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5 key points for becoming financially independent

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5 key points for becoming financially independent

Wednesday, June 24th, 2020

Financial independence can seem like the holy grail. We may be striving towards it but feel bombarded by lots of conflicting messages on how best to attain it. These five points give an interesting perspective:    

Income is not the same thing as wealth

Having a high salary can help you accumulate wealth but that’s no good if you’re still spending more than you earn. That’s why you might hear of a professional footballer earning £30,000 a week going bankrupt while a bus driver, who’s saved diligently all his life, can retire a multi-millionaire. To avoid the spending trap, remember your real wealth or net worth is the amount on your balance sheet – your assets minus your liabilities.

Regardless of what your income level might be, try and achieve financial independence by thinking long term. What goals can you put in place regarding your career plans, your investments or any property you may have?        

Create surplus funds

To take advantage of any investment opportunities, you need to have sufficient money to invest, and to be successful in investing, you need to reach a critical mass. At this point, the returns generated on your savings will have more impact. For example, a 10% return on £10,000 would give you £1,000 before tax, while the same return on a portfolio of  £1,000,000 would give you £100,000 for the same amount of effort and research.

Amassing wealth is a gradual process but through small steps to cut expenses or generate income, it can amount to something over time. When the interest your money has earned starts to earn interest too, that’s when you’ll really start to notice the difference. This is where the power of compounding comes in. It also means you can invest more the next time an opportunity comes round and so on.     

Taxes have an impact

Think carefully about where you hold your assets. Remember not all income is treated the same. You may have a great deal of wealth but be generating a lot of taxable income, while someone who has attained their goal of financial independence may have maximised their capital gains allowance and done some tax-efficient retirement planning.

Take control of your time

Your definition of financial independence may be being in charge of how you spend your time each day. Enjoying what you do for hours on end can be better than any financial return. So while you may not have quite reached your ultimate investment target of maintaining your ideal lifestyle without a monthly paycheck, having the freedom to spend your time how you want is worth a great deal.             

Promote the same values

Becoming financially independent is easier if the rest of your family shares the same goal and beliefs. Does your husband or wife have a similar attitude to saving, investing and risk as you?     

Encourage your children to grow up to be financially independent and manage their own money. Offer them support but don’t let them grow up always expecting a financial hand-out or free board. You’ll never gain financial freedom and neither will they.     

 

June Markets in Brief

Wednesday, June 3rd, 2020

May saw a more positive month for most of the stock markets we discuss, despite the COVID-19 pandemic taking centre stage across the globe. India and Hong Kong aside, all major stock markets made gains during the month. 

The world is tentatively beginning to emerge out of lockdown and there are some signs that the engines of the world’s economies are beginning to restart. These might serve as some consolation for concerned investors, which – given the current crisis – must include anyone with stocks, shares or an invested pension.

However, it must be emphasised that we are still far from a fully fledged economic recovery. Although there are some promising signs, like early flowers in Spring, these signs could be quickly killed off by the economic frost that would result from a second outbreak of COVID-19. Away from the stock markets, the global unemployment crisis deepened to depths not seen in living memory and many large firms remain just a rescue package away from collapse.

UK

The UK continued its economic stimuli policies during the month as it “fought back” against the global pandemic. Rishi Sunak announced that the furlough scheme would be extended until October, although companies will be asked to contribute an increasing amount to the cost. 

May saw the return to work for many after Boris Johnson announced the gradual easing of lockdown restrictions on 10 May. However, the high street remains closed for ‘non-essential’ shops until 15 June, and the possibility that consumers – in the words of M&S boss Steve Row – “may never shop the same way again.” Lifestyle retailer White Stuff were among the latest to announce significant job cuts over their 120 UK stores.

There have already been many job losses across the country and there are expected to be many more as the furlough scheme winds down. Boris Johnson has hinted at a post-crisis jobs programme which would create “high class jobs for the country”; the success of such post-crisis recovery strategies will be vital as the country emerges from the crisis. 

The FTSE rose by a promising 3% during the month to end up at 6,077, and the pound fell by 2% against the dollar to close the month at $1.2343.

Europe

The economic picture across the channel certainly wasn’t a rosy one. During the first quarter, the Eurozone economy contracted by 3.8% and the European Commission forecasted a “deep and uneven recession.” 

There was plenty of grim company news. Renault announced 15,000 job losses around the world, despite the French government’s announcement of an €8 billion rescue package for the car industry. Elsewhere, Nissan closed its Barcelona plant with 3,000 jobs lost.

In spite of all this bad news, the continent’s major stock markets both finished up, possibly bolstered by the €750 billion EU rescue package announced during the month; the German DAX was up by an impressive 7% to 11,587 and the French stock market rose 3% to 4,695.

US

The world’s largest economy suffered a tough month. By the end of May, nearly 40 million Americans were claiming unemployment benefits and Jerome Powell, Chairman of the Fed, announced that the economy could contract by 20-30% during the crisis. 

General Electric announced massive job cuts that could amount to 16,000 jobs and car rental firm Hertz filed for bankruptcy protection after the pandemic caused demand to “collapse”.

Declining retail sales and a record fall in manufacturing output have fanned the flames of this hard economic picture. However, there are faint signs of optimism that new economic opportunities will emerge for innovative firms after the crisis. Thankfully, America’s stock markets echoed this optimism rather than the discouraging headlines. The Dow Jones index enjoyed a good month and rose by 4% to 25,383.

Whatever you’re planning to do in June, we hope you have a pleasant month. In spite of the gloomy news and uncertainty, in May the UK enjoyed the sunniest calendar month on record. We hope that this fine weather continues during June and that you’re able to make the most of it, even if it’s just from the comfort of your garden.

May market commentary

Wednesday, May 6th, 2020

Right now, even a week seems a long time in the news agenda. Remembering the end of March, when we wrote our last Market Commentary, feels like looking back into a different era. 

Reflecting back, how did we leave March? With the US having overtaken China as the country with the most confirmed cases of coronavirus: with the UK’s Prime Minister, Health Secretary and Chief Medical Officer having all tested positive for the disease – and with world stock markets having suffered their worst three months since 1987. 

“The figures that follow will not make for pleasant reading,” we wrote. “It is scant consolation that they would have looked much worse in the middle of the month, before governments around the world rushed to put stimulus packages in place to protect their economies and businesses”.

Well, there’s still plenty of bad news in this commentary. Both China and America reported sharp falls in their first quarter GDP – in China’s case, the first fall since they started recording quarterly figures in 1992 – and the figures for the second quarter will be far worse. Whichever organisation you turn to – the World Bank, the International Monetary Fund, the ratings agencies – they are all making dire predictions. The IMF, for example, is forecasting the worst economic depression since the 30s. 

Despite this, world stock markets have risen: all the markets we cover in this commentary were up during April. 

