Contact us: 01799 543222

Kids off to Uni? But have you been saving enough?

Archive for the ‘Investments’ Category

Kids off to Uni? But have you been saving enough?

Wednesday, September 6th, 2017

Recent figures from the Institute of Fiscal Studies suggest that the average total debt incurred by today’s university students over the duration of their studies amounts to £51,000. The new figure comes as those in higher education see the interest rate on student loans rise to 6.1% in September, despite the Bank of England base rate remaining at its lowest ever figure of just 0.25%. The rise means that students will now typically have mounted up £5,800 of interest by the time they graduate. Total student debt in the UK has now risen to £100 billion, a figure higher than the nation’s total credit card debt.

The rising cost of higher education perhaps makes it unsurprising that 40% of parents are now beginning to save towards future university costs before their children have even been born, with one in five hoping to have saved £2,000 by the time the baby arrives. Frustratingly, however, around two thirds of those who are saving are doing so by simply placing the funds in an ordinary savings account, meaning their money is earning them very little in interest.

An alternative option to consider is a Junior ISA (JISA) in the child’s name, which they can then access when they turn 18. The account currently allows £4,128 to be saved every year, and the best rate market rate for a cash JISA offers 3.25%. Saving the maximum amount at that rate for ten years would result in a nest egg of £49,427 tax free to cover university fees with plenty left over for other expenses.

Whilst a cash JISA offers dependability, a stocks and shares JISA is also worth considering as the potential reward on your investment can be higher. Both types of JISA can be opened at the same time with the allowance shared between them, so spreading your savings between the two can pay off in the long run.

Using your pension to save towards your child’s university education is also an option, thanks to the pension freedoms of recent years. With the ability to take a lump sum to put towards fees and other costs when you turn 55, pensions offer a tax-efficient way of putting away for both your child’s future and your own. This is an option which needs careful planning, however, as you’ll need to make sure you have enough for your retirement before paying for your child’s education.

For those able to do so, it may also be worth speaking to your own parents about helping towards their grandchildren’s university costs. Rather than leaving money to a grandchild in their will, a grandparent might consider gifting towards fees and other expenses or placing the money in a trust, reducing their inheritance tax liability and allowing their grandchild to benefit from their legacy when they really need it.

£94bn lost by holding money as cash

Wednesday, September 6th, 2017

A new report has revealed that the UK’s working adult population has missed out on a staggering £94 billion over the past five years through failing to invest in the stock market and holding their money in savings accounts. The figure comes from public policy think tank, The Social Market Foundation, which has also found that more than £200 billion worth of cash is being held by savers above the recommended three months’ worth of income or ‘rainy day’ level of savings that should be kept available.

The think tank has urged the government to do more to inform and encourage savers about diversifying their savings and investments, as the figures suggest many are devaluing the money they’ve worked hard to put away, thanks to high inflation and low interest rates. More worryingly, the report reveals that more than 14 million working adults in the UK are not saving whatsoever and that more than 26 million have inadequate pension savings.

Had UK savers invested in peer-to-peer loans instead of the stock market or simply left the money sitting in a savings account, the returns they would have seen could have amounted to £40 billion. As such, the report recommends the government markets up to 25% of both its Future Britain Funds and National Productivity Investment Funds to the public. This would not only give savers the opportunity to grow their savings, but would also allow them to invest in the country’s future. This could lead to investment of at least £30 billion in these ‘Britannia bonds’ in the next five years, which would provide greater funding for infrastructure.

Another recommendation from the report suggests that the government give £1,500 to every 15-year-old from 2020, funded by money saved by reducing the ISA allowance. With the help of real life financial education, the teenagers would then use the money to invest in a range of asset classes. This would not only help young people to learn the benefits of wise saving and investment practices, but would also ensure they have at least some financial assets as they head towards life outside secondary education.

