No sooner had I posted my last blog than Kwasi Kwarteng collects the order of the boot from the Prime Minister, suddenly we have a new Chancellor and it is a case of ‘all change.’
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!