies wrestle with high energy and production costs, coupled to increased salary demands from their employees, so expect service standards to fall off (if it could ever get any worse in some businesses!) as companies look to reorganise their structures in order to make them ‘fitter and leaner’ going forward.

In terms of where analysts’ and fund managers see 2023, there is something of a mixed view, given the concerns about a global recession and it’s prolonged impact on economies, but the consensus view seems to be that most sectors should start to progress, if not that rapidly during 2023 then certainly through 2024; time will tell of course!

I noticed last week that gas wholesale prices have dropped significantly from their 2022 high in recent weeks, with the attached BBC article reflecting what this means in terms of household costs going forward (spoiler alert: it’s not as good as it sounds, but will help the government in terms of their subsidy costs, albeit the impending price cap increase will mean that we are unlikely to feel any real benefit for a while!).

Hopefully investments will progress along the same path as they have started 2023 and we can at last start to see some recovery and progression, after what has been a very unpleasant couple of years both within investment markets and moreover our daily lives and those of others around the globe.

Will falling gas prices mean lower bills? – BBC News

Anyway, whoever you’re supporting I hope that they do well and, if it’s not England I can understand why at times; this squad gives us more up’s and down’s than the UK economy; it would be nice to win it all though!

On to what is happening in the investment world; the share and bond investment markets have been quietly moving forwards in terms of their recovery during the past month, although the property sector is stalling as one might expect, with higher interest rates predicted. We have seen average all-sector growth of around 4% and whilst this is not a signal that we are past the worst, there are a few of those ‘green shoots of recovery’ which we can grasp, not least the fact that China seems to be easing its lockdown measures, which in turn will allow one of the biggest global economies to reopen for business again.

Over in America (markets always watch what they are up to and often follow their lead), the economic situation for jobs and consumer spending are positive; so that’s good then? Well actually no it’s not, as it means that US inflation may remain high and that will most likely mean further interest rate hikes for many who can least of all afford them across there, something which has been reflected within global share markets during the past day or so, as there are fears that the picture may be similar in other countries.

Turning to our home economy and markets, whilst Christmas will bring some festive cheer as people spend what they can and enjoy this time of the year, unfortunately we appear to have dropped the ball in terms of moving ahead of some of our European counterparts, as they experience their own economic difficulties, Germany being a point in case. Our solution to the spiralling inflation problem has been to push for double figure pay rises and consequently we are now witnessing strikes throughout much of the public sector (and private sector, if we include the Royal Mail), affecting productivity and all that goes with it.

With pay demands becoming unaffordable and seemingly little to no will to find a solution, it’s a mess.

For my part, whilst there is no magic money tree, there are certainly potential solutions to the terms and conditions aspects being argued by some Unions for employees, but either way, this will have a consequence for all and not in a good way and is additional pain for an already beleaguered UK economy at a time when we least need further disruption, understandable as it may be for many who are struggling to afford to live, in spite of working full-time.

It’s a mixed basket to report upon right now I’m afraid, but my motto is very much, ‘keep one’s head down, focus on the immediate, control and influence what you can and leave the rest to others’ and, most importantly of all, remember to enjoy and respect the positive things that life brings us, they are out there, but all too often we just prefer to engage with the madness of the media and boy, aren’t they just heaping it on us right now?

From an investment market perspective, the budget has underlined what a lot of economists and investors had suspected, namely that we are in recession and that the costs of the pandemic now have to be reconciled. For my part I have no issue with this, what I do object to though, is paying for other people’s incompetence and that has certainly been the case with the cost of the Truss/Kwarteng nonsense! 

Looking at the impact of the budget and recent changes to taxation, we will see smaller businesses tax burdens increase gradually by a quarter over the next few years (for those with profits of less than £250,000 per year), individual income tax and national insurance is now accounting for a third of many people’s wages (above the £12,570 annual tax allowance) and there are then the stealth taxes such as council tax (which is likely to increase by 5% next year) and of course VAT.

I think that it is fair to say that we do indeed pay a lot of taxes and that we are starting to realise that the people charged with spending this money need to be better at what they do and more accountable when doing it. Some of you may have seen the ‘predictions’ from the Office for Budget Responsibility (OBR), whose figures seem to be wildly out of kilter with their previous predictions/calculations; worrying on the one had that they are so high, but more alarming is the fact that they have adjusted them by 2 to 3 times what they previously were; how can they get it so wrong we should ask, or does it suit the situation? 

