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21 July 2017
Of most prominence was the confirmation on Wednesday that the age at which future retirees will be able to claim their state pension will rise from 67 to 68 in 2037–39, seven years sooner than is currently legislated for.
No one is going to rejoice at the thought of having to wait longer to get the state pension.
20 July 2017
Mario Draghi’s bullish rhetoric on the state of the Eurozone recovery caught many investors by surprise last month, but the consensus view is that any formal announcement of tapering will come in September at the earliest.
But first, a brief piece of stock market history. The first signal of the Asian financial crisis was a sharp fall in Thailand’s currency, the baht, in the summer of 1997, when the currency’s peg to the dollar was dropped. However, it’s fair to say that the origins of the crisis stemmed from companies and investors borrowing money in global markets where rates were low and then reinvesting it in the Asian region, to take advantage of higher rates and returns. Many countries became too reliant on foreign debt borrowed mostly in US dollars over short timeframes, which escalated when it subsequently dried up.
19 July 2017
China’s “One Belt, One Road” initiative – a plan to develop rail and port infrastructure spanning more than 60 countries from the Far East to Europe in the west – could surpass President Trump’s vision of the US$1 trillion rebuilding of North America.
18 July 2017
We are currently in a slow growth environment, which should see the Bank of England keep interest rates low. Although a Labour government would probably increase gilt supply in order to raise money for new spending, low rates would keep government bond yields low, even with that increased supply and pressure on the UK’s credit rating. A shortage of global safe havens would also underpin yields, which are extraordinarily low at current levels.
17 July 2017
Not according to Jeremy Podger, manager of the Fidelity Global Special Situations Fund, a member of our Select 50 list of favourite funds.
That’s even more true these days following the introduction of auto-enrolment into pensions, the policy that means you save into a workplace scheme along with your employer, unless you choose not to. Perhaps without even noticing it, people are become stock market investors.
14 July 2017
These headline performance figures may be impressive, but the fact that many of these tech companies don’t tend to pay a dividend means that the wider sector can often be overlooked or under-represented in global equity income portfolios.
13 July 2017
Zooming in is always more difficult. Not for the first time, house price surveys conducted by competing lenders come up with apparently differing conclusions about where house prices are currently heading.
12 July 2017
In recent years a new breed of brands has jumped to verb status very quickly - we ‘Uber’, we ‘Airbnb’ and we ‘Deliveroo’. These companies have only been around for a few years, but already they have infiltrated our physical existence to such an extent that we use their brand name to directly translate what they do. These names/verbs are also symbolic of the rapid rise of the so-called ‘gig economy’- a term that tends to refer to people using apps to sell their labour.
11 July 2017
The past few weeks have seen a dramatic change in the mood music coming out of the central banks on either side of the English channel. Mario Draghi and Mark Carney, heads of the ECB and Bank of England, have fallen in beside their US counterpart Janet Yellen to give investors the broadest of hints that interest rates, on the floor since the financial crisis, are finally heading upwards again.
The collapse in the share price - a year ago they traded at around £3 - reflects the scale of an £845m provision against contracts it now considers likely to incur big losses and the cost of withdrawing from a number of markets in the Middle East.
10 July 2017
The latest reading of a consumer spending index by the payments technology company Visa showed British households spent 0.3% less in June than the same month last year. It was the second month in a row that spending has fallen on an annual basis, Visa said.
Expectations of higher inflation and interest rates, a more encouraging economic backdrop and less onerous regulation have all served to boost the sector, igniting the interest of investors around the world.
6 July 2017
5 July 2017
Ten years ago, when the Bank of England took the precautionary step of raising the base rate from 5.5% to 5.75%, the financial crisis remained in the future although the first straws in the wind were there to see.
In answering this, it’s worth taking a look at bond markets. Bonds, more than equities, are driven by a limited number of assumptions. These are principally about where interest rates, inflation and growth are expected to be at points in the future.
