Good morning everyone, not only do we have plenty of change within our government, but the weather seems to be up and down too!
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