Anyway, back to the business in hand and what this all means for investments; well it’s a mixed one, as it will bring even more cost controls to many businesses, which can be a good thing, but this will be counteracted by a more difficult marketplace to move products within, as there will be less money supply, which when coupled to employees own remuneration requirements it is likely that the ultimate outcome will be that unemployment will rise, as companies lay staff off or fail altogether, so a tough Winter for many, but in the process it will create a leaner business marketplace from which to move forward, which investment markets and investors like, so what is bad news for many can also be a good sign for investment sectors.

As I have said before, is not going to be a nice Winter for so many of us financially, but the impact of the changes being forced on many may spur investment markets into recovery at an earlier point in time. 

Trying to call which investment sector will fare better than another is not really on the cards as yet, but this month has seen a recovery across nearly all areas (property is the one sector which is lagging behind, probably as you may expect) and hopefully the weeks ahead will provide a better indication as to whether the worst predictions are behind us (even though the consequences are very much with us) and a more sustained recovery can start to get underway, we can only watch and hope and ultimately put our faith in those in government appointed with looking after our affairs, although we won’t mark them out of 10 just yet, it wouldn’t look great!

As someone said to me, ‘control the controllable and leave the rest to others to worry about’; whilst this is true and very good for the mind, the older you get the more you look at the people who you are obliged to trust with matters such as governance and question their decision-making and I think that most of us would agree, in recent times it’s not been very good has it?

As an aside, I am finding through my discussions with clients (well, most of you are now friends as we’ve been on our journey for so many years!) that a lot of people are struggling to process the pace and negativity being thrust upon society during recent times and whilst it is becoming a well worn line, we really do need to look out for each other in these difficult times; for my part, I will always be available for chats with my clients/friends on any topic that they wish to bring to the table and if we can make sense of some of the nonsense and smile a bit in the process then for me, its time well spent!

In the meantime, sharemarkets enjoyed a good day on Friday, as there was an expectation that China may start to relax their covid shutdowns; however this does not now seem to be the case and as we already know, the longer that there is economic inaction, especially within such a productive global power as China, the more embedded the issues become and, whilst it is clear that China’s re-opening would herald a postive sigh of relief for markets, it will now have left something of a scar on their economy, from which it may take more time to recover.

Our new Prime Minister seems to be suggesting that he will look to provide postive solutions to our ailing economy rather than just taxing the life out of it, which hopefully is a sign that he genuinely understands the problems that people and many businesses are now facing, but the devil will be within the detail in the forthcoming budget and it will be interesting to see where and how the funds will be raised in order to bail out our economy in the immediate and also how investment markets will react to this news, although I suspect that they may already have most of the answers to those questions.

It is now becoming clear that the UK is already in recession and that this negative spiral may continue for the next year, but I think that in all honesty it was difficult not to foresee that there would be issues arising from the Ukraine conflict and its affect on many resource supply chains, as well as the issues surrounding the recovery from a global shutdown; however this is a part of why the markets have fallen during this year and as signs of a move from the bottom of the current cycle become evident, then we should hopefully start to see investment markets react positively as they plan the route ahead and out of recession.

It is a case of where and how many bumps there may be in that road of course!

Thank you for your helpful feedback so far on the content of the blogs and to try and avoid going over the same ground each time, I will endeavour to keep matters as direct and relevant as possible to any impact on your personal investments (for better or worse!).

So to the week ahead and what is happening that may affect the investment markets? Well last night the United States Federal Reserve increased their interest rates by another 0.75%, following a similar increase only last month; in addition, the European Central Bank has also just increased the Eurozone interest rate by 0.75%, so it doesn’t take too much to see where we will be heading this Thursday when the Bank of England Monetary Policy Committee convenes. As I mentioned in my last blog, the mood suggests we may see a sharp interest rate increase and a 1% rise would not surprise me, unpleasant as it will be for borrowers.

Investment markets are making (or have already made) their adjustments in light of the Winter to come and consequently this past week has seen share and bond prices recover by between 2% and 3%, which is too early to call a recovery but good news nonetheless. Much will hinge on the content of the Chancellor’s forthcoming mini-budget (yes another one!), which again is due over the coming week; indications are that we will see some form of tax rises and cutbacks in order to address the £40 billion blackhole which has appeared recently in our finances; bad news for many but good news for investors, as the market may see this as the right direction of travel to create a stronger UK economy!