4 July 2017
Almost exactly ten years ago, two things happened that changed everything. If you were a technology geek you were probably fairly excited about the new touch-screen camera-phone-emailer device from Apple that had just arrived in the shops. If you also had an unhealthy interest in the minutiae of US financial services, you may have noticed at the same time that Bear Stearns had just injected $3bn into one of its troubled hedge funds. Far more likely, both of these events passed you by in June 2007.
The reach for yield could create an asset price bubble
Under the Conservative’s austerity drive, pay freezes were introduced for most public sector workers in 2011 and 2012, along with a 1% annual growth gap, now as the weak pound pushes up import costs and stokes inflation, this fiscal approach is starting to bite.
For believers in the Tesla mythos, this is the moment when the company graduates from being the maker of high-end curiosities to a genuine game-changer for the global car market.
3 July 2017
If you’re never heard of it, you’re not alone - suffice to say it’s a useful guide to market angst among investors in emerging markets, with a high reading indicative investor alarm and, a low one, the reverse.
29 June 2017
28 June 2017
At times, the difference is one of timing. Bond investors are often quicker to see problems ahead. Those in the equity market can look through rose-tinted spectacles until long after a bull market goes into reverse.
There was recognition also of growing speculation on the matter of when the Bank might begin to wind down its scheme of bond purchases, a programme designed to support asset prices and, thereby, the real economy1.
Why such a disappointingly neutral outlook?
27 June 2017
Conducted not annually but twice a year the latest report, published this morning, pointed out a number of warning lights now flashing on the dashboard, and prescribed various maintenance jobs it thinks are necessary to keep the economy roadworthy.
Gree Electric, Zhejiang Supor Cookware, Fuyao Glass. If you know much about any of these three companies, I take my hat off to you. Gree is the market leader in air conditioning in China. Zhejiang is the country’s largest manufacturer of pressure cookers, blenders and other small kitchen appliances. Fuyao is the world’s only pure automotive glass company. I must confess, I’d never heard of any of them.
The brief reprieve to Italy’s banking woes comes in the same week that US authorities publish details of their latest bank stress tests. In the UK, the sorry saga surrounding the Co-operative bank drags on, with the bank now scrapping plans for a sale and instead carrying on with talks to bolster its capital reserves. Meanwhile, in Germany, insurance giant Allianz ditched Oldenburgische Landesbank for a €224 million loss late Friday, its 90% stake in the ailing bank which they said was no longer of strategic importance.
26 June 2017
He asked me to imagine that it was 1913 and that two ambitious London investors were looking for a location around the world to open a new office, whence they could seek out local companies to invest in.
23 June 2017
Despite the oil cartel OPEC’s best efforts to extend production cuts, the oil price is now in bear market territory having fallen just over 20% in value this year. The downturn has weighed on energy shares and in particular hemorrhaged the S&P energy index, making it the worst performing sector among the 11 major indexes this year.
22 June 2017
21 June 2017
If bull markets climb a wall of worry, we should perhaps be grateful that investors have found something new to fret about. For years, deflation has been the primary concern. Now the question is whether we should be alarmed about the prospect of rapidly rising prices. No-one is very sure, least of all policy-makers in London and Washington who have taken different approaches to managing the path of inflation.
Government policy has been a major driving force behind the improvement in investor sentiment as the authorities have moved to tackle oversupply in heavy industry sectors by implementing much-needed supply-side reforms. For example, coal mines and steel mills have cut output and last year we saw the Producer Price Index (PPI) move into positive territory for the first time in over four years.
That UK consumer price inflation increased again in May, to 2.9%, will not have surprised many British grocery shoppers1. Already at or above the level the Bank of England predicted last month for the final quarter of this year, inflation has shown it has the ability to surprise to the upside2.