Of course the world will look very different when we finally emerge from this crisis. With the Times predicting we’ll need to be at an airport four hours before our flight – for medical screening as well as security – we’re glad we didn’t choose a career in the airline business this morning. 

But where there is change there is also opportunity: new companies will find new ways of bringing new products to new markets. Let’s look at all the details from April – a month when the Prime Minister survived three days in intensive care when, “it could have gone either way” and became the father of a baby boy – and see if we can find some light amid the gloom. 

Coronavirus: Fighting Back 

Almost without exception, countries around the world have put stimulus and rescue packages in place to protect businesses and jobs. In the UK – following widespread criticism of the banks – Chancellor Rishi Sunak has said the Government will now guarantee 100% of loans to small companies, up to a maximum of £50,000. These ‘bounce back’ loans will be available from May 4th. 

For bigger firms, the Government will continue to guarantee 80% of the loans, with companies whose turnover exceeds £45m now able to apply for up to £25m of finance, and companies with a turnover of more than £250m eligible for up to £50m of finance. 

The job retention scheme also swung into action, with the UK Government effectively employing a million extra people on the first day it was in force. 

In the US, the Federal Reserve has perhaps gone even further, offering to buy debt from big companies, helping out local and state governments and lending directly to small and medium sized businesses. These loans are over a four year period – perhaps an indication of how long the Fed believes some companies will take to get back on their feet…

These measures represent a huge commitment on the part of governments: for example, the Guardian estimates that Europe’s rescue package is worth a combined €1.7tn (£1.6tn). They will all need to be paid for one day and – inevitably – there will be countries who struggle with the increased debt burden. You suspect that the impact of coronavirus will be felt long after someone has found a vaccine. 

UK 

The UK headlines at the beginning of April made universally grim reading. ‘A fifth of small firms will run out of cash.’ ‘One million people apply for universal credit.’ ‘Sunak shakes up loan schemes amid widespread criticism of the banks.’ 

…And that was before you went anywhere near the nation’s high street.  Depressing headlines from the retail sector included: ‘March was the worst retail month on record,’ ‘Debenhams facing administration’ and ‘Oasis and Warehouse go into administration.’  

There was plenty more bad news throughout the month and there will undoubtedly be more to come. As Sir John Timpson – of the eponymous high street chain – said, “some household names will simply disappear”. 

As we noted above, the UK Government will now guarantee 100% of loans to small businesses up to a maximum of £50,000. This may turn out to be the most important business initiative of the whole crisis: it will mean that thousands of small companies that might have otherwise failed will now survive the pandemic. 

Yes, it is hard to find good news in the short term – although cheaper clothes and fuel did see UK inflation fall to 1.5%. The figures for the first quarter will undoubtedly show a sharp fall in UK GDP, and the current predictions are that it could fall by anywhere up to 35% in the second quarter. In the middle of the month, the Guardian was predicting up to 2 million job losses. 

But, as the Prime Minister said in his briefing on 30th April, the UK appears to have passed the peak of the first outbreak. The challenge now is to relax the lockdown and re-start the economy without risking a second spike. As the Chancellor said, the UK came into the crisis with “a fundamentally sound economy”. Like him, we are confident that the country – and its economy – will bounce back. 

The FTSE 100 index of leading shares echoed that optimism. Despite falling 200 points on the last day of the month, it ended April up 4% at 5,901. The pound was up by 1% against the dollar in the month, closing at $1.2587. 

The Brexit Negotiations 

Do you remember the good old days? When the Brexit negotiations dominated the news agenda? When Theresa May brought her Withdrawal Bill back to Parliament three times? When every vote – in the Commons or the courts – seemed crucial? 

The Brexit negotiations are still ongoing. Lest you have forgotten, an agreement with the EU is due to be reached by the end of the year. As things currently stand, if no agreement is reached, the UK will begin trading with the EU on World Trade Organisation rules. 

The talks to find an agreement duly resumed after Easter and by the end of the month both sides seemed to accept that some – albeit limited – progress had been made. Inevitably, there were calls to extend the current deadline: Norbert Röttgen, chair of the Bundestag’s foreign affairs committee and an ally of Angela Merkel, told the Observer that the deadline would need to be extended by two years. 

Not so, said Michael Gove to the Telegraph, as he explained that the current crisis was exactly why a deal should be wrapped up quickly. 

We will, of course, continue to keep you updated. One thing that is certain, though, is that UK/US trade talks have been postponed indefinitely while the two countries deal with coronavirus. 

Europe 

It was a while coming, but in the middle of the month, the European Union finally agreed a €500bn (£434bn) rescue package for countries hit by the pandemic, with an opinion poll showing that German voters were in favour of supporting the economies of Spain and Italy. 

How far the money will go is questionable, with the chairman of French car giant Renault saying the company needed €5bn (£4.3bn) “to protect it from damage from the coronavirus pandemic”. He added that they “are working on the idea of bank loans that would be guaranteed by the state”. 

As we mentioned above, the combined bailout packages put in place by the individual European countries run into the trillions of Euros. European economies will need to revive quickly and as the month ended, there were signs of a partial easing of lockdown measures in several countries. 

Confidence will also need rebuilding, with consumer confidence falling to levels last seen in the financial crisis of 2008, and business confidence in Germany described as ‘catastrophic.’ 

The Ifo Institute think tank’s business climate index slumped to 74.3 in April from 85.9 in March – a level never previously seen. “Sentiment at German companies is catastrophic,” said Ifo president Clemens Fuest. “Companies have never been so pessimistic. The crisis is striking the German economy with full fury”. 

As if to reinforce this, the last day of April brought the news that the Eurozone economy had shrunk at a record rate, with GDP falling by 3.8% in the first quarter of the year. 

Despite all the gloom, the leading European stock markets rose in April, dragging the smaller markets up with them. The German DAX index was up 9% to 10,862 while the French stock market rose 4% to 4,572. 

US

For as long as we have been writing this Bulletin, we have included almost the same sentence in every section covering the US: ‘last month saw the US economy add another 150,000 jobs.’ Or words and numbers to that effect…

Nothing more starkly illustrates the impact of coronavirus on the world’s biggest economy than April’s jobs figures. On 3rd April, we noted: ‘US jobless claims soar to 6.6m as 236,000 test positive.’

On the last day of the month it was reported that 3.8m Americans had filed jobless claims in the last week, down from 4.4m in the previous week. Over the last six weeks, approximately 30m Americans have lost their jobs as some states have all but shut down their economies, with the country now having more than a million confirmed cases of the virus. 

The US government has, of course, sought to counter this with an unprecedented fiscal and monetary stimulus, passing bills worth around $3tn (£2.4tn), while the Federal Reserve has slashed interest rates, pumped trillions of dollars into the economy and started lending directly to small and medium sized companies. 