August market commentary

Monday, August 7th, 2017

July got off to the best possible start when Janet Yellen, Chair of the US Federal Reserve, announced that there would be no more financial crises “in our lifetime.” Speaking on a trip to London, she said that the reforms of the banking system since the 2007 to 2009 crash had “minimised the risk of a similar disaster happening again.” Phew, that’s alright then. And if you’re reading this commentary, Ms Yellen, just skip over the bit about Italy…

Sadly, the word ‘crisis’ isn’t just confined to banking. July was the month when Kim Jong-un got a little feisty with an ICBM launch at the beginning and end of the month. The Washington Post described the first test as ‘a grave milestone’ and the regime in Pyongyang claimed the second test brought ‘the whole of the US within range.’ At the beginning of August, CNN was reporting ‘unprecedented levels’ of North Korean submarine activity: the situation is only going to get worse.

In fact, there was plenty to worry about in July. Lloyds of London warned that a global cyber-attack could cost the world economy $53bn, there were simmering tensions between China and India and the IMF downgraded its growth forecasts for both the UK and the United States. Meanwhile, at the G20 summit in Hamburg President Trump fell out with all the other world leaders over climate change. Then he went back to Washington to sack most of his administration…

Despite all this, July was by and large a good month for world stock markets, with three of the markets we cover making appreciable gains and none seeing significant falls.

There was mixed news for the UK economy during July. As we reported above, the IMF downgraded its forecast growth for the year, cutting it from 2.0% to 1.7%. There was also bad news on productivity – the constant theme running through George Osborne’s Budget speeches – which the Office for National Statistics reported had dropped back to pre-financial crisis levels.

Figures for May showed that UK manufacturing had fallen – although this was largely due to a 4.4% drop in car production – and consumer spending had its worst quarter since 2013 in the three months to June, with expenditure dropping 0.3% year-on-year.

Against this, unemployment fell a further 64,000 to 1.49m, bringing the unemployment rate to 4.5% – the lowest since 1975. The number in work rose to 32m, the highest figure ever recorded and up 324,000 on the previous year. London remains Europe’s leading tech hub and both Google and Amazon have recently announced plans for substantial new investment in the city.

Even retail sales gave a glimmer of hope (despite the downturn in consumer spending) as sales rose 0.6% in June for a quarterly jump of 1.5%. And having surged to 2.9% in May, inflation dropped back to 2.6% in June, helped by lower fuel prices.

The UK mirrored the example set by France (see below) in announcing that new petrol and diesel cars will be banned from 2040. BMW followed this announcement by revealing that its new electric Mini will be built in Cowley – giving a huge boost to the car industry and the West Midlands.

With economic growth in the second quarter of the year edging up to 0.3% from the 0.2% seen in the first quarter, it is probably fair to say that the UK ended July with its glass slightly more than half full. That was the view taken by the FTSE-100 index of leading shares, which closed the month up 1% (and 3% for the year as a whole) at 7,372. Helped by fears that a rate rise in the US will now be delayed, the pound ended the month at $1.3224 – it is now up by 7% against the dollar for the whole of 2017.

Do you remember when you were at school? The teacher would go out for five minutes, tell you to carry on with your work and the class would immediately descend into chaos.

In July, that’s how it was with Her Majesty’s Government. Theresa May went on holiday and the class immediately started fighting over Brexit. Philip Hammond seemed to favour a never-ending transition period after leaving the EU and ‘friends of Boris Johnson’ muttered darkly in corners. Ultimately, 10 Downing Street announced that free movement would end in March 2019, but you really do suspect that no-one has any idea.

Business organisations – speaking via the CBI – definitely want some sort of transition deal after Brexit, but credit ratings agency, Moody, suggested that there was now a ‘substantial probability’ of no deal being reached. Given the fact that all 27 members of the EU will need to agree the deal and there is just 19 months to go until March 2019 that view is looking increasingly credible. With Europe now largely on holiday for a month and then the German elections due in mid-September, it is easy to see it being October before any significant progress is made.

As in the UK so it was in France, with Ecology Minister Nicolas Hulot announcing a ban on the sale of any car that uses petrol or diesel fuel by 2040. There is some way to go however: at the moment, hybrid vehicles make up 3.5% of the French market, with pure electric vehicles accounting for just 1.2%. The announcement was part of a renewed commitment to the Paris climate deal, with Hulot saying that France planned to become carbon neutral by 2050.