To try and highlight what sort of a ‘bashing’ certain investment sectors around the globe have received in the past year, I have attached a link below to the Trustnet performance chart which shows the % movement in investment funds within various sectors. The one of note is the property investment sector which, as I mentioned in my last blog, has seen a sharp correction due to the realignment of property values generally.

The only ‘winners’ have been funds linked to India (which as a territory is very volatile in terms of performance and historically, when it is down it tends to stay there for a while!) and Energy (unsurprising given the shortages and profteering, but again an investment sector which has experienced more than enough struggles in terms of delivering value to investors in recent times).

There are not really any other ‘winnners’ to choose from presently, but some sectors have seen harder than expected falls (such as corporate bonds and gilts as well as shares) and whilst there is still the need for economies to ‘re-stock’ their cash resources after the pandemic, it could be the case that a financial recovery would see growth across most, if not all sectors but it is just too early to call until we see what the Winter and a new PM brings and whether we can manage to stave off the impending recession which some would argue we are already in.

If you follow sharemarket indeces as a guide to sharemarket investment performance, I would recommend looking not only at the FTSE100 as the benchmark, but also the FTSE250 (or FTMC). Whilst the FTSE100 shows the cumulative performance of the top 100 UK companies, the FTSE250 covers the next 250 companies in terms of size. The reason I suggest this is because the FTSE100 has become overloaded with companies who rely heavily on export business and so is not always a fair reflection of what is happening and where investment managers are looking when moving your savings around, especially at this moment in time where currency movements and a weaker pound are proving a real headache for some companies.

A summary of investment sector growth/falls in recent times: Sector home page | Trustnet

So what is happening in the investment markets right now? Well thankfully it seems to be all good news, as the change at the top has resulted in the £ gaining in strength (albeit slightly), government bond interest rates reducing, with increased confidence being shown by global investors and hopefully a sound economic plan to be announced within the Chancellor’s budget next week.

One big worry remains which is that, even though I expect there to be a better sense of co-operation between the new PM/Chancellor and the Bank of England and predictions are falling, there is the matter of what decision will be made with regard to increasing the Bank of England Base Rate this month. Even though inflation has fallen very slightly (by 0.1% last month) as has retail spending, there is clearly a need to act further in reducing inflation and that means increasing interest rates. I expect a full 1% rise (we can’t hide from reality for too much longer), but I think it may be just under that, although anything right now will come as a blow to the public at large, who are starting to feel the pressure of the new energy tariffs and rising prices generally.

It is good to see that the predicted peak for interest rates has lowered with the introduction of the new Prime Minister, from around 6% next year to nearer 5%, but the fact remains that we have to get there at some point and I expect the PM/Chancellor will be making some hard and unpopular decisions in the weeks ahead, alongside the Bank of England; after all our base interest rate is still at 2.25%, a very long way from the 5% predicted. In simple terms, another 2.75% interest added to a £150,000 mortgage would amount to a further £340 of monthly repayments! Worrying for many who have not fixed their mortgages over the medium term earlier this year, or have reviews coming up in the year or so ahead.

Throw into the mortgage interest rate conundrum the fact that personal loan rates will be increasing; many car finance companies have put their rates up by as much as 2% this week, we can start to get a feel for what may happen in certain overheated sectors such as property and car sales.

In terms of investment markets, a lot of the bad news to come for the public at large has already been factored into current valuations, as I’ve mentioned previously in other blogs, and taking the investment property sector as a prime example, we have seen a 10% fall in values within this area of investment in the last month, as valuations are being adjusted to allow for what is to come.

The impact of the slow and maybe insufficient decisions taken by the UK during the past 12 months and the malaise of Summer when we were effectively without leadership, have been laid bare in the performance of UK investment markets versus their overseas peers, with shares falling by around 14% compared with 10% falls elsewhere globally and corporate bond markets and government gilts falling by around 20% compared with 10% globally. We need to act and hopefully this will be the start in terms of attracting back the investment which the UK last lost over recent months. It is not to say that anywhere else is not struggling also, it just feels like we have it worse!

There is much to cover and discuss as I’m sure you are all finding right now and I would be delighted to just be able to write about a rapidly improving situation for investors in all of my forthcoming blogs, but if this proves to be the case, it will not be without witnessing a lot of public unrest, as measures and increasing prices really start to bite. One thing is for sure, it will be a tough Winter for many (and for businesses) as the impact of less surplus income starts to really bite; but looking ahead, I hope that any financial pain is relatively short-lived and manageable, with better times ahead.