Will it work? The President is confident that the economy will ‘bounce’ back quickly and that the US will shortly be testing 5m people a day – against a current figure of around 300,000. 

In company news, Disney stopped paying 100,000 of its workers but announced that it had added 50m subscribers in five months to its subscription service, Disney Plus. Confirming the ‘ill wind’ theory, Netflix said it had added 16m subscribers during the crisis. 

Ford reported that it had lost $2bn (£1.6bn) in the first three months of the year as sales dropped 15% and Starbucks confirmed sales were down 10% in the first quarter – but 50% in China. However, lockdown was good news for Mondelez, owner of Cadbury, Oreo and Triscuits, where quarterly sales surged by 15%. 

You know what they say: ‘When the going gets tough, the tough start snacking…’ 

The Dow Jones index – in line with other world stock markets – was much more Oreo Cookies than Ford or Starbucks, rising by 11% in the month to finish April at 24,346. 

Far East 

What impact did the virus have on the Chinese economy? Economists and forecasters waited for China’s first quarter GDP figures to be announced, with some pundits expecting a fall in the country’s GDP of up to 10%. 

In the event, the figure was 6.8% – the first quarterly fall since the country started recording quarterly economic data in 1992. 

“This will translate into permanent income losses, reflected in bankruptcies and job losses,” said Yue Su at the Economist Intelligence Unit. 

…And not just in China. As we will see below, the virus will hit emerging economies especially hard, with the International Monetary Fund predicting that the wider Asian economy will see no growth this year, for the first time in 60 years. The IMF says the region will “face the worst recession since the Great Depression”. 

This was reflected to some extent in HSBC’s first quarter profits, which halved to $3.2bn (£2.6bn) as the company announced that it would put the ‘vast majority’ of its planned 35,000 redundancies on hold due to the ‘exceptional circumstances.’ 

In line with all the other leading stock markets, the four major markets in the Far East all made gains during April. South Korea led the way, rising by 11% in the month to 1,948. The Japanese Nikkei Dow index rose 7% to 20,194 while the markets in China and Hong Kong were both up by 4% to 2,860 and 24,644 respectively. 

Emerging Markets 

It hardly comes as a surprise but April was a worrying month for emerging and developing economies around the world. Clothing manufacturers – among the biggest employers in Asia – gave a dire warning of the impact the virus would have on employment. Sadly, the clothing sector was far from alone in issuing warnings. 

The International Monetary Fund expects 170 countries (out of 195 recognised by the UN) to experience a decline in economic activity per person this year, which will translate into a direct fall in average living standards. The World Bank expects that the virus will mean South Asia – home to economies such as Bangladesh, Pakistan and Sri Lanka – will see its worst economic performance for 40 years. 

Despite this, Facebook chose to place what the papers described as ‘a $5.7bn (£4.6bn) bet on India’s richest man.’ Facebook is buying a 9.99% stake in mobile internet company Reliance Jio which will give it a major foothold in India, where WhatsApp already has 400m users and is about to launch a payments service. 

And it was the Indian stock market that led the way, turning in the best performance of any of the markets we cover in our monthly commentary. It was up 14% in April to end the month at 33,718. The Brazilian market was up 10% to 80,506, while the Russian stock market rose 6% to close at 2,651. 

And finally…

April got off to the worst possible start for beer drinkers, with news that up to 50m pints of beer could go to waste if lockdown lasts until the summer. The estimate was made by the Campaign for Real Ale (CAMRA), based on the amount of beer the UK’s 39,000 pubs will have in their cellars and the length of time it takes to turn bad. Tom Stainer, chief executive of CAMRA, told the BBC it was “a tragic waste”. 

April wasn’t a month that went terribly well for Brant Walker either. Brant is the mayor of Alton, a small town in Illinois with a population of just under 30,000.There were widespread reports of residents ignoring lockdown and social distancing, so Mayor Walker quickly ordered the local police to ‘vigorously enforce’ the rules. 

The next day, Alton’s finest broke up a party at the town’s Hiram’s Tavern, with revellers “clearly disregarding” the Mayor’s executive order. One of those at the illicit party was a lady called Shannon – unfortunately, Mayor Walker’s wife. “I am embarrassed and apologise to the citizens of Alton,” said the mayor in a statement. “My wife … showed a stunning lack of judgement”. 

Oh to be a fly on Mr and Mrs Walker’s kitchen wall…

And quite possibly on the cucina wall of Signore and Signora Faggiani as well. Bored with lockdown, Fabio Faggiani decided to run a full marathon, inside his apartment. He did this by running round his dining room table: completing the full distance of 26.2 miles meant that Fabio had to lap the table 2,800 times. 

There is no word yet on whether Signora Faggiani was trying to watch television at the time. Or, indeed, on whether the people in the apartment below were cheering Fabio on. 

We might, in previous bulletins, have jokingly referred to Messrs Walker and Faggiani as ‘heroes.’ April brought us a real hero. 

We refer, of course, to Captain Tom Moore, who wanted to walk 100 laps of his garden before his 100th birthday and, in so doing, perhaps raise a “bit of money for the NHS”. As we write this – very appropriately, on Tom’s 100th birthday – that ‘bit of money’ so far amounts to over £31m. Happy birthday, Colonel Tom: never was a promotion more richly deserved.  We salute you!

How to make the most of a Junior ISA nest egg

Wednesday, April 22nd, 2020

As of 6 April, the amount you can put into a Junior ISA (JISA) per annum has increased to £9,000 – quite a jump from the previous allowance of £4,368.

The tax saving this provides makes it an effective way of building up a nest egg for your children if you want to help with a gap year, university fees, or to enable them to get a foot on the property ladder.  

Which type of JISA?

You can choose to put the money into either a cash JISA or a stocks and shares one. Even in these low-interest rate days, the cash ones can attract quite generous rates with some as high as 3.6%. Another advantage is that they don’t have the volatility associated with the stock market, a particular issue at the current time.          

Yet while the majority of JISAs tend to be in cash, experts state that this can be a wasted opportunity. Despite the recent turmoil, the stock market will usually outperform cash savings over the long term. Wealth manager, Jason Hollands, calculates that if you achieved a 6 per cent annual return – which he describes as ‘quite modest’ – a JISA that had £9,000 invested in it each year would be worth more than £290,000 after 18 years. As you can see, once compound interest kicks in, it can have a considerable effect. He estimates that even JISAs that had smaller sums of £50 or £100 a month invested into them would accumulate pots of £19,367 or £38,735 respectively.

So if you’re wanting to use the JISA as a vehicle for a long-term investment to get your child through a degree course or to help them to buy a property, cash is not the most effective way to do so. 

It’s also advisable to invest a regular amount on a monthly basis amount rather than just put in lump sums at specific times. This avoids the worry of knowing whether it’s the right time to invest and also has the benefit of smoothing out the peaks and troughs in share prices.  

