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Climate change fears impact on ethical investing

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Climate change fears impact on ethical investing

Wednesday, November 6th, 2019

As pressure mounts on governments and financial institutions to do more to combat climate change, the demand for ethical investment opportunities is on the rise. 

Triodos Bank’s annual impact investing survey has found that nearly half (45%) of investors say that they would be keen to move their money to an ethical fund as a result of news surrounding the environment. When asked, investors state that they would put an average of £3,744 into an impact investment fund, marking an increase of £1,000 when compared with 2018. 

53% of respondents believe that responsible investment is one of the best ways to fight climate change and 75% agreed that financial institutions should be more transparent about where their money is invested. 

Gareth Griffiths, head of retail banking at Triodos Bank UK, said: “Many investors are no longer waiting for governments to take the lead in our transition to a fairer, greener society – they are using their own money to back the change they want to see.” 

Ethical investing isn’t a new practice by any stretch. In fact, some ethical funds have been available for the past 30 years, though they still only make up 1.6% of the UK industry total, according to research carried out by Shroders. 

That then poses the question, why haven’t they earned popularity in the past?

The old consensus was that investing ethically meant you were sacrificing performance for morality. A thought which seems to be changing, however, as research conducted by BofA Merrill Lynch found that a strategy of buying stocks that ranked well on ethical, social and governance metrics would have outperformed the S&P 500’s yearly result for the past five years. 

Further to this, a survey conducted by Rathbone Greenbank Investments found that over 80% of the UK’s high net worth individuals are interested in investing ethically. Many want to back the fight against climate change and plastic waste reduction but say that due to a lack of choice they still end up investing in fossil fuels or mining companies.   

The investment industry has recognised the change in attitude, leading to more and more fund management companies including ethical, social and governance factors in their core investment strategies. However, with the movement only just beginning to gain true momentum, it seems that time will tell when it comes to the mass adoption of ethical investment practices. 

If you have any questions about ethical investment and the impact it might have on your portfolio, feel free to get in contact. 

November Market Commentary

Wednesday, November 6th, 2019

The beginning of October brought us the Conservative Party conference and a plethora of promises and fiery speeches. Meanwhile world stock markets were tumbling on fears of a global sell-off and the US/Europe tariff war joining the US/China dispute. By the middle of the month President Trump declared himself ‘optimistic’ about trade talks with China. 

Come the end of October it looked like the World Trade Organisation (WTO) would allow China to impose tariffs on $3.6bn (£2.8bn) of US goods, a move that was confirmed in very early November.

Boris Johnson spent the early part of the month trying to persuade politicians at home and abroad to do – or vote for – a deal that would allow Brexit to happen on October 31st. By the end of the month he was preparing for a General Election – while his opposite number in the White House was facing yet more calls for his impeachment. 

Let’s look at all the events and figures in more detail…

UK

October was another month where the ‘retail gloom’ section has eclipsed all the others. Christmas is creeping up on us and reception desks in offices up and down the land will shortly be groaning under the weight of Amazon deliveries – as shops in our high streets continue to close. 

The month did start with some good news as Hays Travel stepped in to save the 555 Thomas Cook shops threatened with closure following the company’s collapse. But can Hays really save all the shops? There must be many towns where both companies have high street premises. 

Elsewhere it was the usual tale of woe as John Lewis went looking for discounts from its landlords, Bonmarché called in the administrators and Pizza Express said it was in talks to refinance a £1bn debt pile. 

A report in City AM highlighted the sharp fall in stores’ profit margins as operating costs continued to rise. Profit margins are apparently down from 8.8% in 2009/10 to 4.1% in 17/18, with retailers blaming inflexible leasing arrangements, high business rates and a 10% rise in operating costs over the last five years. 

Unsurprisingly, the BBC reported that 85,000 jobs had been lost in retail over the last twelve months, with the number of retail sector jobs falling (on a year-on-year basis) for the fifteenth consecutive quarter. 

November was, of course, scheduled to bring us Sajid Javid’s first Budget. One absolute certainty was that the phrase ‘reform of business rates’ would have featured in that speech, as the Chancellor looked to find ways to revive the national high street. With the General Election now scheduled for December 12th, any Budget is likely to be delayed into the New Year.

What of the rest of the economic news in the UK? 

There was certainly plenty of bad news in October: the Purchasing Managers’ Index in the service sector showed a ‘heightened risk of recession’. UK car sales in September were disappointing: house price growth is at its lowest for six years and UK productivity recorded its worst fall for five years. 

Meanwhile, climate change protesters Extinction Rebellion were targeting both London City Airport and the London Underground. 

Against that, figures released by the Office for National Statistics showed that the UK economy had grown by 0.3% in the three months to August. The ONS did not exactly cover itself in glory later in the month when it reported a £1.5bn ‘error in the public finances.’ Fortunately it was an error in the right direction, with the UK budget deficit being £1-£1.5bn less than the ONS had previously reported. 

By the end of the month the UK was gearing up for a December General Election – but the bad news was back, as consumer confidence dropped to minus 14 from the minus 12 recorded in September – the lowest level since July 2013. 

Perhaps this was reflected in the stock market. The UK’s FTSE 100 index was the only leading market we cover to fall in October. Having started the month at 7,408 it closed down 2% at 7,248. The pound, boosted by hopes of a deal with the European Union, went in exactly the opposite direction, rising by 5% in the month to close October at $1.2944.

Brexit: an end in sight?

For much of October, uncertainty looked set to continue as Boris Johnson tried and failed to get his new Withdrawal Agreement through the Commons. The House even sat on a Saturday – to the dismay of MPs who wanted to watch the Rugby World Cup – but it all proved futile. 

Reluctantly, the PM accepted an extension from the European Union, pushing the date of leaving the EU back for another three months. Now the uncertainty would go on until January of next year…

And then, on Tuesday October 29th Parliament finally voted for a General Election as the Liberal Democrats and SNP sided with the Government to by-pass the Fixed Term Parliament Act. 

The UK will therefore go to the polls on Thursday December 12th in – whatever anyone claims – will be an election about the future of Brexit. The battle lines are clearly drawn, and the Conservatives started the race with a 16 point lead over Labour. But the experts have been quick to point out that this will be an election where tactical voting will have a major part to play. There will certainly be ‘remain alliances’ in some seats: whether the Conservatives will eventually come to an agreement with the Brexit Party to counter that remains to be seen. 

Europe 

The big – and worrying – news in Europe was that the German economy appears to be heading for a recession, if it is not already in one. 

