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

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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?

Take Survey

PRIVACY POLICY | DATA PROTECTION

70 years – a Jubilee

Jemima Thomas
Jan 2023 • 4 min read

70 years – a Jubilee

We have spent the weekend reflecting on our Queen’s 70 years of service as monarch. An achievement that none of us will see repeated, barring the awful prospect of life being extended dramatically by new medication. HRH Prince Charles is 71; a reign of 70 years would make him 141. HRH Prince William is 40 later this month and so would have to live until at least 110 and would need to become King immediately (for the maths to work).

It is an achievement of longevity. The ONS data for England implies that the average life expectancy of a female aged 96 is another 2.8 years. A male now 71 has an average 16.23 years, whereas a male age 40 has an average 43 years remaining. Mortality statistics are most definitely all about survivors and it may strike you as a little odd that someone aged 40 appears likely to not live as long as someone aged 84. This has the really awful description of ‘mortality drag’ – the statistical reality of “the older you are, the longer you live”. Evidently the Windsor family have some above average advantage of longevity, with HRH Prince Philip living to age 99.

THREE FUTURE KINGS

You probably saw images of the balcony at Buckingham Palace of future monarchs ranging from age 8 to 71. I paused to reflect on the reality of this … most of us have not been in the same ‘job’ for 70 years, and none of us have been waiting for it to start for 71 years! Most of our clients are eager to retire and thereby determine how they set the agenda for each day rather than being held to account for a daily commute, however brief. Imagine having been in training for a role for 71 years.

Irrespective of views about monarchy in 2022, I think it fair to say that we have been witness to a unique milestone, a theme that we discussed in the latest edition of Spotlight (let us know if you have not received your copy yet). In theory we know who the next three Kings will be, whether they all eventually become King is another matter entirely. As much as I like to plan and help you to do so, I am glad of uncertainty and not having a life mapped out from the cradle, with rather limiting choices.

70 years of public service is an enormously big deal. The only people that I suspect may achieve similar lengths of service in their ‘career’ are those in religious orders; and however much the State Pension is mucked around with by politicians, it’s worth noting that working for precisely half that time would entitle you to a full State Pension. You would obviously require rather more than the State Pension to run a Palace, but mercifully we don’t have to worry about that problem – although your most recent energy bill may have you wondering if you are.

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