Inheritance Tax Implications

Parents or guardians are the only ones who can actually open a JISA but grandparents can pay money into the account. This can be a productive way of using up their annual gift allowance. They do just need to bear in mind the Inheritance Tax rules, though, especially now the JISA allowance has increased. The annual gift allowance on an Inheritance Tax free basis is £3,000 per donor (with one year’s allowance carried forward). Inheritance Tax would be charged on anything over this limit in the seven years before their death. Gifts of up to £250 per person can be given during the tax year as long as another exemption has not been used on the same person.

Once your child turns 18, the JISA becomes theirs. They can either access it directly or transfer it into an adult ISA. This encourages them to develop a lifelong interest in money and helps build up a great investment discipline. In fact, the Government’s decision to increase the JISA allowance was all part of its aim to create a generation of savers.    

The new JISA allowance could mean that your child comes of age on a much sounder financial footing.  

April Market Commentary

Wednesday, April 8th, 2020

In March, the coronavirus outbreak seemed to steal all the headlines, giving us almost hourly updates as it transformed our lives, and made the word ‘unprecedented’ feel like an understatement. Inevitably, there has been a serious impact on world stock markets, which have suffered their worst quarter since 1987.

The figures that follow will not make for pleasant reading: it is scant consolation that they would have looked much worse in the middle of the month, before governments around the word rushed to put stimulus packages in place to protect their economies and businesses. To give just one example, the US government passed a near $2tn (£1.62tn) aid package, described by one US Senator as a “wartime level of investment in the economy.”

It is worth noting that markets have always recovered over time. They recovered from the crash in 1987 and they recovered from the 2008 financial crisis.

Inevitably, the impact of the pandemic overshadows this Commentary. We have, therefore, added an extra section. Optimistically titled ‘Coronavirus: Fighting Back’, it details the economic and fiscal efforts governments are making in the face of the virus.

Coronavirus: Fighting Back

As we mentioned above, governments around the world have been launching stimulus packages to help their economies withstand the shock of the Covid-19 epidemic.

In the US, the Federal Reserve initially announced a $700bn (£565bn) package of aid, which was subsequently dwarfed by a near $2tn (£1.62tn) intervention. President Trump declared the pandemic a national emergency, opening the way to yet more state aid and direct intervention in the economy. By the end of the month, he was talking of a $2tn programme of infrastructure investment to boost the US economy.

UK Chancellor Rishi Sunak delivered his Budget speech on 11th March – which now feels like several months ago – and initially announced a £30bn package of aid for business. “We will do whatever it takes,” he declared. A week later he was back, announcing a much larger package of aid which now covers small business grants, business interruption loans, help with wages, business rate reliefs and help for the self-employed.

The EU announced a €750bn (£700bn) aid package in the middle of the month and both the World Bank and the IMF pledged money to fight the outbreak and its economic impact.

Will all this be enough? The simple answer is that no one knows: as we have commented below, even with all this intervention some household names will be out of business by the time the dust finally settles. Hopefully the picture will look brighter by the end of April, otherwise we may see another raft of central bankers standing sombrely at lecterns while they deliver another round of aid packages.

UK

In any normal month, Rishi Sunak’s first Budget – and his promise of massive investment in the UK’s infrastructure – would have taken up the bulk of this section of the Commentary. As we have seen, anything the Chancellor announced on 11th March was almost immediately superseded by events and – when this is finally over – another Budget seems inevitable. Like other countries, the UK will, one day, have to pay for the rescue package and the unprecedented increase in Government borrowing.

Whether there will be a UK high street to play its part in that recovery is currently looking questionable. There are always winners and losers from crises: currently the supermarkets (reportedly busier in March than at Christmas) and Amazon are the winners, while ‘ordinary’ shops are very much the losers. Pubs and restaurants up and down the land are going to close, irrespective of how much help the Chancellor gives them with business rates. The closure of the Carluccio’s chain – putting 2,000 jobs at risk – will not be the last by any means.

John Lewis has warned that stores could close, shopping centre operator Intu has said it could go bust and even before lockdown was introduced in the UK high street, footfall was down by 8%. Goodness only knows what the figure will be now.

Marks and Spencer, and several other household names in the fashion and retail sector, are warning of closures. As one analyst put it, “You do not buy a new outfit to stay at home”.

The rest of the UK news is, inevitably, dwarfed by the impact of the crisis. You won’t be surprised to hear that both consumer and business confidence fell during March, or that the UK’s credit rating was downgraded as a result of the pandemic. Credit rating agency Fitch dropped the UK from AA to AA- as it said that the country’s economic output would fall by almost 4% this year.

Was there any good news? At the beginning of the month, Nissan announced that it was investing £400m in its Sunderland plant to build the new Qashqai – and two days later the Chinese firm Jingye completed the takeover of British Steel, safeguarding 3,000 jobs. Then, on the morning of the Budget, the Bank of England cut base rates from 0.75% to 0.25%.

None of this, of course, could do anything to stop the stock market’s slide in March. The FTSE 100 index of leading shares fell 14% in the month to close at 5,672 and is down by 25% for the year as a whole. The pound fell 3% in the month to end March at $1.2415, down 6% against the dollar for the year to date.

Brexit Negotiations

March began with the UK saying it would take a ‘hard line’ in trade talks with the US as the Government pursued trade deals around the world in the wake of leaving the EU. The first round of trade talks with the EU was held at the beginning of the month, with the intention of reaching an agreement by the end of the year. That first round of trade talks threw up ‘clear differences’ – but that was always going to be the case.

Then, in the middle of the month, came the news that the EU chief negotiator Michel Barnier had tested positive for the Covid-19 virus. A week later it was Boris Johnson’s turn, swiftly followed by Health Secretary Matt Hancock and the UK’s Chief Medical Officer.

Predictably, talks with the EU are now on hold. Equally predictably, reactions to that news depend on your original viewpoint. The two sides are either saying that a deal by 31st December is now impossible or muttering, “Have they never heard of Zoom?”

Hopefully, the situation will be clearer by the end of April. We will, as always, report back…

Europe

March was the month that Europe went into lockdown. It had started with the normal corporate news we have come to expect, with the IFO Business Climate survey saying that the German car industry ‘would face significant challenges’ over the months ahead.

A week later the whole of Europe was facing a very different challenge as Italy went into lockdown and Angela Merkel predicted that up to 70% of Germans could be infected by Covid-19.

Factories rapidly started closing all over Europe, free movement was forgotten as individual countries closed their borders and the ECB raced to implement a rescue package, scrapping its budget rules to fight the virus.  

The impact of Covid-19 on Europe could be severe and long lasting. The blow to Italy’s economy – to take just one country – could be catastrophic, especially with several Italian banks long having been widely seen as vulnerable. If the outbreak is prolonged then the fragile economies of Spain, Greece and Portugal are going to compound the problem. The German taxpayer may ultimately decide that their own country is the only priority.

