Market Moves: Important Updates
20 June 2022
To all Financial Friends
On 18th June 2021 in my commentary of that date I forecasted that in 12 months time inflation would hit 8%. Unfortunately, uncomfortably accurate. This was when the Bank of England said inflation would peak at 5%. "I just don't beleeeiivvee it I said!" Once the inflation tiger is out of it's cage it's hard to get it back in! The bank now says we are heading for 11% inflation by the year end. There is no comment this time on when inflation will peak - very wise of them!
The Interest Rate/Inflation Shock to the System
To quote the Financial Times today: 'Global stocks have suffered one of the worst weeks since the outbreak of the coronavirus pandemic, as investors take fright over aggressive interest rises by the major central banks and the threat of a prolonged economic slump.' It may be reassuring to read below how previous commentaries guided you to move to more defensive holdings. This, as we talked of what we called 'The Turning Point' coming up ahead - as we deem it now has.
The trauma and uncertainty caused has driven every type of asset down - there has in this short space of time been nowhere to hide. We are moving out of years of manipulating the economy to suit ourselves and back to a more natural and even sustainable disciplined pattern of financial behaviour. Change is not easy although very necessary.
This said, if you did move your funds in line with our commentaries then your funds will not have fallen as far as the markets of the UK, US and other major economies of the world. As the dust settles, we will see volatility again giving rise to profit taking opportunities. During the last 12 months students have taken profits from 12.6% over a six-month period. Then 8% over a 4-week period and lesser returns periodically also. Those profits, if they were stored in cash, could now be drip fed monthly buying up equities at potentially bargain prices.
Even a year ago we selected these assets for consideration: Inflation Linked Govt. and Corporate Bonds. Gold and silver. Infrastructure funds. Consumer Staple funds.
PLEASE NOTE: A financial or economic commentary like these, are written to explain, interpret or give an opinion on economic events and markets to help readers understand what’s happening and why it matters. Designed to help you make informed decisions of your own by making you aware of opportunities, risks and potential rewards in the market.