Figures released at the beginning of October showed that German industrial orders fell more than expected in August: this was due to weaker demand and added to signs that a manufacturing slump is pushing Europe’s largest economy towards a recession. 

Thomas Gitzel, economist at VP Bank Group, said that, “The German economy is [already] in the midst of a recession.” With the economy having shrunk by 0.1% in the second quarter, “The German government will come under pressure to give up its strict Budget policy,” added the economist.  

There was more bad news for Europe at the beginning of the month when the WTO gave the US the go-ahead to impose tariffs on $7.5bn (£5.8bn) of goods that it imports from the EU. It is the latest chapter in a 15 year battle between the US and the EU over illegal subsidies for rival planemakers Boeing and Airbus and – as Brussels threatened to retaliate – was largely responsible for the global share sell-off at the beginning of the month. 

Did October bring us the first moves towards a common European budget? European finance ministers have laid the groundwork for a shared financial mechanism, designed to be used ‘in the event of future economic shock’. Eurozone countries will be required to pay capped contributions into the fund and – presumably – be able to draw on the fund if they duly suffer an ‘economic shock.’ Countries who are struggling economically will be able to reduce their contributions by 50% ‘when necessary’. 

The end of October brought the news that Fiat Chrysler are in merger talks with PSA – owners of Peugeot and Vauxhall – to create ‘one of the world’s leading automotive groups, valued at around $50bn (£39bn). 

On the stock markets both the German and French indices enjoyed good months. The German DAX index rose 4% to close at 12,867 while the French stock market was up just 1% to close October at 5,730. 

US 

The US economy added 136,000 jobs in September as hiring continued to slow down: economists had been expecting a figure around 152,000. However, the previous figure of 130,000 reported for August was revised upwards to 168,000 and the two months taken together were enough to push US unemployment down to a rate of 3.5% – the lowest figure for 50 years. 

With Bill Clinton having famously said, “It’s the economy, stupid,” you would think – given those numbers – that Donald Trump would be a certainty to win a second term in the White House. Maybe not: November will see the Democrats continue their bid to have the President impeached, with Elizabeth Warren having emerged as the clear favourite to win that party’s nomination for 2020. 

Away from politics Microsoft was betting on ‘foldable not bendable’ as it unveiled folding devices with dual touch screens which it hailed as the future of mobile computing. There was more good news for Microsoft later in the month as it beat off competition from Amazon to win a $10bn (£7.7bn) contract from the Pentagon. The contract is for the Joint Enterprise Defence Infrastructure (‘Jedi’, obviously) and is aimed at making the US defence department more ‘technologically agile.’ 

Two companies, meanwhile, were having rather less successful months. First up was Facebook – where a host of big names were queuing up to disassociate themselves from the Libra cryptocurrency the company hopes to launch. Meanwhile Apple received any amount of flak for withdrawing an app – apparently under pressure from the Chinese government – which allowed protesters in Hong Kong to track the whereabouts of the police. To compound the misery, figures released at the end of the month showed iPhone sales slowing down. 

Perhaps Apple will be helped by the Federal Reserve’s decision to cut US interest rates for the third time in four months. As US economic growth for the third quarter slowed to 1.9%, the Fed cut rates to a range of 1.5% to 1.75%.

The Dow Jones index was up in October, but only by 129 points to 27,046 – leaving it unchanged in percentage terms. 

Far East 

October got off to a bad start for Japanese shoppers as the Government – pushing worries about a sales slowdown to one side – increased its sales tax for the first time in 5 years. The rate rose from 8% to 10%. 

But the country soon had even bigger worries, as it braced itself for Typhoon Hagibis, ‘the biggest storm for decades.’ Winds reached 140mph with some areas suffering from floods and landslides. 

China now has more ‘unicorns’ – tech start-ups valued at more than $1bn (£770m) – than the United States, but the figures for the third quarter showed the economy growing at its slowest rate since 1992. Admittedly that ‘slow’ rate was 6% – due to the continuing trade war with the US and falling domestic demand – but it was still below the government’s target of 6.1%. 

As anyone who has watched a news bulletin will know, the pro-democracy protests continued in Hong Kong and the economic consequences of the unrest were finally felt in October. With shops closed, public transport paralysed and tourists scared away, Hong Kong slid into recession in the third quarter, with the economy shrinking by 3.2% in the three months to September. That was much worse than the 0.5% contraction in the second quarter – and was well beyond economists’ worst fears. 

In common with all the major stock markets, those in the Far East fell at the beginning of the month in line with the global sell-off, but they had all – even Hong Kong – recovered by the end of October. Despite the typhoon, Japan led the way, rising 5% to 22,927 and Hong Kong’s Hang Seng Index shrugged off the news about recession to rise 3% to 26,907. The Chinese and South Korean markets were both up by 1%, closing October at 2,929 and 2,083 respectively. 

Emerging Markets

We have written previously about the economic problems in Argentina, a country that held an election in October. The winner was the centre-left candidate Alberto Fernandez in a vote inevitably dominated by economic concerns, with the recent – and continuing – crisis leaving a third of Argentina’s population living in poverty. 

It was a quiet, but profitable, month for Brazil, Russia and India as they all moved in the right direction in October. The Brazilian stock market rose another 2% to end the month at 107,220. The Russian market was up by 5% to 2,894 and the Indian market broke through the 40,000 barrier, ending October up 4% at 40,129. 

And finally…

With all this uncertainty around the world you’d be forgiven for harking back to ‘the good old days’. Shepherds in Spain did this by allowing their flocks of sheep – in their thousands – to follow ancient migration routes from the north of the country to the south for some winter grazing. What’s noteworthy about this annual event is that one of these ancient routes has, since the Middle Ages, been replaced with a large portion of the city centre of Madrid. Dodging sheep is certainly a change from their more popular running from bulls!

While we’re on animal news, rats hit the headlines when psychology professor Kelly Lambert taught them to drive. Strangely enough it was not the fact they were driving that shone the spotlight on the cruising critters. Instead, research found that driving reduced their stress levels… though they were not expected to sit a driving test.

And on that note, we wish you a great month.

Can you still trust your Fund Manager?

Wednesday, October 30th, 2019

October has not been a good month for fund managers (the people who make the investment decisions that dictate how well your savings and investments perform).

There have been two very high profile resignations – one as a result of a Sunday Times investigation, the other from a Panorama exposé. Unsurprisingly, clients have been asking us questions, so we decided to write this short article outlining what has happened and, more importantly, dealing with any worries clients may have.