In keeping with the rest of the world, March was not a happy month for European stock markets. The German DAX index fell 16% to 9,936 while the French market fell 17% to 4,396. For the year as a whole, the two markets are respectively down by 25% and 26%.

Illustrating how vulnerable some of the smaller markets might be, the Greek stock market fell 22% to 558 in March, and is down by 39% since the start of the year.

US

Total ‘non-farm payroll employment’ in the US rose by 273,000 in February, with the US Bureau of Labor Statistics reporting that the unemployment rate was unchanged at 3.5%.

The difference in March was that the figures were out of date almost as soon as they were announced. As the figures came out, the US Federal Reserve was implementing the first emergency cut to interest rates since the collapse of Lehman Brothers in 2008. As one report put it, ‘the world’s biggest economy is running scared’. Chairman of the Federal Reserve, Jerome Powell, said that the cut would be a ‘meaningful boost’ to the US economy.

A fortnight later, the Fed had to act again – effectively cutting US rates to zero and announcing a stimulus package worth $700bn (£565bn). This was subsequently dwarfed by the near $2tn package which the US administration approved by the end of the month.

But, as the old saying goes, ‘it’s an ill wind that blows no good’. No one will be surprised to hear that Amazon has gone on a hiring spree as the demand for home deliveries rockets.

Away from the economy, it is looking almost certain that the US Presidential Election in November will be between Donald Trump and Joe Biden – formerly Barack Obama’s Vice President. March saw Biden defeat Bernie Sanders in a string of primaries and go a long way to clinching the nomination.

When Donald Trump was inaugurated in January 2017, the Dow Jones index stood at 19,732. To the President’s horror, the Dow slipped below that level at one point in March, falling to 18,917. By the end of the month, it had recovered to 21,917 where it was down 14% for the month and 23% for the year as a whole.

Meanwhile, the economic news continued to worsen, with 3.28m Americans – an unprecedented number – seeking jobless benefits and American Airlines saying that it will need $12bn (£9.7bn) in state aid. The remark of UK Chancellor, Rishi Sunak – “we will not be able to protect every business and every job” – will apply just as much in the US as it will in the UK. By the end of this crisis, it may well be that many household names have ceased to exist.

Far East

The newspapers are already full of demands for there to be ‘a reckoning’ with China when the Coronavirus is over. Everyone reading this will have their own views on whether the Chinese Communist Party lied about and/or covered up the true extent of Covid-19 in the early days of the outbreak.

Whatever the truth, countries will continue to trade with China and so, for the purpose of this Commentary, the country’s economic performance remains important to both the Far East and wider world trade.

The beginning of March brought confirmation that Chinese manufacturing had fallen to a record low in February, with the Purchasing Managers’ Index down to 35.7 from the 50 it had recorded in January. At one point, exports were down by 17% as the virus had a bigger impact on Chinese manufacturing than the economic crisis of 2008.

Fast forward to the end of the month and those figures had been turned on their head, with the PMI soaring to 52 by the end of the month.

Despite this, the World Bank is predicting a year of ‘pain’ for Far Eastern economies. The Bank is now predicting that growth in China this year will be just 2.3% compared to a prediction of 6.1% made last year. This lower growth rate will inevitably impact the smaller Far Eastern economies, with the World Bank now projecting a best case scenario of 2.3% growth for the region this year, and a worst case of just 0.5%. This compares to the 5.8% growth forecast before the Covid-19 outbreak.

In the current circumstances, it is somewhat ironic that China’s Shanghai Composite Index delivered the ‘best’ monthly performance of those markets on which we report. It closed March at 2,750 from an opening level of 2,880, meaning that it was down just 5% in the month and 10% for the year as a whole.

The Hong Kong market fell 10% in the month to 23,603 (down by 16% since 1st January). The Japanese stock market fell 11% in March to close at 18,917 while the South Korean index fell 12% to 1,755. Both those markets are down by 20% for the year as a whole.

Emerging Markets

Back in 2018, Vladimir Putin won another six year term as Russian President and promptly laughed off suggestions that he would run again in 2024, when he will be 72.

But now it appears that Vladimir Vladimirovich has had second thoughts and – like his friend Xi Jinping – rather fancies being President for life. Before Covid-19 brought normal politics to an end, a Russian MP had proposed ‘resetting to zero’ the number of Presidential terms Mr Putin has served. In theory, the move will require the approval of the Russian Constitutional Court: you shouldn’t expect that to be a problem when normal service is resumed.

The Indian Premier, Narendra Modi, appears to be in rather more immediate need of reassurance. He has made a public appeal for forgiveness after making a very rapid decision to put 1.3bn people into lockdown. The situation is fast turning into a human tragedy as millions of the poorest migrant workers face walking hundreds of miles to get home, facing both rising temperatures and closed state borders.

Modi’s finance minister was also under attack after announcing an £18.8bn stimulus package for the economy: critics derided it as ‘not nearly enough.’

The Indian stock market ended the month down 23% (and 29% for the year as a whole) at 29,468. It was not, though, the worst performer in this section, as the Brazilian market fell to 73,020 – down 30% in the month and 37% for the first quarter. In relative terms, the Russian market did ‘well:’ it was down by just 10% in the month and, at 2,509, is down 18% for the year as a whole.

And finally…

We debated long and hard as to whether to include the ‘And finally’ section in the Commentary this month. In the end we decided to keep it for two reasons. First, we’ve long suspected that it is the most widely read section of the Commentary. Secondly, it’s a symbol of normal life – and a reminder, despite the fact that amusing stories were hard to find in March 2020, that we will get back to normal life one day.

And what could be more normal than the British Wife Carrying Championship? Technically we should have reported on it last month as it was held on 29th February, but sometimes even the most interesting stories take a while to make the papers.

We must add our congratulations to David Threlfall and Cassie Yates, the winners of this year’s race. Should you wish to see it, a quick search on Google or YouTube will help your self-isolation or working from home.

The event’s website certainly pulled no punches: wife carrying can be a dangerous activity, which can lead to slipped discs, broken legs and arms, limb dislocation, spinal injuries and hernias.

Nevertheless the event appears to be gaining in popularity. For any clients who may feel like participating next year, please note that ‘wives’ (not necessarily your own) must weigh at least 50kg. There are also generous prizes for anyone who might see wife-carrying as a route to the professional sports career they have long wished for.

The winner this year received a barrel of ale, the oldest ‘carrier’ won a pot of Bovril and a tin of pilchards, while the carrier of the heaviest ‘wife’ was rightly rewarded with a pound of sausages.

On that upbeat note, we’ll leave this month’s Commentary. Let’s hope the world is a more positive place when we report again in May. Until then, take care, stay safe and remember that if you need to contact us we are never more than a phone call or an email away.