Again, from an investment perspective, the positive triggers to look for are a strengthening £, falling inflation rates and a robust plan for reducing the UK’s centralised debt issues (this may be announced next week).

With the proposed tax savings all but reversed in an attempt to get the investment markets back onside and to strengthen the value of the £ on global markets, there is some upside to be seen, although the cost of where we have come to in the past month is still taking its toll and there will be more work to do and difficult decisions to be taken, coupled to the malaise which still exists around who is actually running the country.

From an investment perspective, the pressure on asset sectors such as government bonds has eased a little and of course the £ started to rise again in recent days, which as I mentioned in my previous blog are both helpful signs for your own investments.

However, just today we have seen that inflation has picked up again over the past month with the underlying CPI figure now standing at 10.1% (mainly due to rising shop prices, as the likes of petrol and other commodities has fallen slightly): this is a continuing concern for the markets, although I think we will see an increase in the next week to the bank base rate, not least because this provides a perfect excuse for the Bank of England to do so; how this will address price competition, time will tell.

I suspect that the Bank of England may even go for an increase of as much as 1%, which will worry a lot of borrowers, alongside the increasing costs of energy and prices generally, however the sooner we reach the point of a reversal in the rate of inflation, the quicker we can start to recover from the impact of this last few years and it was always going to be a difficult Winter, as I have said on many occassions, but I just hope that the damage to the business and consumer sector is not too great in the process.

The past few days have seen a recovery in investment markets generally and this should hopefully feed back in to people’s investment values in the days and weeks ahead; for Prudential investors, there has however been a one-off adjustment to the value of the ISA and Pension funds (not the bonds!) of around 6%, which was caused as a result of the mayhem of the past month. As the review took place before the events of the past few days, we may see a change/reversal to this in the time ahead, should markets get back to where they were a month or two before.

For those with an eye on the political situation, Prime Minster’s questions after mid-day today will be a good, if not awkward, watch and I expect we will see some change still to come at the top in the weeks ahead.

In the meantime, I will continue to keep you appraised of any developments and hope that there is postive progress to come!

This year has, to say the least, been a troubled one as the world attempts to move out of the post-pandemic slowdown. We have of course been hampered by the Ukraine conflict, but in investment terms, the over-arching problem has been that of rising inflation and the failure on the part of governments and Central Banks alike to tackle it sooner. 

During the pandemic, Central Banks across the globe allowed governments, banks and larger businesses to raise funds by way of purchasing debt from them, in the case of the UK government these are known as gilts and the process is better known as Quantitative Easing. The problem with purchasing debt is that the interest on it has to be serviced and ultimately repaid; not a problem when the economy is moving ahead, but a big problem when we are beset by the once in a lifetime issues of emerging from a global shutdown into a war and a shortage of raw materials. As the scarcity factor of goods has pushed prices up, in-part causing inflation to rise, so has the cost of servicing the borrowing from the pandemic and prior to that (£80 billion a year at the last count!). As a consequence, interest rates on general consumer borrowing are having to rise to counteract this, which is what we are now seeing and fearing, especially painful as it is for homeowners with mortgages. 

Conversely, if inflation falls, then national debt servicing should cost less and interest rates can be allowed to come back down again, which is what the Bank of England had hoped may happen within the next couple of years or so. 

So where are we now in this curve? Well firstly, due to the inaction in addressing inflation last year, the problem has been allowed to manifest itself to a worse degree, meaning that steeper intervention with interest rate rises is needed. coupled to this the fact that we have a new Chancellor whose solution is to borrow even more money and to try and give this to people to help spend the economy out of trouble, which cannot work as it just drives interest rates up, and the latest giveaway to basic rate taxpayers amounting to around £300 a year has already caused the Bank of England to have to intervene, as money rushed out of the UK and into overseas countries due to concerns about the UK’s rising borrowing levels, this has caused the £ to fall sharply in value, which of course also makes everything we import (which is a lot of what we use) more expensive! Terrible plan, in fact it’s not even a plan! 

So at the present time, we have the investment markets looking at the UK as something of a debt-laiden liability (which if the current Chancellor continues on his existing path may worsen) coupled to a fairly flat economy (although this is a global issue so may be less relevant in this context).

