Global markets remained volatile last week as traders assessed mixed results from some of the tech giants, while rising interest rates and fuel prices also added to market pressures.
On Friday, the price of a barrel of brent crude oil rose reached a seven year high. Meanwhile, the UK energy regulator Ofgem revealed its energy price cap would be increasing by £700 a year, fuelling worries around inflation and pressures on the cost of living.
Also, last week, the Bank of England voted to increase interest rates from 0.25% to 0.50% in a bid to counter rising inflation. This represented the first back-to-back interest rate rise the UK has seen since 2004.
Paul Dales, Chief UK Economist at Capital Economics, noted the Bank seemed more hawkish than many had expected. He said: “The decisions by the BoE to hike interest rates from 0.25% to 0.50% and to start reversing quantitative easing were both as expected…It feels as though the Bank is stepping up its fight against inflation. This supports our view that rates will be raised to 1.25% this year compared to the rise to 0.75% that most economists had been expecting.”
The same day the BoE raised its rates, the European Central Bank (ECB) said it would keep any policy changes on hold for now. However, Azad Zangana, Senior European Economist and Strategist for Schroders, noted the tone of the ECB’s press conference was decisively less ‘dovish’ than such a move implies.
Zangana said: “With inflation overshooting ECB projections that are just two months old, this should not be a surprise. Christine Lagarde, President of the ECB, was keen to emphasise the concern governing council members felt over inflation, and the impact on the population.
“When pressed, Lagarde would not repeat the guidance that interest rates were very unlikely to rise in 2022. Instead, [she] stated that a full assessment of incoming data and the risks to the medium-term outlook was required. This will follow next month.”
Turning to the US, markets were volatile following some mixed results from the largest technology names. On Thursday, Meta (formerly Facebook) struggled after it revealed its first ever drop in users, and the extent to which Apple’s recent iPhone privacy changes were hurting its bottom line. This saw the company lose over a quarter of its market capitalisation in a single trading session – approximately $230 billion, the largest one-day loss in US history.
While Meta witnessed the biggest fall, it was not alone. In a bad day for investors, companies such as PayPal and Spotify also dropped on weaker outlooks. Overall, these falls and the uncertainty they brought helped bring down the S&P 500 by 2.4%, and the NASDAQ down by 3.7% on Thursday. Both indices had started the week well; however much of this momentum was consequently wiped out on Thursday before a bounce back on Friday.
This serves as a reminder of the importance of diversification. With parts of the market struggling and others growing, a broad base of investments can help smooth returns in the short-term and provide a stable foundation for achieving long-term financial security.
The global situation remains complicated thanks to wider geopolitical events, specifically in the Ukraine, where Russia and the various Western powers remain locked in talks, with both sides accusing the other of stoking tensions.
Speaking at an Invesco Global Investors Forum, Sir Adam Thomson, former UK Permanent Representative to NATO, said investors were going to have to get used to an unstable equilibrium between the East and the West, as Russia attempts to assert itself as a great power and imposes its understanding of interstate relations.
While this might suggest increasing tensions in the future, Thomson suggested the West will get better at handling East-West relations. He also suggested an all-out invasion of the Ukraine by Russia was unlikely because “things are going well for Moscow” with the talks – and Russia may be able to receive significant diplomatic concessions preferable to war.
Money is never far from our minds. Sat at our desk, or in the middle of the night, we find ourselves thinking. ‘Will I ever be able to retire?’ Or ‘what if I need money fast to cover a medical bill?’
According to research from the Money and Pensions Service’s (MaPS) Financial Wellbeing Survey in November2021, 24 million of us feel ‘financially vulnerable’.
What do we do if we don’t know what to do? We turn to people we think know more than us, our friends or family. Or we Google it.
Suddenly, you’ve got information overload. Do the authors know what they’re talking about – could their advice leave you worse off, not better? What if it’s actually a scam?
Faced with 20 answers, not just one, many of us do nothing. Feeling that you’re not in control of your finances is like the floor dropping from under you. The effect on our financial wellbeing is undeniable.
Nowadays, especially post-pandemic, information overload has made our lives more complicated, not less.
According to Alex Loydon, SJP’s Director of Partner Engagement and Consultancy: “The access to information is both an advantage, and a disadvantage. Access has changed, but the complexity of finance hasn’t. Sometimes the more we know, the worse it gets. Anxiety levels go up – and confidence drops.”
Confidence is central to financial wellbeing. It’s not just knowing what an interest rate is, or the different sorts of ISAs. It’s an awareness of your own financial situation; how much money you have, how much you spend, or how much you need to retire on.
Talking to experts who can explain the complexities of finance and simplify your choices is the first step towards feeling confident, capable and in control.
There’s nothing like talking things over face-to-face. It boosts your financial confidence, it makes complex choices clearer, and decision-making simpler.
Because we build long-term, personal relationships at SJP, our clients feel safe sharing personal information. Having a clear, detailed road map towards a secure financial future is a real relief.
You can finally put the worries to bed.
“Higher energy prices are something that we’re going to have to adjust to in common with other countries around the world and it would be wrong to pretend otherwise,”
UK Chancellor Rishi Sunak explains that the higher energy prices are likely here to stay.
Capital Economics, Schroders and Invesco are Fund Managers for St. James’s Place
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