How long does it take to beat a bear market?

Wednesday, April 1st, 2020

The current COVID-19 crisis has wiped billions from the world’s financial markets. In the world of investing, such markets where share prices are falling are known as bear markets. 

Beating a bear isn’t easy, but you’ll be pleased to read that in all 10 prior occasions, the FTSE All-Share has completely made up the ground in the next bull market, a market where share prices are rising. Unfortunately, it usually takes longer for markets to rise than it does for them to fall. 

Bear markets are typically nasty, brutish and short, like recessions rather than economic upturns. Again using the All-Share as a guide, the average time it has taken to recover a bear market loss is 648 days, compared to the 385-day average market downturn.

Staying invested even when markets are falling can be wise because if you sell, you own less shares that can potentially gain value when the market starts to rise again. Stock market investing is best conceived as a long term game played over years rather than months.

Watch out for the bear traps

Bear markets are littered with sharp advances which often turn out to be nothing more than small peaks before the downward turn resumes. These are perilous to investors who opt for a ‘buy on the dip’ investment strategy.

For example, during the 2000-03 bear market that followed the dot-com bubble, there were six major rallies in the All-Share that generated a combined gain of 2,030 points, even as the index actually declined by 1,649 points overall during this period. Those who piled into these market rallies would have lost out in the long run.

Nine of the ten largest single day surges on America’s S&P 500 index have been during bear markets. Beating a bear is a slow game, and those who are over-eager can suffer larger losses. 

Trying to see the bottom

Bear markets are like a murky pond – it’s impossible to see the bottom or the trough until after it has passed.

For those of us who don’t have a crystal ball, it’s impossible to foresee exactly how low markets will fall. Taking a slow and steady approach is probably your best bet to conserve your portfolio’s value. This might mean a lower return than a brash approach, but you’re not putting too much money at risk. Additional pain is suffered by those who plough lots of capital into ‘bear trap’ short term rallies.

Coronavirus – and the markets’ volatility

Wednesday, March 18th, 2020

With billions being wiped off the stock market due to the coronavirus outbreak, it’s hard for investors not to panic. Markets are extremely volatile, despite measures taken by central banks around the world, including the Bank of England, to try and reduce the impact of the pandemic.   

There are, however, a few key principles to bear in mind regarding your finances:

Stay invested

The main advice is to hold your nerve. Don’t get distracted by all the ‘noise’ of the markets lurching up and down. If, for example, you see the market jump up 600 points, only to witness it lose 1400 points and then rise another 800 points in the course of a week or even a day, you know emotion has taken over from all rational thought. In such circumstances, it’s better to wait until things calm down, no matter how long that may be.      

It would be impossible to predict the bottom of the curve so it’s better to keep your funds invested. Otherwise, by taking your money out, you could risk being out of the market on the very days it recovers and does well.  

Think long term 

The coronavirus situation is without doubt unprecedented, fast moving and deeply concerning. Yet although we might not have gone through anything like it in our lifetime, the stock market has experienced crises before and recovered. Just think of both World Wars, the Gulf War, oil shortages, the 2008 financial crisis and recession. So while in the short term your investments are likely to be affected, anyone investing in the stock market knows they should be thinking about a five to ten year period. Coronavirus will continue to unsettle the markets but volatility will always be a part of investing.   

Diversify, diversify  

It’s a good idea to use this time to review your portfolio carefully. Consider whether it is still in line with your attitude to risk. Is it balanced with a mix of different investments, including shares, government and corporate bonds, property and cash? Ask yourself if it is still in tune with your long-term goals?   

Moving money into an ISA means you don’t have to invest the money all at once and can drip-feed amounts into the markets when things may be less turbulent. Try and build some protection into your portfolio by ensuring it has a mix of cash, gold or short-dated government bonds. Make sure it’s not too concentrated on just a few funds, or on one or two particular countries or industries that could be most hard hit. 

Don’t check obsessively   

The best advice at times like these is not to sit there checking your investments on your phone, tablet or desktop all the time. Switch off your notifications as it will only make you anxious and could tempt you into making a knee-jerk reaction.  

There’s a lot to be said for the sentiment expressed in Kipling’s poem, “ If you can keep your head when all about you…” particularly when markets are plummeting.

The impact of coronavirus on stock markets

Wednesday, March 4th, 2020

Stock markets across the world have fallen sharply because of fears over the economic impact of the coronavirus as the number of cases continues to rise. The situation is changing rapidly all the time but at the time of writing the virus that started in China has spread to more than 50 countries, including the UK.

The Dow Jones was hit by its biggest ever daily points drop of 4.4% on 27th February and the main European markets also fell dramatically, with London’s FTSE 100 index down more than 3%. Shares lost almost 13% of their value, wiping £200bn from the value of companies on the index. This made it one of the worst weeks for the global markets since the financial crisis in 2008. There has been some limited recovery in the last few days but significant volatility remains likely.

Investors are concerned the situation could spark a global recession, while Mark Carney, Governor of the Bank of England, has already warned that the outbreak could result in the UK’s economic growth prospects being downgraded. 

Sectors most affected 

Not surprisingly, shares in airlines and travel companies have dropped significantly. EasyJet fell by 16.7% in the FTSE 100, while Tui and British Airways owner IAG both dropped by more than 9%. Oil prices have plummeted, with the price of Brent crude being at its lowest since 2016.    

Firms that rely on goods from China, like the car manufacturer, Jaguar Land Rover, have highlighted that they could soon run out of parts. Companies such as Nike, Apple and Walt Disney have been badly hit, with shares down more than 4%.

The prognosis

Although stock markets may be reliving the financial crisis of 2008, there is no way of knowing how the situation will play out. Previous epidemics such as SARS and MERS had a significant impact on the economy but the effect was transient. Even the worst-hit stock recovered within a year.        

Sonja Laud, chief investment officer at Legal & General Investment Management, explains that,

“What markets are trying to digest is how long this is going to go on and what the economic damage will be.” The situation may look as if it is going to go wider and deeper than investors  originally assumed but acting in panic will not help.

On the plus side, these sudden falls have come after a very strong period for shares in 2019.  So while they may appear dramatic in the short term, the starting point for quite a few markets was an all-time high.  

The best course of action?  

With sensationalist headlines in the media, panic can quickly spread. There are undoubtedly going to be mixed messages. You’ll hear some people saying it’s a good time to buy shares while they are dipping, while others will recommend you sell your shares quickly and buy government bonds instead.

It may sound like a cliché but it is a case of weathering the storm. Rather than make any sudden decisions, try and stick to your long-term investment plan. As the saying goes, it’s about time in the markets rather than timing the market. So while the dips may seem acute now, the picture could look very different over a ten or fifteen year timeframe.

If you do have any particular concerns about your investment strategy at the current time, do not hesitate to get in touch.   