The combination of all of this uncertainty is unfortunately why we have seen investment markets continue their slide this year. The way forward, which was due to start about now, but has been well and truly scuppered by the mini budget, was for the Bank of England to follow the United States path of starting to ‘sell’ debt and gilts back to investors, which would then see our financial position as country strengthen and thus allow us more flexibility to try and assist the economy back onto its feet. However, the Bank of England are now fighting fires and having to actually ‘buy’ more of this debt. 

To say we are in something of a vacuum right now would be a great description of events and it is clear that the Government and Bank of England need to become more aligned in their strategies. Globally, the issues which are now emerging in our day to day lives (energy bills increasing, interest rates rising, etc) are ones which the markets have been endeavouring to factor into investment values this year, so it would not be wrong to say that things could start to go positive once again and quite quickly, if the economy does get on track. Yes we are, I’m afraid, going to endure yet another difficult year on many fronts, but as we saw during the pandemic, investment markets tend to work ahead of the curve and so could start to recover before we see an improvement within our day to day lives. 

Whatever one’s politics, the one thing we need right now is a sensible and informed government taking the right fiscal decisions and listening to the wisdom of well-versed economists before doing so. I think we can gather that this is not happening, so it’s a case of watch this space for now and hope for change. 

The positive signs to watch for from an investment perspective are, the £ strengthening, positive growth in the economy (that may be a slow burner for now!) and a reduction of our debt load; in the immediate, there is a problem which has to be addressed this month, of finding around £40 billion of cuts in government and public services to pay for the recent mini budget handouts, whether the mini budget is reversed or where this will come from is what the investment markets (and the Bank of England) are waiting to hear! 

I will keep you all posted on here, but please call me if you wish to cover anything at all with regard to your own investments. This blog contains my personal views and not those of the regulated sector but as you know, I will try to explain matters as I see them and I hope that it helps!

Some of the volatility has been as a result of market-makers taking short term profits from their portfolios and not really allowing any progression within many sectors. However within the past week, both within the UK and Overseas, we have seen an indication as to the fact that higher inflation rates are expected as economies start to re-open again later this year. The sign for this has been a sharp increase in yields within ‘safer’ investment sectors such as the Government and Corporate Bond marketplace and a move away from shares. The consequence of this has been to see a fall in share values, particularly within the more niche sectors such as technology and small to medium-sized companies, due to the fact many of these companies carry a large debt burden (not least as a result of limited trading conditions over the past year) and are vulnerable to the consequences of inflationary increases; because with higher inflation comes higher interest rates and so the cost of servicing company debt increases!

My personal view, for what it is worth, is that whilst many of these companies may carry a bigger debt burden should interest rates rise, this must be balanced against the prospect of much better trading conditions (perhaps even a boom period) as life hopefully returns to normal again; furthermore, it is unlikely that goverments will not want to increase interest rates at a time when economies need to be restarted and encouraged; so perhaps the current turmoil in bond rates and share prices is a manufactured one rather than a fair one… time will tell, but one thing is for sure, if it is factored into prices in investment markets now, there should be much better times ahead!

I think that we are all feeling the weight of this latest lockdown in one way or another and I have certainly felt more isolated from you all as time has marched on; but as I have said previously, I am very much open for business and here for you if you need anything at all and I hope that we can soon meet up once again and maybe share some of our better stories of the past year!

On a positive note, investment markets continue to progress within the UK and to a good extent globally, with shares returning to value in the UK now that we have a clearer path for the economy in the year ahead (hopefully).

Keeping to the script and away from politics, the outlook for growth away from cash deposits seems somewhat more certain than we have seen for a couple of years and there are some small but encouraging signs in terms of businesses and production returning from the continent to the UK under Brexit and goodness knows we will need the job creation programme that’s for sure!

One thing that has been talked about in recent months and which I have convered under previous blogs, is the subject of whether or not interest rates may actually turn ‘negative.’ Whilst this has been trialled in some countries, just yesterday the Governor of the Bank of England poured cold water on the notion, so it looks like, unless things take another turn for the worse economically and we fall into a second recession, interest rates will most likely remain at or around where they are now for the forseeable future; not good news for cash deposits but positive news for mortgage and lending propositions and for business generally.

So in summary, I think that things are quietly moving up nicely and, in order not to tempt providence, I had better leave it at that for now and hope thta you are all keeping healthy, getting vaccinated where you wish to and remaining positive.