The initial skirmishes between Britain’s chief negotiator David Davis and his EU counterpart, Michel Barnier confirm that the UK has the weaker hand. Britain quickly accepted on day one that agreeing the terms of the divorce, guaranteeing the rights of EU citizens currently living in Britain and the nature of the Irish border must precede any trade deal. That looks like 1-0 to Europe.
Constant changes to rules for savings and pensions are more than just a frustration - they can leave your retirement plans in a mess as the assumptions they were based on become out of date.
20 June 2017
In a debate which has rumbled on for three years there’s an increasing consensus among investors that the inclusion of China’s domestic equity market is only a matter of time - with relatively high odds on it being tomorrow.
Relative to some of their counterparts elsewhere in the world, UK companies have historically given high priority to rewarding shareholders via dividends. The yield on the FTSE 100 index of the country’s largest companies is typically higher than those in many other developed markets, particularly the US and Japan.
19 June 2017
The City had been anticipating a 7-1 split in favour of keeping the Bank rate at its low of 0.25%. The 5-3 result struck a decidedly more hawkish tone, and was the tightest call from the Monetary Policy Committee since 2011.
16 June 2017
15 June 2017
14 June 2017
In practice, Brexit hardly featured in the election campaigns at all. For political reasons, neither of the two main parties had any incentive to focus on our exit from the EU. With their supporters divided on the issue, it was far too risky to express a view beyond anodyne comments about the people having spoken, respecting their will, getting the best deal for Britain and other platitudes.
“Is it acceptable for a public institution to reduce a population’s standard of living over the course of a decade or longer?”
13 June 2017
These numbers will keep the economy in focus at a time of heightened uncertainty but also matter hugely to your personal finances – from how much you shell out at the supermarket to the interest you pay on loans, the growth of your pension income and the health of your investments.
The Federal Reserve will almost certainly raise interest rates this week for the third time in seven months. The market will undoubtedly view this as a positive development. Investors will focus on the reason interest rates are rising - America’s improving economy - rather than the impact of higher borrowing costs. They will, in other words, view the glass as half full.
12 June 2017
In a two-day meeting beginning tomorrow, US policy makers will have their turn at taking the pulse of the world’s largest economy, with expectations of a federal funds target rate rise of 0.25%.
The first point to stress is that whilst a hung parliament was not the specific outcome that many expected, asset prices in the UK and to a certain extent globally, already discounted a period of extended political uncertainty given the complexity of delivering on the outcome of last year's European Union referendum. Simply put, that we are facing a period of political uncertainty is nothing new.
9 June 2017
There are short term uncertainties to navigate, including the leadership of a Conservative party that, despite the unforeseen Labour resurgence, remains the party with the most valid claim on leading the government after this result.
As with last year’s referendum, however, the market’s response to an unexpected political outcome has itself been a surprise. Markets are said to hate uncertainty but the FTSE 100 reacted to political stalemate with a rise of more than 1%.
The opinion polls were wrong-footed in the 2015 General Election, the EU referendum and the 2016 US presidential election. Unsurprisingly, the public has been left with little faith in the ability of opinion polls to correctly call an election (or referendum) result.
8 June 2017
Despite the multiple political stumbling blocks placed in the way over the past year, investors have stayed focused on the attractions of equities in a world of moderate growth yet low inflation and interest rates. Increasing evidence of an economic recovery across the eurozone has been another reason for optimism.
7 June 2017
Analysis of invested pension pots since new freedoms were introduced two years ago has shown how retirees may have faced alarming 12% falls in their retirement fund at one stage - before a market recovery helped put them back in the black.
A common discussion I have had with investors recently relates to their ever-increasing allocations to alternative asset classes. Within that, infrastructure is high on the wish list. However that asset class is better labelled ‘infrastration’. It seems there is a lack of supply of infrastructure projects around the world to meet the supply of capital willing to be invested.
