Ticking time bomb

I hope that this update finds you well and now enjoying some more social activities?

With us moving forward once more and the 17th behind us you may recall from my last update, I did wait for the fanfare on the 14th which didn’t come.

What I did see on the 17th, was people in pubs at midnight and the joy on faces in news reports with people returning to some more normal life.

The downside of this is that high streets remain relativity subdued and the hospitality sector questioning if they can carry on let alone just reopen indoors?

In some parts people remain nervous to go back out and move toward a more normal life with the threat of the new variant upon us, again.

The 21st of June is looking less likely now if we are predicting things and as we all know there is little smoke without fire. Hence the gentle rumbling and leaks that are currently being discussed and the fact this date may happen but looking a little different, i.e., local restrictions.

The Bank of England governor Andrew Bailey has announced they expect inflation to peak in the coming weeks then maintain this level but soften next year.

This interview and statement off him seemed poorly timed as inflation more than doubled in April from 0.7% to 1.5%. The expected rate is 2%, but the Bank of England now “thinks” it will be 2.5% by the end of the year and then return to normal.

That’s a real difference to the commentary and predictions at the start of the year may I add so it just goes to show how quickly things can change.

The US inflation rate recently hit 4.2% in April from 2.6% and this spooked the markets. Yes, this is partly driven by increasing travel and related services given these had been extremely depressed due to covid. However there has been a real upturn in food and energy prices that has driven this as well. This is now the highest inflation numbers since September 2008.

The upward trend of inflation is the elephant in the room and for our older readers you will remember the good old days of 15% interest rates and inflation the same to boot.

It’s extremely unlikely this will come back but inflation is a powerful way of us losing money without actually losing money. The cash in your pocket is slowing losing its buying power with saving rates not keeping up.

The equity markets are showing that you must be invested for the long term to tap into this potential area of growth. Getting inflation plus the bank base rate is only keeping your money standing still, nothing more.

We have seen the pound strength, so this has affected our domestic markets with a stronger pound we look less attractive. We have seen this before as the pound has gone up the markets down.

The markets have shown some resilience and with the global sell of tech and some profit taking from last year the value tilt is still having its time to shine.   Will it last, only time will tell, but once a value stock has made its money, the manager will sell the stock and move on.

As you can see, I am yet again banging the drum of inflation, I didn’t want to but it’s certainly something I am trying to prepare you for. The race to the bottom on prices has happened and with regards to fuel and food costs these will pick up. Brexit is having a marginal impact here with goods and produce so do expect the food bill to get a little more expensive.

The good news, equities are acting like equities and bonds like bonds (at last).

Commercial Property is returning to a more normal existence with a slightly clearer path ahead and these sites being put back in use once more.

Residential property remains the beast we just cannot tame, and the buyers are now outstripping the supply by some way. The race to the end of the new stamp duty holiday is well under way.

Cash is still dragging its feet and if this was a race it is still yet to get out of the traps. I would implore you to consider and review your cash reserves, are they needed, where are they invested, are they tax free and what rate am I getting.

As per my past comments being invested in a diverse portfolio is without doubt the best way forward here and as the domestic market starts to get further traction, we should see the undervalued UK assets pick up.

FTSE100

17/01/2020 = 7,674

07/05/2021 = 7,129

Still a little away off but the highest it’s been since January 2020 was on the 07/05 as per the figures above.

Finally, can you please update your safe senders mail list to include this address:

reviews@hallfinancialplanners.co.uk

I have been copying these updates to this mail address for some time now as well if you had noticed.

The reason for this is that we all have access to this central mailbox to ensure your ongoing needs are always met. Of course, continue to email or call us directly, we are here to help in any way we can.

If you have any questions at all on any of this or feel you want to bring your review forward from later in the year, please just get in touch.

Here’s to the 21st, fingers crossed!