However, both the UK and France were beaten to the punch by Volvo, with the Swedish-based, Chinese-owned company announcing that all its new models will have an electric motor from 2019. Geely, Volvo’s Chinese owner, has been quietly pushing ahead with electric car development for more than a decade and now plans to sell one million electric cars by 2025.

There was good news in Spain, as the economy grew by 0.9% in the second quarter of the year, finally taking it back to the size it was before the credit crunch of 2008. But there was less good news in Italy – this is the bit you might care to skip, Ms Yellen – where CNBC described the Italian economy as a ‘basket case.’ The country has €2tn of public debt, which is around 133% of the country’s GDP and – as we have reported in previous commentaries – several of the country’s banks have needed rescuing, burdened by loans that will simply never be repaid. ‘No more financial crisis in our lifetime’ is a laudable aim, but it reckons without the Italian banks.

…But let us leave Europe with our glass half full: the unemployment rate in the European Union has fallen to 9.1% – the lowest level since February 2009.

The major European stock markets were both down in July, but not by any significant amounts. The German DAX index fell 2% to 12,118 while the French stock market dropped just 1% to close the month at 5,094.

Let’s start by sparing a thought for Amazon boss, Jeff Bezos, who for one glorious day in July was briefly the richest man in the world as Amazon shares rose. Then they released disappointing figures, ungrateful investors sold the shares and poor old Jeff was back in second place, grubbing along on $89bn and still behind Microsoft boss, Bill Gates.

Not that July was a great month for Microsoft as it announced plans to cut ‘thousands’ of jobs worldwide in a bid to get its cloud computing business to compete more successfully with Google and – you guessed it – Amazon.

In the wider US economy, though, there was good news on US jobs as figures for June showed 220,000 new jobs created and unemployment remaining low at 4.4%. However, that was countered by bad news on retail with sales down by 0.2% for the month, against an expected 0.1% rise. Coupled with inflation falling to 1.6% this led many commentators to speculate that a future rise in interest rates would be postponed.

Google’s bottom line was hit as the company was handed a $2.7bn fine by the EU for promoting its own shopping comparison site at the top of search results – but that is just petty cash for Facebook, where advertising revenues for the second quarter climbed to $9.3bn with more than a quarter of the world’s population now logging onto the site each month.

There was even better news for the US at the end of the month as figures for the second quarter showed that the US economy had bounced back from weak growth in the first quarter, growing at an annualised rate of 2.6% between April and June. No surprise then that the Dow Jones Index finished the month up 3% at 21,891.

Far East 
The main story in the Far East was the growth of the Chinese economy in the second quarter of the year, which came in at 6.9%. That is equal to the growth in the first quarter and well ahead of the official target for the year, set at 6.5%.

Clearly, plenty of lenders are confident that the Chinese economy will continue to grow as figures from the Bank for International Settlements showed a surge in lending to China and Chinese companies: international banks lent $92bn to China in the first quarter of the year, well up on the same period in the previous year.

Woe betide us all if the Chinese economy ever slows down, but in the meantime there was no slowdown at Samsung as the South Korean tech giant reported record profits thanks to a surge in demand for memory chips. Profits were £9.3bn for the three months to June, up 72% on a year earlier.

China announced that it will now allow rice imports from the US – watch out for President Trump sacking his Rice Commissioner any day now – and also unveiled plans for a new ‘unhackable’ internet. To be centred on the town of Jinan, some 200 users from the military, government, finance and electricity sectors will be able to send messages secure in the knowledge that only they are reading them. No doubt that will be seen as a challenge by North Korean hackers…

As well as his successful missile tests, there was more good news for the Supreme Leader when figures showed that the North Korean economy had grown at its fastest rate for 17 years, largely based on mining, energy and exports to China. It is easy to see where North Korea is spending the money, and the month ended with more worrying news as China and India exchanged a war of words over disputed territory on the Doklam Plateau in the Himalayas, which is claimed by both China and Bhutan. China warned India – which is backing Bhutan in the dispute – that it will defend the territory “at all costs”.

