Should the Bank of England raise rates?

The Governor has warned us that a rate rise could happen soon. Markets have duly priced in an increase. The pound rallied strongly against the dollar, partly on that interest rate expectation. UK ten year rates and other longer term bond yields have adjusted upwards. The problem is that the economy is slowing. Treasury policy … Continue reading “Should the Bank of England raise rates?”

Nobody puts sterling in the corner

The story for September remains mundanely similar as for much of the year. Global political noise is barely being acknowledged by capital markets; central banks attempt to signal the way higher for rates without spooking the market; the global economy continues to bump along. Despite an increasingly aggressive stance from North Korea, a destructive hurricane … Continue reading “Nobody puts sterling in the corner”

When economic pessimism means more hikes, not fewer

There has been a striking shift in recent Bank of England (BoE) communication. In the minutes of its September meeting, policy makers noted that “some withdrawal of monetary stimulus is likely to be appropriate over the coming months.” This message was then reiterated in speeches by noted ‘dove’ Gertjan Vlieghe and Bank Governor Mark Carney. … Continue reading “When economic pessimism means more hikes, not fewer”

Markets shrug at May’s Florence speech

Theresa May’s speech confirmed that the UK is seeking a transition period but gave few further details on the final shape of Brexit. Investors had hoped that Prime Minister Theresa May’s Florence speech would be the factor that pushed Brexit negotiations forward. However, the speech was a slightly softer version of her Lancaster House speech … Continue reading “Markets shrug at May’s Florence speech”

Broken-hearted again …

Having raised interest rates by 0.25 percentage points in June, the Federal Open Market Committee has indicated that it expected to hike rates once more this year and that it plans to begin its balance-sheet normalisation program (its plan to sell off the assets that it purchased under quantitative easing) “relatively soon”. In the UK, … Continue reading “Broken-hearted again …”

What’s wrong with low interest rates?

Interest rates are low, but is this a problem?  After all, in times gone by the worry was that rising interest rates killed off economic expansions. You know the story: inflation picks up as economic slack diminishes; central banks slam on the brakes; and recession follows. Since the global financial crisis, however, interest rates (and … Continue reading “What’s wrong with low interest rates?”

Has unconventional monetary policy had its day?

“People will always try to stop you doing the right thing if it’s unconventional,” so said Warren Buffett in an interview for Time magazine in 2008.  Buffett wasn’t referring to monetary policy specifically, but there’s some truth in his adage if we apply it to the more controversial tools that central banks have used since … Continue reading “Has unconventional monetary policy had its day?”

Why a pension could be better than a Lifetime ISA

There’s a new savings option available this tax year – the Lifetime ISA – aiming to help anyone aged 18 to 39 save for a deposit on a house, or for later in life, or both. It promises to be a useful product, but pensions remain the primary means for investing towards retirement.    What … Continue reading “Why a pension could be better than a Lifetime ISA”

The big election risk to pensions

If Europe’s electoral calendar wasn’t already packed enough, Theresa May’s decision to go to the polls has added another event that will impact markets. The motivations for the early election are obvious. Polls have given the Conservatives a heady 15-20 point lead over Labour during recent months, which could see Mrs May’s narrow sub-20 seat … Continue reading “The big election risk to pensions”

How far will inflation and interest rates rise?

In February the US inflation rate as measured by the CPI hit 2.7%. In the UK the rate reached 2.3%. The US dollar had strengthened over the previous year, whilst the pound had weakened. Both economies were affected by rising oil and other commodity prices. In the USA the arrival of higher inflation led to … Continue reading “How far will inflation and interest rates rise?”

After the FTSE 100’s 37% return, should I still invest?

The FTSE 100 has soared in the past year and reached a new all-time high. Is the UK stock market still good value? The rise in the FTSE 100 since a low last February has been remarkable. The index was up 33% between 11 February 2016 and mid-January 2017. Including dividends, the index returned 37%. … Continue reading “After the FTSE 100’s 37% return, should I still invest?”

How the stockmarket returned 81% without moving

The FTSE 100’s record high barely beats the level of 1999, yet investors have been richly rewarded, highlighting the power of dividends. Reinvesting dividends is one of the most powerful tools available to an investor to boost returns over time. If you had invested £100 on 30th December 1999 in the FTSE 100, the capital … Continue reading “How the stockmarket returned 81% without moving”

Infrastructure spending: What’s not to like?

Is it time for an infrastructure push? The International Monetary Fund (IMF) thinks so, and we agree. Public infrastructure investment not only provides a short-term lift to demand; it also helps economies to grow faster without hitting capacity constraints. And to these two benefits, we would add a third: increased infrastructure spending could help relieve … Continue reading “Infrastructure spending: What’s not to like?”