The Downfall of Neil Woodford

There cannot be anyone in the financial services industry who has not heard of Neil Woodford. He began his career with Reed Pension Fund and TSB and then, aged just 27, became a fund manager with Eagle Star. In 1988, he moved to Invesco Perpetual where he really made his name. Woodford ran their Income and High Income funds, with combined assets approaching £25bn.

He gained a reputation as one of the UK’s leading – if not the leading – fund managers, famously avoiding the worst of the dot com bubble in the 90s and the 2008 financial crisis.

In 2014, he left Invesco Perpetual to form Woodford Investment Management, operating both a listed investment trust and an equity income fund. But in March 2019, the Sunday Times launched an investigation following two years of poor performance that had seen fund assets contract by more than £5bn.

The investigation found that Woodford’s flagship fund held less than 20% of its assets in FTSE 100 companies, compared to more than 50% when it was formed. More than 20% of the assets were in much riskier Alternative Investment Market companies. The Equity Income fund was suspended in early June, following the inevitable withdrawals by investors subsequent to the Times’ investigation.

St James’s Place terminated Woodford’s contract to run three of its funds – with assets of £3.5bn – and the Financial Conduct Authority launched a formal investigation. On October 15th the company announced that the Equity Income fund would close, and on the following day Neil Woodford announced that he would resign from his remaining investment funds and ‘close the company in an orderly fashion.’

Meanwhile, at Capital Group…

This time it was an investigation by the BBC Panorama programme rather than a newspaper, but the end result was the same.

Mark Denning was one of Capital Group’s leading fund managers: he’d been with the company for 36 years and helped to manage some £229bn of assets. The allegations from the BBC programme – screened on October 21st – were simple: Denning had used a fund based in Liechtenstein to buy shares in companies his funds had backed.

Despite denying any wrongdoing, he swiftly resigned, with Capital Group equally quick to release a statement: We have a Code of Ethics and personal disclosure requirements that hold our associates to the highest standards of conduct. When we learned of this matter we took immediate action.

Patently, investment fund managers are not supposed to invest in the same companies as their funds, as they could potentially profit at the expense of investors. Given the Panorama investigation, neither Capital Group nor Mark Denning had any choice as to what to do.

Our Thoughts

It has been said that Neil Woodford’s spectacular downfall was caused by a lack of scrutiny. At Invesco Perpetual, wrote the BBC, ‘he was challenged on his investment decisions.’ The inference was clear – when it was his own name over the door, there was not the same degree of scrutiny.

Rest assured that scrutiny is exactly what we provide on your behalf. It is a fundamental part of advising you on your savings and investments that we match any advice we give you to your investment risk profile. That means your investments are spread geographically, by sector and – yes – by fund manager.

We also speak to fund managers regularly, and meet them at industry events. Almost without exception, they are hard-working, diligent and have nothing but the best interests of their investors at heart. Two such high-profile cases coming close together has inevitably focused attention on fund managers – but it does not mean that the two cases we’ve outlined are representative of the wider profession.

Rest assured that we will continue to monitor the performance of your savings and investments as diligently as we have always done – and that we will continue to meet with and scrutinise the fund managers we trust to look after our clients’ money.

Hopefully these brief notes will have set minds at rest and answered any questions you may have had. But, as always, if you would like to discuss matters with us in more detail, we are never more than a phone call or an email away.

Help to Buy ISA deadline is looming

Wednesday, October 2nd, 2019

After 30th November 2019, potential first-time buyers will no longer be able to apply for a new Help to Buy ISA.   

Savers who already have an account will be able to keep saving into it until 30th November 2029, regardless of when the ISA was opened, but accounts will close to additional contributions after that date. 

What is the Help to Buy ISA?   

The Help to Buy ISA was introduced to help first-time buyers over the age of 16. Individuals receive a bonus of 25% of their savings when it comes to purchasing a property, up to a value of £3,000. They can put £1,200 into the ISA in the first month, while subsequent payments are limited to £200 a month. The final criteria is that the property purchase cannot exceed £250,000 (£450,000 for London) if the buyer wants to receive the 25% boost. 

How does the Lifetime ISA differ?

The Help to Buy ISA is not the only option available. The Lifetime ISA is designed to help people aged between 18 and 40 to save towards their first home or for later life. The Government will again give a bonus worth 25% of what is paid in, up to a maximum of £4,000 per year. Savers can then receive a maximum of £1,000 per year as a government bonus. This can be used to buy a home worth up to £450,000 anywhere in the country. 

Both ISAs can be helpful when it comes to saving for a first-time property purchase, although there are some marked differences between the two. 

The Lifetime ISA rules mean that savers have to wait at least a year before they can use it to buy a home. With the Help to Buy ISA, individuals have to have saved £1,600 before they can claim the minimum government bonus of £400 but this can be done over a period of three months: £1,200 in the first month followed by two subsequent deposits of £200 in the next two months. 

It is possible to spread deposits across multiple ISAs. However, the maximum that can currently be saved in ISAs is £20,000 for the 2019-2020 tax year. 

Helping your children get their first house 

Given the struggles the younger generation face to get on the property ladder today, you may be wondering the best way to give financial support. If you’re considering giving your child enough money for a deposit, there are no immediate tax implications. You can give as much money as you like to your children tax free, but if you were to pass away within seven years of the gift, they could be faced with an inheritance tax bill if your estate was worth more than £325,000. You can gift up to £3,000 a year without paying inheritance tax.            

If your children or grandchildren are interested in taking out a Help to Buy ISA, encourage them to do so as soon as possible before time runs out. If you would like to know more about the options around gifting money to your children to help with a deposit on a house, don’t hesitate to get in touch.  

Own a second property? Look out for Capital Gains Tax changes.

Wednesday, September 25th, 2019

There have been several changes relating to Capital Gains Tax (CGT) over the past few years. The coming years are set to bring more. Here’s our summary of some of the more important changes coming that might be coming into effect from April 2020. 

If you are thinking about selling a residential property in the next year or two, you need to know about proposed changes to the capital gains tax rules for disposals from April 6th 2020. 

If you only own one property and have always lived there, you should not be affected. However, if you own more than one property or you moved out of your only property for a period of time, you might face a capital gains tax bill. 