Away from all the squabbling, what happened on the Far Eastern stock markets? The Chinese and Hong Kong markets both enjoyed a good month rising 3% to 3,273 and 6% to 27,324 respectively. The Japanese index was down 1% at 19,925 and the South Korean market barely moved – finishing just 11 points higher at 2,403. On a year-to-date basis, both the South Korean and Hong Kong markets have done exceptionally, with respective gains of 19% and 24%.

Emerging Markets 
For once a quiet month in the Emerging Markets section with – you will find this hard to believe – no Brazilian politicians being arrested for corruption. Instead, we will simply concentrate on reporting some encouraging performances on the major stock markets, with all three of the markets we cover up in July. The Russian index – after a very disappointing first half of the year – was up 2% to 1,920: the Brazilian market was up 5% to 65,920 and the Indian index up by a similar amount to 32,515. The Indian stock market is now up by 22% for the year as a whole.

And finally 
July was another fine month for the ‘And finally’ section of this commentary, beginning with a Texan contractor (understandably he preferred not to be named) who trapped himself inside a Bank of America ATM whilst changing the lock. He was rescued when a customer tried to withdraw $100 and instead received a note saying, ‘Please help, I’m stuck in here.’ He naturally thought it was a joke, but on failing to spot any TV cameras and hearing a faint voice coming from the hole in the wall, the customer decided to call the police…

…Never mind, perhaps machines will take over from those useless humans. Or maybe not. A security robot in Washington was tasked with patrolling the foyer of an office building. Instead, it patrolled itself straight into the building’s fountain and ‘drowned.’ So much for 21st Century technology. ‘We were promised flying cars,’ wrote one observer on Twitter, ‘Instead they’ve given us suicidal robots.’

Never mind, the makers of the robot can always console themselves with a cup of tea and Kit Kat – unless they happen to be in Japan. Nestle have opened a new factory there to make ‘exotic Kit Kats’ for which there is apparently a booming market in Japan. The new factory will make a range of flavours – among others – green tea and wasabi flavoured – maybe not to everyone‘s tastes..!


July market commentary

Friday, July 7th, 2017

June was a fairly quiet month.

Well, apart from the chaotic General Election in the UK. Oh – and the decisive win for Emmanuel Macron in the French parliamentary elections. And the start of the Brexit negotiations. And Italy was forced to bail out two more banks. President Trump pulled out of the Paris climate change agreement – and in Brazil, President Michel Temer was accused of corruption – the first sitting President in Latin America’s largest country to face criminal charges. Anything else? Just another global ransomware attack…

In fact, the only things that were quiet in June were the world’s leading stock markets. Of the 11 major markets we cover in this Bulletin, four were up, five were down and two were unchanged – but none of them by very much. If you wanted real excitement in June then you had to head to Greece, where the Athens Composite General, buoyed by EU ministers approving the latest Greek funding deal, was up by 6%.


…But we begin the commentary with matters even more chaotic than the Greek economy: the UK General Election of 8th June. It was all meant to be so simple wasn’t it? Encouraged by a huge lead in the polls, record personal approval ratings and an opposition that appeared to be a shambles, Theresa May called the election as she sought her own mandate. Well, not so much an election, more of a coronation. But writing in the Telegraph in May, Nigel Farage sounded a warning note. “The more people see of Theresa May the less they like her,” he said. And so it proved. The Conservatives remain the largest party in the UK parliament, but have had to strike a deal with Northern Ireland’s Democratic Unionist Party. Meanwhile, the Prime Minister’s popularity continues to slump…

Away from the peace and quiet of politics, what of the UK economy? Figures for the first quarter of 2017, released by the Office for National Statistics, confirmed that UK growth was just 0.2% for the January to March period, putting the country next to Italy as the slowest-growing in the league table of the world’s advanced economies. The ONS also confirmed that inflation for May had risen to 2.9% and – with a figure in excess of 3% forecast for later in the year – most people are now suffering a fall in real wages. Not surprisingly, the ONS also confirmed that the UK savings ratio – the proportion of disposable income which households save – was at a record low, falling to 1.7% in Q1, down from 3.3% in the previous quarter.

