Weathering the Storm: Staying the Course Through Economic Turbulence
22 September 2022
To all Financial Friends
A tsunami of events has hit the world in recent times. Across the board there has been no way to hide from the economic effects. Our selection of infrastructure funds has saved the day in our preferred asset holdings. A gain of 22.1% (global) and a gain of 5.27% (UK) over the last 12 months.
For years we have been sheltered by the printing of money and manipulating interest rates to remain low. This with huge levels of borrowing has brought us through Covid and other threats to the financial system.
Now we are in a state of turbulence as we seek to reshape the economic structure and move towards perhaps a new type of normal. As usual all market conditions create the opportunity for profit. Volatility can at times create short term profit opportunities.
As this all unfolds, please be keen not to miss profitable opportunities that arise because they will.
Pick up the phone and call me for the chance to discuss your holdings and share ideas, information and understanding to ensure you discover the best way forward. Talking times available from Wednesday 28th September.
OR IF YOU PREFER – READ ON some interesting stuff within………………………………………………………..
Status Quo?
Yes, I suggest. Our previous commentaries have put forward the following asset types to best weather the current economic storms and bring you to a safe and a profitable sunny harbour. Tides and winds oppose progress but the course is set.
Recalling the sound reasons for our preferred asset selection you may still be content with these asset holdings: Global Infrastructure (+22.11%) UK Infrastructure (+5.27%) Government Inflation linked bonds (average -29.4% ) Gold (-6.61%). Figures quoted for one year to date 22/09/22.
Meanwhile savers with money on deposit (Bank or Building Society) are now seeing a loss in the spending power of their savings of more than 8%. This against current levels of inflation of 10%
Infrastructure funds have been the highlight when investors have been saying there has been nowhere to hide from falling assets during the tsunami of events that have arisen.
Consumer staple funds were proposed. As inflation erodes disposable income, less money is spent outside the essentials we need to buy to live. This sector would suggest relative safety in stormy seasons. We asked our stockbroker to select a basket of shares in this sector for consideration. Please ask for details if this interests you.
General Commentary
Students of the Money Awareness Course will not be surprised that today bank base rate has been increased to 2.25%. A tiny bit of good news for deposit holders at the bank but worrying news for mortgage holders seeing their outgoings rise while inflation is hitting them hard already.
In past commentaries we talked of the coming ‘turning point’ This was when (as is the case now) interest rates would need to be raised to seek some normality in the markets. Inflation at 2% was the goal to provide stability and economic growth.
We said that the banking system had an unenviable task in seeking to balance the need to create modest inflation whilst not crippling economic growth. Putin’s war can be and to some extent should be blamed for the inflation crisis. However, look at the years of market manipulation, the printing of money and tactics to keep capitalism afloat and there you may have the main culprit.
With inflation at around 10% clearly things have gone badly wrong. Interest rates will need to be raised to uncomfortable levels if inflation is to be controlled. Our commentaries have consistently said that inflation would get out of control.
The pound has sunk to its lowest level in 37 years. Good for exports, bad for imports, but good for American visitors to the UK. Pandemics are still in the air. War threat is a drum beating in the background for us. For the brave Ukrainian people, it is hell on earth, (how else would you describe it?) Defeating the worst effects of increasing global warming is the biggest concern you might think?
New Prime Minister Liz Truss turns to controversial strategies to cope with rocketing energy prices and recovery from huge covid financial support payments. Can we go on doling out money for ever to prop up the great British public – if so for how long? Borrowing lots more to pay back later from a booming economy is the answer? Drive down taxes and attempt to make Britain the place to invest? This is the big Truss gamble being taken.
PS. Interesting. When Pelosi went to Taiwan China played war games. Inflation linked bonds shot up by 11% over just 5 days. Are these holdings a safe and profitable haven in times of war and rumours of war?
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.