The two main changes you should be aware of are: 

Final period exemption 

The last period of ownership counting towards private residence relief will be reduced from 18 months to just nine. Currently, the final period exemption allows individuals a period of grace to sell their home after they have moved out. However, the government feels that individuals with multiple residences have been taking advantage, hence the reduction.   

Lettings relief

Lettings relief is set to be removed, unless you live in the property with the tenant. For UK property, HMRC must be notified and tax paid 30 days after completion rather than the January following the end of the tax year in which the disposal took place. Failure to pay on time will result in HMRC imposing interest and potential penalties. 

With no transitional measures in place, this means that higher-rate taxpayers previously expecting to benefit from the maximum potential relief of £40,000 could be lumped with £11,200 extra tax overnight. 

Here’s an example of how the new taxes could influence a sale:

Steve, a higher rate taxpayer, bought a flat in April 2009 for £100,000. He lived there for 6 years until April 2015 before moving out to live with his partner. He let the flat until 2020 when he sold it for £300,000. The sale was completed on 4th June 2020. 

If the contracts were to be exchanged before the April 2020 changes, a CGT of £6,618 would be due. However, after the deadline a CGT of £21,636 would be due, payable seven months earlier – this is due to there being a lower period of private residence relief and a lack of lettings relief. 

The next steps

The two above changes are set to be enacted as part of the 2020 Finance Act and at the moment are not definite. The consultation to these steps closed on 5th September 2019. Assuming that draft provisions reach the Finance Bill 2019-20, we will have to see if any changes are made to either after it is debated in Parliament. 

Marshmallows and financial planning

Wednesday, September 11th, 2019

The Stanford marshmallow experiment is one of the most famous pieces of social science research out there. It has arguably influenced the way that many people live their lives, in addition to providing plenty of fun and interest for those with young children who are in the ‘I’ll try this at home’ camp.

So what is the marshmallow test? 

A marshmallow is placed in front of a child, they are told that they can have a second one if they can go 15 minutes without eating the first one – then they are left alone with the marshmallow.

As you can imagine, many children ate the marshmallow as soon as the door closed, others fidgeted and wiggled as they tried to restrain themselves, eventually giving in. A handful of children managed to wait the entire time. 

Following the experiment, the children were monitored as they grew up and it was found that those who waited for the second marshmallow performed better in exams, had a lower likelihood of obesity, lower levels of substance abuse and their parents reported that they had more impressive social skills. 

In other words, it could be said that the ability to delay gratification is a trait that leads to valuable rewards in the future. 

So how does this relate to financial planning?

The results from the experiment can easily be applied to the way you save and invest money. Simply put, if you save rather than spend now, you’ll gain greater rewards in the future. 

How do you delay gratification?

Cutting out frivolous and impulsive purchases are a good start. Think to yourself: ‘do I really need this?’ Do you have to buy a coffee from the coffee shop near work? Do you have to eat out twice a week? Small acts of restraint can lead to a big pay off in the future. 

When it comes to building a financial plan, it’s important to identify the levels of savings required for achieving goals in the future. Are you aiming for an early retirement or buying a holiday home? Setting out these goals early and developing a plan will help you to streamline your saving strategies so that you remain on track. Just remember, one marshmallow now or many marshmallows later.   

Whatever you want to purchase: a boat, a house or a car, delayed gratification is an extremely valuable skill to learn when it comes to achieving your financial milestones. The more you see your savings grow, the more motivated you will be to keep going. It’s good to see your hard work pay off and over the span of a few years, you could see dramatic increases in your wealth and financial security. 

September Market Commentary

Wednesday, September 4th, 2019

Introduction 

August is traditionally known as the ‘silly season’. The great and the good are on holiday. Nothing is happening: there are no world events. So the newspapers have to resort to any number of peripheral and not-at-all-serious subjects to fill their columns. 

Not this year. 

Most of the headlines in the UK concerned Brexit. This Commentary is written on 1st September with no idea what will have happened by the end of the week, never mind by 31st October when the UK is – currently – scheduled to leave the European Union. 

But the big story of the month was not Brexit, but the continuing trade war between the US and China. The President didn’t mince his words: 

“Our country has lost, stupidly [sic], trillions of dollars to China over many years. They have stolen our intellectual property […] and they want to continue. I won’t let that happen! We don’t need China and, frankly, would be far better off without them. […] Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies home and making your products in the USA.” 

China was not slow to respond as these words went hand-in-hand with another raft of tariffs. China has hit back against the Trump administration with a drastic exchange rate devaluation, almost guaranteeing a superpower showdown and a lurch towards a full trade war. The yuan blew through the symbolic line of seven to the dollar for the first time since the global financial crisis. […] The calculated action by the People’s Bank threatens to unleash a wave of deflation across the world and risks pushing East Asian countries and much of Europe into recession. It is certain to provoke a furious response from the White House. 

Capital Economics commented rather more succinctly that Beijing had taken the fateful step of ‘weaponising’ its currency. 

It is therefore hardly surprising that Reuters described the world economy as ‘probably being in recession with most business indicators flat or falling.’ And this was reflected on world stock markets, as none of the major markets we cover managed to gain ground in August. 

UK 

Boris Johnson ‘enjoyed’ his first full month as Prime Minister with Brexit dominating the agenda: as always there is a special Brexit section below, so let’s push it to one side for the moment. 

Figures released in the middle of the month showed that the UK economy had contracted for the first time since 2012, shrinking by 0.2% between April and June. However new Chancellor Sajid Javid has said that he does not expect the UK to slide into recession. 

There’s plenty of gloom on the UK’s high streets. July 2019 was the worst month on record for retail sales growth as consumer spending fell to a record low. Unsurprisingly this will result in job losses – Tesco is to cut 4,500 jobs at its Metro stores – and store closures. Shoe retailer Office is to close half its UK stores and empty shops are at their highest level for four years. 

There was one ray of sunshine – literally – as the good weather saw pubs and restaurants post modest monthly growth, although those with the beer glass half empty will point out that restaurant closures are continuing to rise. 

There was, though, plenty of news for those who prefer to see their glass as half full. 

Figures for June confirmed that wage growth had reached an 11 year high at 3.9% and that the employment rate was at its highest since 1971. The rate is estimated to be 76.1% with 32.81m people in employment – 425,000 more than a year ago. 

There was plenty more good news: Derby train maker Bombardier won a £2.34bn contract to make trains for the Cairo monorail, beating off ‘pharaoh-cious’ competition from Chinese and Malaysian firms. Overall, exports from the UK were up by 4.5% in June, the best performance since October 2016. 