Environmental investing themes for 2020

Wednesday, February 19th, 2020

Although the financial markets have seen their fair share of volatility over the last decade, there has been a growth in opportunities for investors wanting to invest in environmentally conscious businesses. If you’re looking to make a more positive impact on the world while also seeking returns on your investment, it’s important to be aware of some of the emerging trends and themes surrounding environmental investment. Let’s take a look: 

The internet of things 

New and interesting developments have arisen around technological integrations. Many appliances and devices now come embedded with sensors, software and the ability to connect to a network. This new interconnectivity in objects enables them to collect data so that manufacturers can identify areas of efficiency or inefficiency and make changes accordingly. 

However, this industry is still in its infancy, so there will be some time before it fully flourishes. With that said, it remains an attractive piece of tech for manufacturers, so there’s little doubt that the industry will continue to grow, presenting investment opportunities in both software firms and manufacturers alike. 

Electric vehicles

Many vehicle manufacturers are set to bring electric offerings to market in 2020, due to a predicted rise in consumer demand. It had been announced that the sale of new diesel and petrol cars would be banned by 2040. Boris Johnson has now brought the deadline forward to 2035, given that pressure was being put on the Government to make it as early as 2032. The increase of electric vehicles on the road may in turn lead to increased investment in charging infrastructure. 

There may also be investment opportunities in companies that produce the technology and components required to develop and manufacture electric vehicles. 

Fast fashion

The rise of the fast fashion industry has been close to meteoric. With its rise have come notable environmental concerns – the European Environment Agency lists textiles as the fourth biggest pollution after housing, transport and food. Fast fashion has a very negative impact on the environment, from the amount of water that is required to create products, to the amount of fabric that ends up in a landfill or is burned. 

As a result, opportunities have arisen around the creation of materials that are more environmentally friendly than cotton or fossil-fuel derivatives, so firms involved in the development of sustainable materials may be worth investigating. 

With concerns around climate change reaching greater heights, the need for environmentally conscious solutions become all the more vital. If you’re interested in environmental friendly investing, then make sure to get in contact for more information.  

February Market Commentary

Thursday, February 6th, 2020

China grabbed the headlines again in January, but this time not for trade. On 31st December, the Chinese authorities had notified the World Health Organisation of an outbreak of pneumonia in Wuhan City, Hubei Province. Today the country is in lockdown, the death toll is rising fast, the number of infected is rising faster. 

The trade war with the US has been pushed off the front pages and the disease’s inevitable shock to the economy is starting to kick in amid praise for how China has reacted to the outbreak compared to SARS earlier this century. 

The run-up to Brexit – and even the murmurings of the great and the good at the World Economic Forum in Davos became mere sideshows. 

As always, here are the details.

UK 

With only a few isolated bright spots – Tesco’s Christmas sales were up for the fifth year in a row: Aldi and Lidl did well – it was hard to find any good news for the UK high street over the holiday period. 

As the reports filtered through in January, they were almost all equally gloomy, with Morrisons reporting a fall in like-for-like sales, Sainsbury’s saying its sales had ‘slipped’ and John Lewis admitting it may not be able to pay a staff bonus. 

It has been estimated that the UK retail sector lost 57,000 jobs in 2019: more worryingly, there are early forecasts that the sector shed another 10,000 jobs in the first three weeks of this year. Department store chain Beales is now in administration, threatening the closure of 22 stores and 1,000 more jobs. 

Chancellor Sajid Javid will deliver his first Budget on 11th March. It will undoubtedly contain measures designed to help the high street – the recently announced £1,000 a year rate relief for small pubs is an early indication of that – but with Amazon yet again having a record Christmas, you fear it may be too little too late. 

The Eurozone had a poor end to 2019, which was the same story in the UK as factory output in December fell at its fastest rate for eight years. Slowing global demand was blamed – and that was before Coronavirus had been identified. 

UK car manufacturing was similarly down: production fell to its lowest level for ten years and is forecast to continue falling this year. We mention Tesla’s success below and the simple truth is that our car manufacturers are facing ever more threats from companies they had never heard of ten or even five years ago. It is hard to see the trend being reversed. 

There was, however, some good news as the IMF forecast that the British economy will grow faster than the Eurozone. The IMF sees growth going from 1.3% last year to 1.4% this year and 1.5% in 2021. Of the G7 countries, it is forecasting that only the US and Canada will grow faster than the UK, while Italy, France, Germany and Japan will ‘struggle to keep up’.

Big projects were much in the news in January. Crossrail is now likely to be delayed until Autumn 2021 and – despite claims that its costs are ‘out of control’ – it looks like the Government may well press ahead with HS2. They have already made one controversial decision in allowing Chinese company Huawei to be involved in the UK’s 5G infrastructure: they now look set to ignore economic and environmental objections to HS2. 

The Chancellor’s upcoming Budget is promised to be the start of a ‘decade of renewal’. Investment in the UK’s transport infrastructure will be at the top of his list and not just HS2: there will be money available to reverse some of the Beeching cuts to the rail network and – hopefully – re-invigorate local communities. 

He will certainly have some healthy tax revenues to play with, as a rise in full-time female workers pushed the UK’s employment rate to a new high of 76.3%. There are now a record 32.9m people in employment in the UK. 

The FTSE 100 index of leading shares did not, though, have a record month. Like almost all of the world’s leading stock markets it drifted lower in January as the potential implications of the Coronavirus became clear. It eventually ended down 3% at 7,286. The pound was virtually unchanged in percentage terms, ending the month trading at $1.3184. 

Brexit and the UK’s Future Trade Negotiations 

The UK voted to leave the European Union on 23rd June 2016. As everyone will now know, we finally left on Friday 31st January, just 1,317 days after the Referendum. 

There is now a ‘transition period’ with the EU lasting until the end of this year, during which time the terms of a trade agreement will – in theory – be sorted out. So for the current year, this section of the Commentary will keep you updated on the progress of those negotiations, which are currently due to start in earnest. 

Foreign Secretary Dominic Raab has said that the UK “will not be aligning” with EU rules on trade, while Boris Johnson has said there is “no need” to follow the EU’s rules to do a trade deal. Meanwhile, Irish Premier Leo Varadkar has warned against “rigid red lines” and former European Council President, Donald Tusk, has teasingly said there is “plenty of time” to get a trade deal in place before Christmas. Whilst at the same time, hinted at “empathy” for an independent Scotland joining the EU. 

As you can see, the war of words has already started. To misquote Macbeth: there will be a lot of sound and fury in the months ahead, much of it signifying nothing. We’ll do our best to sort the wheat from the chaff. 

At the same time as negotiating with the EU, the UK will also be pursuing trade deals with countries like the US and Australia. We will also keep you up to date on all those developments in this section of the Commentary. 

