Managing money for the long term

As a wild generalisation, people are not very good at appreciating the impact of inflation over time. As part of this issue, savers also put excessive faith in cash now rather than cash later, so there is a great deal of scope for people to make poor decisions, repeatedly during their lifetime.

The Daily Mail reported the investment return on a misplaced Post Office Savings book between 1954 and 2018, where £1 1s 7d became only £4.88 over 64 years. To put inflation in context over the period, to have the same buying power that £1 1s 7d had in 1954, you would need to have £28.67 in current legal tender.

Attack in Salisbury threatens global stability

This week geopolitical tensions have heightened following an assassination attempt on a former Russian spy turned double agent. While this is pretty normal behaviour from the Kremlin, what makes this event so incredible is the method chosen. The reports suggest that a military grade nerve agent was used in a very public setting, an Italian restaurant. That the Russian government would sanction such a high-profile execution, willingly endanger members of the British public and expose the existence of a secret illegal chemical weapons program all suggests they were sending a message. What that message might be is unclear, but it can’t be good for global stability.

Read what the team at FE consider to be significant over the current week.

Trump accepts olive branch from Kim

This week markets have been reeling from a barrage of political events. Markets decided early on that Trump probably didn’t mean what he’d said last week about tariffs, but then took two on the chin when his chief economic advisor Gary Cohn quit, ostensibly because the president did mean what he said as we all found out when he signed an executive order to implement tariffs on Thursday. Before we could fully react to that, news broke that Trump has agreed to meet with Kim Jong-un, a complete break with decades of US foreign policy. The White House may have started a trade war and prevented a nuclear one within 48 hours.

Read what the team at FE consider to be significant over the current week.

Trump renews fear of global trade war

This week we have been rocked by two irrepressible forces of nature – the “Beast from the East” weather front and Donald Trump’s Twitter feed. While freezing weather has caused chaos across the UK, the suggestion that the US might impose heavy tariffs on steel and aluminium imports has the potential to do the same to global trade. While there has been a lot of noise surrounding the Trump presidency, he has largely followed the Republican playbook. If the trade war materialises however, this could cause a major shock to the global economy.

Read what the team at FE consider to be significant over the current week.

Fed minutes shake up markets

Minutes from the ECB’s January monetary policy meeting have confirmed that fears of Trumpian dollar manipulation and currency wars keep Mario Draghi awake at night. Meanwhile, Fed officials are more concerned than investors had thought about the pace of the country’s growth. This has heightened expectations that the Fed will raise rates four times this year, one more than had been priced into markets. This shook up stocks and bonds, with the S&P 500 ending the day 0.6 percent down and ten-year Treasury yields jumping to 2.94 percent.

Read what the team at FE consider to be significant over the current week.

Bond yields rise with inflation expectations

This week saw a small but significant rise in bond yields, continuing a trend which started in January and which is most likely due to increasing inflationary pressures and expectations of rates rising faster than previously thought. In the short-term equities have faltered too as investors reassess valuations of companies in the light of potentially higher discount rates. We would expect the direction of equity markets to change once there is a little more certainty about future rate hikes. Past Fed boards would have been quick to act to fix expectations, will the new chairman take a different attitude? Only time will tell.

Read what the team at FE consider to be significant over the current week.

The week of the global market sell-off

Wow. That escalated quickly. This week a major bout of volatility rocked markets with a worldwide sell-off prompting fears that the long bull run since the financial crisis might finally be over. However, it doesn’t look that way this time. Unlike sell-offs that have come before economic downturns, this week’s drama has been triggered by signs that the economy is doing too well. Better than expected employment and wage growth in the US have raised fears that interest rates might rise a little quicker than expected with the Bank of England delivering much the same message on Thursday.

Read what the team at FE consider to be significant over the current week.

Pound Cost Averaging and ISAs

Recent market turbulence has just reminded all equity investors that their investments can fall in value as well as rise; in practice, this is probably more a return to the norm, rather than a new phenomenon. Unfortunately, only time will tell!

Everyone needs to remember that there is at least one positive to market turbulence, especially when you are drip feeding money into a stocks and share ISA over a number of years. Not everyone can afford to put the maximum of £20,000 into an ISA in one go, so many people put somewhere between £50 and £1,666.67 in every month and use it to ride the rise and falls of the market.

Auntie May's postcards from the Yangtze

China has commended “Auntie May” for sidestepping human rights during her three-day official visit. We are hoping that she can live up to her nickname and secure a lucrative trade deal for Werther’s Original Hard Caramels because the future of this country’s other mainstay, financial services, is looking rockier than ever. EU diplomats rejected a special deal to guarantee free flows of financial services after the Brexit transition period. This casts further into doubt the nature of the country’s divorce with negotiations between the two sides only a month away.

Read what the team at FE consider to be significant over the current week.

Why financial advice?

As most of the main stream media are full of tales of bad advice and poor advisers, I was pleasantly surprised to see a positive piece on the Telegraph Money web page last week, (see here: Although the writer is a newly freelance journalist, concentrating on financial matters, she makes it clear that she has no specialist knowledge in the personal financial field and was surprised at the priorities of her new financial adviser. She was expecting a conversation about pensions and the adviser was asking questions about disablement and death!