There was also news of booming investment in the UK tech sector, especially from the US and Asia, as tech start-ups attracted a record $6.7bn (£5.58bn) in funding in the first seven months of this year. 

Mortgage lending also jumped to a two-year high as figures for July confirmed the approval of 67,306 mortgages, up from 66,506 in June. 

It wasn’t just the high street where there was bad news. Belfast ship maker Harland and Wolff – the firm best known for building the Titanic – called in the administrators, putting 120 jobs at risk. Optimism in the UK services sector also fell sharply and – in line with the rest of Europe – output was down in the UK car industry. 

Unsurprisingly, the FTSE 100 index of leading shares – along with the world’s other markets – had a difficult time in August, falling by 5% to 7,207. The pound was unchanged in percentage terms, ending the month at $1.2165. 

Brexit planning 

This section could be out of date within a matter of hours. 

Over the last month we have Boris Johnson in talks with Angela Merkel and Emmanuel Macron. One of his key demands has been the removal of the Irish backstop: do that, he has said, and then we can talk about the rest of the Withdrawal Agreement. 

His threat has always been that the UK would otherwise leave the European Union with ‘no deal.’ There seems to be a growing number of MPs getting ready to fight the Government and oppose a ‘no deal’ by seizing control of the House of Commons agenda – possibly aided by the Speaker – and making ‘no deal’ illegal. The Government hints that if this happens they will simply ignore the legislation. 

All this is, of course, set against the background of the Prime Minister’s decision to prorogue parliament (ending what has been a very long sitting) in readiness for a Queen’s Speech. Depending on your view, this is either a ‘coup against democracy’ or a perfectly normal decision by the Executive. 

As of early September, the country faces a possible General Election on 14th October, with the Prime Minister and Jeremy Corbyn trying to outwit each other. As we said earlier, there’s every possibility this is old news by the time you read this. 

Europe 

It was hard to find much good news in Europe. The month opened with the news that growth in the Eurozone economy had slowed as German output fell to a six-year low and the manufacturing sector continued to struggle. Germany’s overall Purchasing Managers’ Index was down to a 73-month low of 50.9 as the economy dealt with the US/China trade tensions, the overall global slowdown, weak demand from China and the uncertainty over Brexit. 

Against this, the service sector did well and wages rose, as the Eurozone reflected what is now a familiar pattern for so many developed economies. 

Figures in the middle of the month confirmed that the overall German economy had shrunk by 0.1% in the three months to June. A similar story in the three months to September would see Europe’s biggest economy officially in recession. 

August saw the return of political uncertainty in Italy – inevitably leading to a sell-off of Italian bonds and a fall in the stock market – as Matteo Salvini, leader of the right-wing League party, called for a snap election. 

By the end of the month a new government had been formed without Mr Salvini, as the anti-establishment Five Star movement formed a new coalition with the centre-left Democratic Party (PD). “We consider it worthwhile to try the experience,” said Nicola Zingaretti of the PD. We shall see…

Despite the gloom it was a relatively quiet month on Europe’s major stock markets. In keeping with the majority of world markets both Germany and France were down, but not significantly. The German DAX index dropped 2% to 11,939 while the French stock market fell just 1% to end the month at 5,480.  

US 

Given its impact on the wider world economy it seemed sensible to cover the US/China trade dispute in the Introduction, so this section deals purely with matters domestic. 

August started with a spat between the President and the Federal Reserve, as the Fed – as expected – cut US rates by 0.25% to a range of 2% to 2.25% and the President – as expected – said that it wasn’t enough. Federal Reserve Chairman Jerome Powell described the cut as a ‘mid-cycle adjustment to policy.’ His boss demanded ‘an aggressive rate-cutting cycle that will keep pace with China, the EU and other countries around the world.’ 

A few days later it was announced that the US had added 164,000 jobs in July – well down on the 224,000 jobs created in June but broadly in line with expectations. Unemployment remained flat at 3.7% and hourly earnings were 3.2% up on the same period last year. 

There was worse news later in the month as inflation rose to 1.8% (from a previous 1.6%) thanks to rises in gasoline and housing costs. This, of course, means that the Federal Reserve are likely to be more cautious about future rate cuts, which will presumably not do much for the President’s temper. 

In company news, Uber’s shares dropped 13% as it unveiled what were coyly termed ‘disappointing profit figures’ but which were really a thumping record loss of over $5bn (more than £4bn) for the three months to June 2019. Meanwhile co-working space provider WeWork unveiled a loss of $900m (£750m) in the first six months of the year and announced that it would seek a stock market listing. Whatever happened to that quaint notion of companies making a profit and paying a dividend to shareholders? 

By the end of the month the President was back on the attack, confirming that he was planning a new, temporary cut in payroll tax in a bid to further boost the US economy. “A lot of people would like to see it,” said the President. 

Wall Street generally likes to see news of tax cuts, but in August there were just too many worries about the trade war with China for the Dow Jones index to make any headway. It was down 2% in the month, closing at 26,403. 

Far East 

All roads in the Far East led to Hong Kong in August as the pro-democracy protests continued and the authorities became more and more determined to quash them. The month ended with tear gas, water cannons and threats of five-year jail sentences for anyone taking part in the protests. 

Throw in the continuing trade war between the US and China and August was inevitably a difficult month for the region’s stock markets, as we will see below. 

The month had also started with another trade row, albeit on a much smaller scale. Japan has removed South Korea from its list of ‘trusted trading partners,’ citing security concerns and poor export controls. Unsurprisingly, Japanese car sales in South Korea duly slumped. 

There are now growing fears that the US/China trade war and general worries about the global economy will push some of the smaller, ‘innocent bystanders’ in the Far East – such as Hong Kong and Singapore – into recession. 

In the region’s company news Samsung launched a range of new phones – but Samsung heir Lee Jae-yong, along with disgraced former President Park Geun-hye, now faces a retrial on bribery charges. Meanwhile China’s leading specialist facial recognition company Megvii decided to seek a stock market listing. 

Inevitably the pro-democracy problems and general unrest in Hong Kong had to impact economic growth at some point. Figures for the second quarter of the year showed that the economy had grown at just 0.5% year-on-year, which was below expectations. So it was no surprise to see the Hong Kong stock market down by 7% in the month, as it closed August at 25,725. 

China’s Shanghai Composite index was down 2% at 2,886 and the South Korean market fell 3% to 1,968. Japan completed a miserable month for the region’s stock markets as it dropped 4% to close August at 20,704. 