6 June 2017
One of the biggest ironies of the last seven weeks has been the almost total absence of that monumental decision in the campaign. The Lib Dems are desperate to talk about it but the only two parties that really matter in our polarised system - both the Tories and Labour - have preferred to ignore the elephant in the room. The rest of us meanwhile seem to have moved on to other issues. Politics is in a strange place.
Brent crude oil was back above $50 a barrel on the Asian markets overnight, following the joint announcement by Saudi Arabia, the United Arab Emirates, Bahrain, Yemen and Egypt that they would cut ties with Qatar due to what they labelled as Qatar’s “embrace of various terrorist and sectarian groups aimed at destabilising the region”.
5 June 2017
Addressing investors this week, Rose acknowledged the many macro influences Japan has been subject to over the past eighteen months, pointing out the phenomenon of negative interest rates, Brexit and the arrival of Donald Trump as US president.
2 June 2017
Ghosts of 1974 may have been troubling sterling. In that year, there were two general elections, both designed to land the government of the day a decent working majority. Both elections failed to deliver one.
1 June 2017
“I don’t like the term bond proxy because it tends to get applied to a cross section of sectors and industries within the market - consumer staples, healthcare, utilities, real estate, telecoms, and so on. But the reality is that those sectors offer you very different characteristics,” he said, speaking to investors on Tuesday.
But figures out this morning from Nationwide show a cooling in the rate of house price growth for the third month running, with UK house prices rising at their slowest annual rate for almost four years in May.
Equity valuations are stretched and the economic recovery is now eight years old. Yet in the middle of last year, a renewed economic vigour took hold around the world, followed by the promise of reflationary policies as Donald Trump was elected president. Cyclical assets surged, and bonds paused in their long ascent.
The corruption scandal threatening to engulf its president Michel Temer’s government, roiled markets last week, with the premier facing impeachment calls over allegations of government account manipulation.
31 May 2017
While last week’s sunny weather may have temporarily lifted the spirits and loosened the purse strings, the UK consumer is feeling the pinch. A recent poll by YouGov and the Centre for Economics and Business Research has found British households are more pessimistic about their personal finances than they have been at any time since December 2014.
30 May 2017
For a brief moment, the conventional wisdom about emerging markets was turned on its head. Britain, the US and Europe took an increasingly unpredictable turn via Brexit, Trump and the rise of the anti-EU right. Meanwhile, China, India and Russia started to look reassuringly stable. Where the upheavals continued, as in Brazil, the changes at least looked to be for the better.
Since then headlines over Brexit, Trump and European politics have pushed China concerns to the backburner. But this week, investor worries over China and its mounting debt pile returned to the fore with Moody’s downgrading the country’s sovereign debt rating for the first time since 1989.
25 May 2017
When April’s retail sales figures came in a bit better than expected, there was little celebration. Few believed this was anything more than an Easter-related blip. And sure enough the latest figures from the corporate coal-face suggest that the pressures on the High Street are very real.
24 May 2017
The recoveries of oil and commodity prices last year have been key. The export of raw materials accounts for around 42% of Brazil’s annually traded goods2. When the world economy is doing well, so should Brazil.
It is now 20 years since the stock market flotation of Amazon. Quite rightly, this anniversary has focused attention on the remarkable story of how an online bookseller revolutionised retail. In two decades its sales have grown from $16m to $136bn. The company is now valued at nearly twice as much as Walmart, the world’s largest bricks and mortar retailer. Almost single-handedly, Amazon has changed the way the world shops.
23 May 2017
Last week a more welcome display of modernity found form in roughly the same part of the West Midlands, with industrial robotics giant FANUC opening its new UK headquarters.
Having said that, emerging market investing is a broad category; encompassing countries as divergent as South Africa, India, China and Turkey, all with their own unique issues and economies. The next political crisis is never far away, with the news flow surrounding Erdogan and Zuma the most recent examples. That is why the companies I include in my portfolio have to be capable of withstanding the occasional storm, meaning they must have strong balance sheets and offer an attractive return on equity.