Europe 

The year opened with more calls for strikes in France: the CGT union called for more action after President Macron used his New Year’s address to promise to push through his planned overhaul of the country’s pension system. The protests continued throughout the month – eventually leading to clashes between French police and the country’s firemen. February began with no resolution in sight. 

Away from French unrest, it was a poor end to 2019 for Eurozone manufacturing, which contracted for the 11th consecutive month. The Purchasing Managers’ Index fell from 46.9 to 46.3 in December, with any figure below 50 indicating a contraction. Figures from the PMI showed that both orders and output were down in December. 

One thing that certainly was down was the number of Swedish people taking to the air. The number of people who travelled through the country’s airports was 4% lower in 2019 than in 2018 as ‘flight shaming’’ impacted Swedes’ travel habits. So far no other European country has reported similar figures but it is, perhaps, a sign of what we might see in the coming years.

The year also ended badly for Volkswagen: not only was it overtaken in value by Tesla (as we report below) but Canadian prosecutors were proposing to levy a £110m fine on the company. VW had imported 128,000 vehicles into Canada which violated the country’s emissions standards. 

Both the major European stock markets were down in the first month of the year: the German DAX index fell 2% to 12,982 while the French stock market fell by 3% to end the month at 5,806. 

US

January was the month when the impeachment of Donald Trump reached the Senate and – to no one’s surprise – the Republican majority there duly looked after its President. With senators blocking impeachment witnesses, the President is all but acquitted. There appears to be nothing to prevent Donald Trump running for re-election in November, with the bookmakers expecting him to win a second term in the White House. 

Away from the trial, economic data showed that both wage growth and jobs had slowed in December. The US added 145,000 jobs in the month, well down on the 256,000 created in November. This capped a year of solid – but slowing – jobs growth as the US labour market expanded for the 10th consecutive year. 

The average hourly rate of pay rose at an annual rate of 2.9%, down from the 3.1% recorded in November. 

There was, however, no slowing down at Tesla, which saw its shares reach a record high – in the process, giving it a bigger market capitalisation than Volkswagen – as the company beat Wall Street estimates of how many vehicles it would deliver in the fourth quarter. The Silicon Valley carmaker delivered 112,000 vehicles in the last three months of the year, and 367,500 for the year as a whole. 

Much less surprising was the news that Amazon had enjoyed a record Christmas, shipping ‘billions of items’, with 5m people around the world signing up for a trial of Amazon Prime or for one of the company’s other subscription services.

Apple also claimed record sales and profits over Christmas, thanks to a surge in demand for the new iPhone 11, but by the end of the month the effects of China’s Coronavirus were being felt. 

Starbucks (coffee seems to be the barometer of an economy these days) made the decision to close 2,000 outlets in China due to the virus and the Dow Jones index – which had broken through the 29,000 barrier in the middle of the month when the US/China trade agreement was signed – eventually ended January down 1% at 28,256. 

Far East 

The news in the Far East was, of course, dominated by Coronavirus. But even without the face masks, there were plenty of worries for the Chinese economy. 

Figures released in the middle of the month showed that the economy grew by ‘only’ 6.1% in 2019. While that figure is beyond the dreams of Western economies, it represented China’s slowest rate of growth for 29 years. The Government was already rolling out measures to boost the economy before the Coronavirus hit, beginning the year by cutting banks’ reserve ratios and releasing $100bn (£75bn) into the economy. The longer the virus lasts, the more the Chinese government is likely to pump money into the economy.  

Chinese investment in Europe also fell to a nine year low as the Government in Beijing increasingly focused on stimulating domestic demand. As the US/China trade dispute continued through 2019, Chinese investment in Europe fell by 40% and was down by 27% in North America. Investment in the US and Canada fell from $7.5bn (£5.68bn) in 2018 to $5.5bn (£4.17bn) in 2019, the lowest level since 2009. 

Unsurprisingly, stock markets in the Far East had risen in the middle of January as the US/China trade deal was signed, but the impact of the Coronavirus wiped out those gains and more, meaning that the four main Far Eastern markets were all down by the end of the month. 

The biggest fall was in Hong Kong, where the Hang Seng index dropped 7% to 26,313. The South Korean stock market was down 4% to 2,119 while China’s Shanghai Composite index and Japan’s Nikkei Dow were both down by 2% to 2,977 and 23,205 respectively. 

It’s worth noting that as of 3rd February, the Chinese stock market had fallen by 8% and stood at 2,746, no doubt a consequence of the Coronavirus.

Emerging Markets 

In January, Amazon boss Jeff Bezos announced an investment of $1bn (£770m) in India, to help digitise small and medium businesses so they can sell online. Announcing the investment, Bezos said the 21st Century is “going to be the Indian century.” But not everyone was pleased at the news, as retailers across the country demonstrated at what they see as a growing threat to local retail markets. 

Russian President Vladimir Putin also appeared to be making plans for the next century. He was last elected President in 2018, winning a six year term which would have seen him in power until 2024. However, he now seems to have wearied of the tiresome business of getting re-elected and January found him busy re-arranging the structure of Russian government in a move widely seen as paving the way for him to remain President for life, much as Xi Jinping has done in China. 

Despite Jeff Bezos’ investment plans, the Indian stock market fell 1% in the month to close January at 40,723. Brazil’s market was down by 2% to 113,761 but there was – at last – a market which went up in January as the Russian stock market managed a gain of 1% in the month, closing January at 3,077. 

And finally…

Last January we brought you the news of Greggs and their vegan sausage roll. This year, the company celebrated Veganuary by releasing the vegan steak bake to an expectant world – a move that proved hugely popular. The company has now announced that its workers will share in a £7m one-off payment as a special ‘thank you.’ Helped by the success of the vegan sausage roll, Greggs CEO Roger Whiteside said 2019 had been an “exceptional year”.

Clearly, though, not everyone is eating vegan sausage rolls and walking five miles a day. The BBC reported that ‘M&S sales squeezed as men shun skinny trousers’ as the mainstay of the British high street was forced to concede that it had overestimated the demand for tight-fitting men’s clothes in the run-up to Christmas. As a result, it was rushing to order more ‘regular’ and ‘relaxed-fit’ clothes. 

You can only conclude that people eat more over Christmas… who would have thought?

Let us leave this Commentary with a tale of true love, or at least what Japanese billionaire Yusaku Maezawa hopes will be a tale of true love…

Mr Maezawa – who made his money in fashion – is seeking a ‘life partner’ to accompany him on a trip to the Moon. He will be the first civilian passenger on Space X’s lunar trip, planned for 2023. He wants to share the experience with a “special woman.” 

One doubts that he will be short of potential candidates. To paraphrase Mrs Merton’s famous remark to Debbie McGee, ‘What was it that first attracted you to the billionaire Yusaku Maezawa…’

Have a great month, we’ll be back with more updates in March.