Emerging Markets 

It is easy to think that the big story in Emerging Markets was the fires in the Amazon rainforest. The G7 offered Brazil money to combat the fires – which President Jair Bolsonaro immediately rejected as he traded insults with French President Emmanuel Macron. 

Of greater long term significance to the financial markets – and the wider economy of South America – might well be the political and economic developments in Argentina. Both the peso and the Argentinian stock market plunged after a shock defeat for President Mauricio Macri in mid-month primary elections. The peso fell 15% against the dollar, while some of Argentina’s leading stocks lost 50% of their value. 

In early September, the Argentine Central Bank imposed currency controls as the crisis deepens, with the country also looking to suspend debt repayments to the International Monetary Fund. 

Fortunately, it was a much more sober month for the three major emerging stock markets we cover. The Russian market barely moved at all, rising just one point in the month to 2,740. The Indian market was also unchanged in percentage terms, closing August at 37,333 and, despite all the controversy and criticism of the government’s response to the fires, the Brazilian stock market was down just 1% in the month at 101,135. 

And finally…

All too often, the news was depressing. That is especially true if you are one of the directors of that well-known financial institution the Bank of Mum and Dad, now one of the biggest mortgage lenders in the UK. 

According to recent figures from L&G the Bank of Mum and Dad lent (or gave) a total of £6.3bn last year to help its children get on the housing ladder. The UK’s 10th biggest mortgage lender, the Clydesdale Bank, lent just £5bn. 

The average amount lent by the Bank of Mum and Dad is £24,100 – up by £6,000 on the previous year. But not content with running a bank, it appears that Mum and Dad have decided to diversify – and the Hotel of Mum and Dad is doing record business. 

According to the Office for National Statistics a quarter of the young adults in the UK – those aged 20 to 34 – live at home, with the number growing steadily over the past 15 years. According to a survey by MoneySuperMarket of 500 adults living at home and 500 parents who had adult children living with them, the ‘kidults’ were at home for an average 9.7 months and cost Mum and Dad £895 as they emptied the fridge, had their washing done for them and demanded that the old people open a Netflix account. 

This year the stay has extended to more than 10 months and the cost has escalated to more than £1,600 as water, heating and electricity costs have risen at the hotel. 

Apparently many of the guests are also demanding a steady stream of takeaways. A welcome distraction, perhaps, from reading the latest Brexit updates.

The generational gap in savings

Wednesday, August 21st, 2019

A new report by Scottish Widows (SW) has found that savings habits among younger people are rather lacking when compared with older generations. 

14% of people aged 20-29 are not saving any money, whereas 20% are saving between 0-6% of their wages and 26% are saving between 6-12%. That leaves only 40% of people between the ages of 20 and 29 making what SW deems to be ‘adequate’ savings (12% and upwards). 

The figures differ for those over 30 where 59% of savers are saving adequately. 

Scottish Widows outlines that the central problem with savings in the UK is that people simply aren’t saving enough. This could be attributed to the decline in defined benefit pension schemes and wider economic challenges. Though progress has been made, with record highs in the adequate savings category, according to SW, this is still not enough. 

The lower level of savings among younger people is likely to be a reflection of differences in priorities. SW’s study found that 45% of younger savers (under 30s), the highest of any age group, are saving towards medium-term goals such as buying a house. 27% were found to be saving for the long term and 28% were saving for rainy days. 

SW notes that the savings gap for young people “is perhaps unsurprising but nonetheless worrying.” Those under 30 are at a time where long-term saving can be hardest, yet investment growth can be advantageous. SW outlines how younger people are missing out on “the power of compound growth.“ 

They later go on to present four interlocking issues that have led to this general lack of savings made by younger generations:

  • Most people remain disengaged with long-term savings – 38% of people are not aware how much they are saving 
  • Financial pressures – 28% of individuals earning between £10,000 – £20,000 say they’re not saving at all
  • Self-employed individuals are being left behind – 41% of the self-employed aren’t saving at all
  • Home ownership is a struggle for young people – 56% of 20-29 year olds say they have not saved for a deposit

Scottish Widows then set out a number of reforms that would benefit savers: 

  1. Raise pension contribution rates – a new level of 15% to give people a chance to maintain their quality of life during retirement
  2. More flexibility between pensions and property – including the ability to use some retirement savings to help with the purchase of their first property
  3. Create better education and guidance – which includes information on the role of property and pensions in retirement
  4. Provide a hardship facility – allowing some savings to be used to avoid problem debt
  5. Ensure the self-employed have access to similar benefits as those in employment

Though there are marked improvements from last year’s report, it seems there is still a long way to go in terms of saving habits in younger individuals. As suggested above, there may even be a requirement for governmental reform in order to achieve the goals that Scottish Widows have set out.

For advice on how to develop savings plans to stand the test of time, don’t hesitate to get in touch.  

Find the right investment for you

Wednesday, August 21st, 2019

In the wake of the Woodford debacle, there’s a lot of buzz around investments and the rationale for choosing them. So we thought it would be useful to outline what you should be thinking about when it comes to choosing an investment to enable you to get the best outcomes for your money. 

Review your goals

It sounds obvious, but taking the time to think about what you want from your investments is key to selecting the correct fund for you. Writing down your needs, your goals and how much risk you may be prepared to take is a good starting point. 

Consider your investment’s lifespan

How soon will you need your money back? Timeframes will vary between goals and will affect the level of risk you are prepared to take. For example:

  • If you’re saving for a pension to be accessed in 30 years’ time, you can ignore short-term falls in the value of your investments and focus on the long term. Over longer periods, investments other than cash savings accounts tend to deliver a better chance of beating inflation.
  • If your goals are shorter term, i.e saving for a big trip in a couple of years, investments such as shares and funds might not be suitable as their value can fluctuate, so it may be best to stick to cash savings accounts. 

Make a plan

Once you’ve identified your needs, goals and risk levels, developing an investment plan can help you to find the sort of product that’s best for you. Low risk investments such as Cash ISAs are a good place to start. After that, it’s worth adding some medium-risk investments such as unit trusts if you’re comfortable with higher volatility. 

Adding higher risk investments is something you’ll only really want to approach once you’ve built up a few low to medium-risk products. However you should only do so if you’re willing to accept the risk of losing some or all of the money you put into them. 

Diversify, diversify, diversify

You’ve probably heard it before, but diversifying is a key part of investment planning. It’s a basic rule that to improve your chances of better returns, you have to accept more risk.  Diversification is an excellent method that improves the balance between risk and return by spreading your money across different investment types and sectors. 