So the UK glass is very much half-empty. Or is it? A recent CBI survey showed manufacturers’ order books at a 29 year high, with food, drink, tobacco and chemicals leading the way. The same survey showed export orders at a 22 year high: CBI Chief Economist Rain Newton-Smith said, “Britain’s manufacturers are continuing to see demand for ‘Made in Britain’ goods rising. Total and export order books are at highs not seen for decades, and output growth remains robust.”

This was reinforced when the World Bank upgraded their forecasts for UK growth over the next three years, increasing their estimate for 2017 to 1.7% from the 1.2% they had forecast in January. Growth expectations for 2018 and 2019 are 1.3% and 1.5% respectively.

Meanwhile, Rolls Royce has protected 7,000 engineering jobs in the East Midlands after announcing its biggest investment in the UK for more than a decade. It will be investing £150m in Derby, creating up to 200 extra jobs and safeguarding the other jobs for five years. Simon Hemmings, from the Unite union, said it was “a once in a generation investment and a big commitment to the UK.”

The FT-SE 100 index of leading shares closed the month down 3% at 7,313 as the pound rallied against the dollar, rising to $1.3026. The UK stock market is now up by 2.38% for the year as a whole: not a bad performance given the uncertainty surrounding the political situation and Brexit.

The Brexit negotiations formally began on 19th June, 11 days after the General Election. So far – to use Macbeth’s phrase – we have seen plenty of ‘sound and fury’ but little of substance. However, several trade bodies have made their views known: the Engineering Employers Federation, for example, has called for a ‘softer’ Brexit, with access to the single market at the heart of the Brexit negotiations.

Equally, there have been plenty of dark mutterings in the corridors of Westminster: as Theresa May twists in the wind, Chancellor Philip Hammond is supposedly becoming an increasingly pivotal figure – and he is said to prioritise jobs and the economy over control of immigration.

However, it may well be that the real discussions don’t begin until after the summer holidays and the German elections in September. By that time the position of Theresa May should also be much clearer: if she survives the summer, she is likely to survive until the Conservative Party Conference in early October.

The big news in Europe continues to be French President Emmanuel Macron, who must surely be wondering what all the fuss is about. You decide to form a political party: a year later you are President. A month after that your party wins a majority. Politics, it is too easy…

His En Marche party did indeed win a majority in the parliamentary elections. Perhaps not as large as some of the early projections were forecasting, but En Marche and its allies in the centre took 350 of the 577 seats available. The real story, though, was the turnout, which fell below 50%, reflecting continued disillusionment with politics in France.

Turning to economic matters, the European Central Bank was in a bullish mood, increasing its forecast growth for the Eurozone in 2017 to 1.9% from the 1.8% it forecast in March. Growth is expected to be 1.8% next year and then 1.7% in 2019. ECB President Mario Draghi also forecast that Eurozone inflation will be 1.5% in 2017, down from an earlier forecast of 1.7%.

Also in a bullish mood was the German economy, with the trade surplus for April confirmed at €18bn and employment at the highest level since reunification. An extra 650,000 people were employed in May, taking the total in work to 44.1m.

And now to economies that are faring slightly less well…

Eurozone ministers have struck a deal to unlock the latest tranche of Greece’s bailout cash, releasing €8.5bn to the country. This will avert a debt crisis in July when the latest repayment of €7bn becomes due. So essentially, the EU has released money to Greece to pay back the money that was previously released to it: presumably that makes sense to someone… Meanwhile the Italian government was busy bailing out two Venice banks to the tune of €5.2bn: clearly it is not just the city that is sinking.

Also sinking were Europe’s leading stock markets. The French index was unmoved by the Macron majority and fell back 3% to close the month at 5,121. In Germany, the market was also down, falling 2% to 12,325.

