February 2024
- Inflation and interest rates continue to dominate financial markets and the noise now is will interest rates increase, not, when will they decrease this is because inflation will not go away, and the US economy is impressing investors around the globe.
- A relevant issue is the absence of a significant recession in any of the largest economies. Finance like any other industry is good at nicknames/labels for events i.e., the technical term “recession” has been re-christened with terms like Hard Landing, Soft Landing and No Landing. These terms are being used to describe/forecast the depth of a recession, but now the most talked about event (a recession) is just not happening so a “No Landing” is being referred to
- Geopolitically speaking it’s good Jo Biden and Xi Jinping are committed to lowering US-China tensions as reported in the FT over the weekend, also reported was it seems there is a clear priority to avoid escalation with Tehran over the Red Sea attacks on shipping
- Whilst the US economy is stronger (although faltering now) economies in Europe and the UK are not, so there really should be more emphasis on interest rates falling there rather than the US
- Purchasing Managers indexes are down globally, and some say this is the most accurate way of forecasting a recession
As mentioned previously, elections can affect Investment Markets positively and negatively and there are elections this year in the US, Russia and the UK which the conservatives may well lose
- What are we getting right
- Staying away from direct investments in China
- Invested in Tech and staying with the US in general
- Not selling off our Fixed Interest exposure and watching their value return
- Watching out for cash accounts and short dated bonds ceasing to offer attractive levels of return and what to do when this happens
- What did we get wrong
- Investments in Infrastructure and we took too long to move away from agriculture
- Our portfolios are holding up well because: –
- Investing in underlying assets directly i.e., government gilts and high-quality corporate bonds
- We continue to insert structured products into our portfolios because by doing so introduces a certainty ingredient
- Our portfolios use fixed interest and fixed interest investments suffer when interest rates are high and there is more supply – this affects their value negatively. It should be remembered however with fixed interest you get your money back at maturity not the case with other investments so it’s a matter of holding these investments until interest rates start to come down or the investment matures.
Please note that:
- This information in isolation is not financial advice.
- Past Performance of investments is not to be relied on and the value and the income from investments can go up as well as down.
- It is advisable to regularly review your investments.
