INFLATION, INTEREST – THE NUMBERS ARE STARTING TO HURT

TODAY’S BLOG

THE NUMBERS ARE STARTING TO HURT…

If you are a car driver as I know most of you are, the current price of petrol will almost certainly have caused a gulp of disbelief as you fill up your “pride and joy”. The rate of inflation may be a testing 9% or 10% (next release from the ONS is next week) but the price of fuel is rising much faster than that. Indeed, I have noticed the price at a station change within the space of a return trip to a local garden centre.

Today, 16th June 2022 unleaded petrol is around £1.87 a litre or £1.93 for diesel. In June 2020 it was £1.07 and £1.11 respectively. That’s an increase of 74% in a year. If only I could tell you that investments had fared as well, they haven’t. Markets have been very difficult lately, largely since November. Global equities are down 1.48% over 12 months and global bonds are down 12.01%. When the numbers go in opposite directions to our daily reality of the cost of living it becomes alarming.

I am not going to pretend to you that this is easy or that inflation will quickly disappear as the Bank of England appears to believe (returning to around 2.4% in 2024). We could be in for inflation that lasts rather longer than that. Sadly, we are in short supply of good politicians around the world, those that we have seem intent on destroying any sense of self-respect. The “unexpected” war in Ukraine is certainly lasting longer than most expected… which does leave me wondering, who on earth is doing this “expecting”? most of the hard-nosed realists I know do not have much faith in politicians to resolve much at all, other than their own salaries and second jobs.

THE JUBILEE, 1977 AND A 67% MARKET DECLINE

If the Jubilee parties didn’t remind you of 1977, the impending rail strikes and some of the economic data may soon help you to do so. Still, we have learned lessons from the past haven’t we! I imagine that you appreciate that I am being a little sarcastic. Sadly, you and I cannot control very much of what is going on. We can control how we respond. All the lessons of history are that successful investing means riding out the peaks and troughs of the global market cycles. Some of these are very deep and “hurt”. For some context, the average bear market since 1926 fell by -35% and lasted 18 months. Some were worse, some better (hence average). The worst fall was in June 1972, markets collapsed -67% and the bear market lasted 2 years 7 months. £100,000 in 1972 would have fallen to around £33,000 however for those that held their nerve that same £100,000 became £1,207,159 when considered over 154 months (12 years 10 months). That is amazing isn’t it… but so few investors had the patience, confidence or perhaps ability to stay the course. This is not easy, hindsight is easy, the present and an unknown future are “difficult” yet that is the reality of our daily lives. Complex, unknown and full of conflicting messages and competing media.

Today the Bank of England raised its base rate to 1.25%. Let me get ahead of the “news services” and spin this in different ways. Interest rates have increased 25% overnight. The highest for over a decade. This is true, but in the context of interest rates they are half as much as they were in November 2008 (3%). When I started the firm in 1999, rates were 5% (some 333% higher). When I started in this game, they were 10.88% and I have a very real experience of them at 14.88%.

Life changes, your plans may need updating, but your main priorities and principles are unlikely to alter at all. Do get in touch with me if you are concerned. As I may have said, investing is a long-term, a lifelong process. Remember your money should serve you, not the other way around.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

INFLATION, INTEREST – THE NUMBERS ARE STARTING TO HURT2023-12-01T12:12:49+00:00

THE GLOBAL MARKETS

TODAY’S BLOG

THE GLOBAL MARKETS

There is little chance that you have escaped the news or the reality that the global stock markets have been very turbulent. The charts are either setting new records or getting pretty close to them. So, by way of an update I thought that I should remind you of some of the basic investment principles that we believe and are applied to your portfolio.

Firstly, we cannot control the markets. Let us simply acknowledge the reality that the prices of assets around the world are not things that any of us control. Neither can we control Government policy. In truth there is very little that we can control, but when it comes to investing, it may as well be a secret, or so it seems.

YOUR BEHAVIOUR

I am not going to suggest that your feelings are things you can control, they are real and need to be acknowledged. However, they are not the basis for a good investment experience. When it comes to your portfolio, none of us are naturally programmed for optimal performance. So, whilst we note our feelings, we do not base our plans around them. We base our plans on the goals you have set and the basic, easy to say, hard to do, investment principles.

ASSUMPTIONS

As every “crash” happens, investors invariably tell themselves the same thing… “this time its different”. The truth is that unless you genuinely believe that capitalism, globally is dead, then nothing is different. Yes, there are things wrong with capitalism, but if its basic premise is to raise money so that companies and organisations can create and meet the needs of real people in different markets, that creates jobs, wealth and share profits and therefore prosperity. If you don’t believe that, then you really should not be investing in anything at all.

I am not pretending that there is not, or will not be some significant difficulties and hardship around the world as a result of the pandemic and crisis of confidence in markets, but it will return, it is a question of when, not if.

BULL and BEAR

This in mind, Vanguard produced a rather helpful chart this morning which I wanted to share with you. This shows the Bull and Bear runs of the FTSE AllShare Index. Note the falls and the durations of the respective “runs”. I have put the pdf of this below. This shows total returns, so includes the income (dividends) from shares. This takes a long-term view, since 1900. So before all of us were alive, through two world wars and unspeakable things that man does to man. Will we ever learn? Here is another opportunity for you as an investor to do so. Do not panic, this will pass.

In the office we have a sculpture by Linda Hoyle of a bull and bear that I commissioned (sounds fancy, but it wasn’t). This is in our reception and is a reminder that both are ever present, battling for the upper hand. There is opportunity in both. You can find Linda’s work here.

Download the pdf: Solomon’s Bull and Bear Markets

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

THE GLOBAL MARKETS2023-12-01T12:13:20+00:00
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