Avoid high risks 

As mentioned above, it’s best to avoid high-risk investments unless you’re willing to accept the chance that you might not see any returns or even lose your investment. Adverts that proclaim to offer high levels of return will rarely come without risk and we’d urge caution before investing in anything that you’re not 100% certain about. If you do decide to pursue a high-risk product, it’s vital to make sure you fully understand the specific risks involved. 

With all investments comes a degree of risk, and returns can never be wholly guaranteed. Of course, we would always advise talking to an independent financial adviser. For more information, feel free to get in touch.

August Market Commentary

Wednesday, August 7th, 2019

Gold hit a six-year high as nervous investors looked for alternatives to stock markets. The IMF cut global growth forecasts amid continuing trade tensions.

In any normal month these would have been perfectly normal introduction, but July was not a normal month. With Boris Johnson becoming UK Prime Minister and sweeping into 10 Downing Street on a wave of promises to deliver Brexit ‘do or die’ by 31st October – only a handful of months away. 

How you feel about that commitment will almost certainly depend on how you voted in the 2016 Referendum. If you voted Leave then Boris is showing real leadership, we finally have a Prime Minister who is negotiating from a position of strength and he has achieved more in a week than Theresa May achieved in three years.

If you voted Remain then Johnson is threatening the union of the UK, driving the pound to dangerously low levels and risking – if not actively seeking – a catastrophic ‘no deal’ exit on 31st October. 

The one thing we think you can now say is that the UK will leave the European Union on 31st October. The public commitments to that date have been so clear that any backtracking is unthinkable. But there remain any number of imponderables, as we discuss in the Brexit section below. 

And so to the other world news that made the headlines in July. And yes, gold did hit a six year high of $1,450 (£1,190) an ounce as jittery investors looked for a safe haven. Gold is up by 6% over the last month and 12% in the last year as the US/China trade dispute, lower growth prospects for world trade and worries about inflation if the US Federal Reserve cut interest rates all added to investors’ uncertainties. 

Meanwhile, the International Monetary Fund (IMF) has trimmed its growth forecasts for the global economy for both this year and next year. Growth for this year is now forecast to be 3.2% – down from the 3.3% forecast in April – with growth for 2020 forecast to be 3.5%. Growth “remains subdued” said the IMF, with an “urgent need” to reduce trade and technology tensions. However, the IMF did raise its forecast for UK growth, from 1.2% to 1.3%. 

July was a generally uninspiring month for world stock markets. Of the major markets we cover in this Commentary only four made gains, and none of those gains were significant. Let’s look at what happened in more detail.

UK 

June was a wet month and UK high street retailers duly reported a ‘wash out.’ Total sales decreased by 1.3% in the month, taking the yearly average down to a 20-year low according to research from the British Retail Consortium. 

Bookmaker William Hill added to the gloom with plans to close 700 shops – putting 4,500 jobs at risk – and there are suggestions that up to 3,000 betting shops could close up and down the UK as gamblers increasingly move online and the reduction in stakes on fixed odds betting terminals starts to bite. 

And it is not just betting shops. A report from Retail Economics predicted that internet shopping will overtake physical stores by 2028 as deliveries become faster, cheaper and more convenient. The trend will be driven by millennials and Generation Z, who will form 50% of the adult population in the next decade. Ten years from now our high streets will be very different places – if they exist at all. 

Away from the high street there was good news in July though, as Amazon (who else?) announced plans to create up to 2,000 new jobs, taking its UK workforce up to nearly 30,000. 

Japanese telecoms company NTT announced that it would be opening a global HQ in London for one of its subsidiaries and at the end of the month Hitachi Rail announced a £400m investment at its plant in Newton Aycliffe, County Durham.

Jaguar Land Rover also unveiled an investment of ‘hundreds of millions’ to build a range of electric vehicles as its Castle Bromwich plant, which will secure the jobs of 2,700 workers at the plant. But – as there was across Europe – there was also bad news for the UK car industry, with Nissan threatening to cut 10,000 jobs worldwide and the Society of Motor Manufacturers and Traders saying that overall investment in the industry has ‘plummeted.’

From the roads to the rail. Boris Johnson has long been sceptical of HS2 and the chairman of the project has now written to the Department of Transport saying that it ‘cannot be delivered within its £56bn budget and the cost could rise by £30bn. There is bound to be a review of the project but meanwhile the Prime Minister used a speech in Manchester to commit to a faster trans-Pennine rail link – something the North of England has long needed. 

Let’s end the new Prime Minister’s first UK section with some more good news. ‘Fintech’ (financial technology) investment is booming in the UK and 2019 is set to be a record year, as funding reached £2.3bn in the first six months of the year. And household finances are looking up – June saw consumers saying they were optimistic about their personal finances for the first time this year. 

Also looking up was the FTSE 100 index of leading shares, which closed July up 2% at 7,587. But if the stock market was going up, the pound was definitely going in the other direction with the financial markets anticipating a ‘no deal’ Brexit. The pound closed the month down 4% against the dollar at $1.2218. 

Brexit 

To no-one’s surprise, it was Boris. The result was, perhaps, closer than many had predicted but Boris Johnson comfortably beat Jeremy Hunt in the vote by Conservative members, kissed the Queen’s hand and took over from Theresa May as Prime Minister. He duly appointed Sajid Javid as Chancellor, and we can expect a radical Budget when the new man in 11 Downing Street presents it. Whether that will be before or after 31st October remains to be seen, but one suspects that the speech – and the measures proposed – will be in stark contrast to anything Philip Hammond might have had in mind. 

Boris Johnson has had meetings in Northern Ireland, having already visited Scotland and Wales. He has demanded that the Irish backstop – the most contentious part of Theresa May’s Withdrawal Agreement – be scrapped and he’s been met with the predictable response from Europe. 

Are we now headed for a ‘no deal’ Brexit? Boris Johnson says he doesn’t want that, but has ramped up preparations just in case, with Sajid Javid committing an extra £2.1bn and meetings of the relevant Cabinet committee taking place every day. 

There remains, however, a significant number of MPs vehemently opposed to ‘no deal’ and the Government’s majority is wafer-thin. It’s unlikely, but you cannot rule out a General Election before 31st October and there will certainly be further attempts in parliament to thwart a ‘no deal’ Brexit. Meanwhile the Brexit Party and the hard-line Eurosceptics will be holding the Prime Minister’s feet to the fire.

‘May you live in interesting times’ is supposedly a Chinese curse. If nothing else the next 90 days in UK politics will certainly be interesting.

Europe 

There was plenty of economic news in Europe in July, but we should perhaps start in the corridors of power where, after much talking, negotiating and deal-making, German Defence Minister Ursula von der Leyen emerged as the only name on the ballot paper to replace Jean-Claude Juncker as European Commission chief. 

Von der Leyen makes no secret of her wish to move to closer European integration and – while the headlines were all about how her appointment will impact Brexit – she could, in the long run, be very bad news for a country like Ireland, which has benefitted from a lower corporation tax rate. 

It was all change in the top jobs as Christine Lagarde left the IMF to take over as head of the European Central Bank. 

Lower down the bankers’ food chain it was very much all change at the beleaguered Deutsche Bank as it announced plans for 18,000 job losses. There are rumours that the bank’s customers are pulling out $1bn (£800m) a day amid worries about the bank’s continuing solvency. 

There was also more gloom for the European car industry as car sales dropped by 7.9% in the European Union in June, the biggest fall since December and 130,000 registrations down on the same period last year. 

More generally the German manufacturing recession worsened as the Purchasing Managers’ Index for the sector dropped to 43.1 from 45.0, with any figure above 50 reflecting ‘optimism.’ This was the lowest level since 2012 as export orders showed their sharpest decline for a decade. 

How did all this translate onto the European stock markets? The German DAX index was down 2% in July to 12,189 while the French stock market fell just 20 points – unchanged in percentage terms – to 5,519. In Greece the market rose 4% to 900 as the centre-right under Kyriakos Mitsotakis won the snap general election. 

US

It was a good start to the month in the US, as figures for June confirmed that 224,000 jobs had been created against the expected 160,000. Normally this would have persuaded the Federal Reserve to keep interest rates on hold 

However, revised figures at the end of the month showed that the US economy had grown by less than expected in 2018, increasing by 2.5% and missing the President’s target of 3%. 

With Donald Trump continuing to describe the Fed’s decision to keep interest rates on hold as a ‘faulty thought process’ something clearly had to give and it duly gave on the last day of the month, as the Fed reduced US interest rates for the first time since 2008. The rate was cut by 0.25% to a target range of 2-2.25% but this wasn’t enough for the President. He scorned Federal Reserve chairman Jerome Powell on Twitter: ‘As usual, Powell let us down.’ 

In company news, there was the now seemingly-monthly bad news for Facebook, which faced a $5bn (£4.1bn) fine over privacy breaches, while US Treasury Secretary Steve Mnuchin criticised its plans for a crypto-currency, telling a press conference that it could be used by money launderers and terrorist financiers and was a national security issue. 

Apple posted a small rise in sales for the third quarter of its year – although iPhone sales and profits both dipped. Alphabet (Google’s parent company) and Amazon posted more impressive figures, with both firms reporting sales increases of close to 20% for the latest quarter. 

Meanwhile Elon Musk – of Tesla, SpaceX, the Boring Company and other future fame – brought us what may be his most revolutionary project yet. His company Neuralink revealed a brown and white rat with thousands of tiny electrodes implanted in its brain. It is, apparently, the first step towards linking the human brain to artificial intelligence, with the company betting that millions of people will eventually pay to become cybernetically enhanced. 

If Wall Street was cybernetically enhanced in July it wasn’t by much. The Dow Jones Index rose by just 1% in the month, closing at 26,864. 

Far East 

There was plenty of news in the Far East in July, but one story dominated all the others. The month began with Hong Kong leader Carrie Lam condemning the extreme use of violence as pro-democracy protesters stormed the parliament building. 

The protests continued throughout the month, and it seems inevitable that they will go on into August, quite possibly with ever increasing violence. Beijing – through the Hong Kong legislature – is determined to stamp down on any show of dissent and when then-Foreign Secretary Jeremy Hunt tried to intervene he was told in no uncertain terms to show some respect.

Away from the protests figures confirmed that China’s economy had grown at just 6.2% in the second quarter of the year. Obviously ‘just’ is a relative term, but this is the slowest rate of growth in China since the 1990s. 

Unsurprisingly the continuing trade tensions with the US meant that both China’s exports and imports were down when figures for June were reported, with exports down by 1.3% and imports down by 7.3% as domestic demand slowed. With China’s economy now driving so much growth around the world – not just in the Far East – it was hardly surprising that the IMF reduced its projection for global growth this year. 

In South Korea, Samsung announced that it was finally ready to sell its long-awaited folding phone after the April launch was delayed due to problems with the screen. The phone will go on sale in September in selected markets but – with the phone costing nearly $2,000 (£1,630).

A week later, Samsung faced rather bigger problems than fixing the screen on a folding phone, as the world’s biggest smartphone and memory chip manufacturer saw profits fall 56% in the three months to June. Samsung said results were in line with expectations as it blamed the continuing China/US trade war and a trade dispute between the South Korean and Japanese governments. 

It was – perhaps unsurprisingly – a disappointing month on Far Eastern stock markets as three of the four major markets fell.  China’s Shanghai Composite Index was down 2% to 2,933 while the Hong Kong market was down by 3% to 27,778. South Korea suffered a sharper fall as the market dropped by 5% to end July at 2,025. The one bright spot was Japan’s Nikkei Dow index, which was up 1% in the month to 21,522. 

Emerging Markets 

It was a relatively quiet month for our Emerging Markets section. Of the three markets we cover, Brazil was the only one to make any gains in the month with the stock market rising just 1% to 101,812. The Russian market slipped back by a similar amount, closing down 1% at 2,739. However, India suffered a sharper fall, sharing the month’s wooden spoon with South Korea as it fell 5% to end July ay 37,481. 

And finally…

News from the French Civil Service: Auditors for the Provence-Alps-Riviera region published a report in July showing 30 ‘ghost’ civil servants had been paid more than £22m to do nothing for the last three decades. Their jobs were phased out in 1989 but they continued to be paid, much to the embarrassment of the French President.

But, of course, we now know that the real way to riches is through your teenage son’s bedroom. Worried that he’s spending far too long in there playing video games? Nonsense, he’s working on his future career. July saw 16 year old US teenager Kyle Giersdorf win $3m (£2.46m) as he became world champion of the computer game Fortnite. 

With two British teenagers also picking up major prizes, it’s becoming an even bigger challenge for parents trying to convince their kids to wash the dishes.