As we noted above, Donald Trump – as was widely expected – has pulled out of the Paris climate deal. Many US firms (Facebook, Goldman Sachs, Disney) reacted with horror to this latest demonstration of America First, but the coal industry welcomed the move, saying it would protect jobs and ease regulation. The Dow Jones Index seemed to broadly agree with the coal industry: it rose 0.6% on the news.

The US had added fewer jobs than expected in May, with payrolls increasing by 138,000 against the anticipated 180,000 – but this still resulted in unemployment falling further to 4.3%, the lowest level since 2001.

This perhaps prompted the Federal Reserve to raise interest rates for the second time this year, increasing them by 0.25% to a target range of 1% to 1.25%, the highest level since 2008. Chairman Janet Yellen said, “Our decision reflects the progress the economy has made and is expected to make.”

The IMF remained unimpressed and – citing ‘uncertainty about White House policies’ – trimmed its forecast for US growth to 2.1% for both 2017 and 2018, down from 2.3% and 2.5% respectively and well below the 3% the White House is targeting.

In company news, Facebook reached 2bn users, Amazon dipped into its back pocket and bought Whole Foods for $13.7bn and the EU competition commissioners gave Google a $2.7bn slap across the wrist for promoting its own shopping service.

More impressed than the IMF with White House policies and boosted by the news that US business confidence was at its highest for 3 years, the Dow Jones index closed the month up 2% at 21,350.

Far East 
We have written previously in this commentary about the scale of lending by Chinese banks, and many Chinese conglomerates have gone on spending sprees abroad on the back of it (several of them buying UK football clubs). However, President Xi Jinping, concerned about stability in the financial sector, has now launched a crackdown on these ‘financial crocodiles.’ It is generally felt among Western commentators that the Chinese financial sector is over-leveraged and under-regulated and this may possibly see the start of less financial investment overseas by Chinese conglomerates. Where it leaves the manager of your team if you need a new left back only time will tell…

One conglomerate that won’t be going shopping any time soon is Toshiba. Its troubles continued as it admitted that losses for 2016 may be even greater than previously forecast – perhaps up to £7bn from a previous estimate of £6.5bn. No such worries for Japan’s Softbank though, which bought Boston Dynamics, the robot-maker owned by Google’s parent company.

Three of the four major Far Eastern markets rose by 2% in June, with China’s Shanghai Composite Index closing at 3,192: the Japanese market went through the 20,000 barrier to end the month at 20,033 while the South Korean index continued its good recent run, ending June at 2,392. The only exception was Hong Kong, which was virtually unchanged at 25,765.

Emerging Markets 

As we noted above, Brazil’s President, Michel Temer, has now been formally accused of corruption, the specific charge being that at some point between March and April of this year the President took a bribe of $150,000 from Joesly Batista, the former chairman of a meat packing company. This is the latest salvo in an increasingly bitter war between the President and officials from the Department of Justice, who seem determined to build a case against him. The case will now go to the lower Chamber of Deputies, who must decide if the case has any merit.

There was some good news, however, as Brazil came out of recession after two years of negative growth during which the economy shrank by 8%. The longest recession in the country’s history was finally ended as growth of 1% was confirmed for the first quarter, with the economy boosted by a record harvest of soybeans, one of Brazil’s main exports.

The Brazilian stock market duly weighed up the good and bad news and decided to do nothing very much in June, ending the month virtually unchanged at 62,900. The other two major emerging markets we cover, India and Russia, were both down by 1% in the month, closing at 30,922 and 1,879 respectively. No – nobody accused that nice Mr. Putin of corruption…

And finally…
Can we find anything cheerful to end the commentary amid June’s doom and gloom? Perhaps not, as it appears that global beer sales are drying up. The International Wine and Spirits Record reported that worldwide beer sales were down by 1.8% last year, with overall alcohol consumption down by 1.3%. This marks a significant acceleration in the average fall of 0.3% seen over the last five years: the only bright spot on the horizon was the continuation of the gin revival. Worldwide sales of the iconic British drink rose 3.7% last year.

And what better to have with your favourite summer tipple than a new snack which is taking California by storm and has been hailed by Los Angeles lifestyle website ‘Hello Giggles’ as “genius.” West coast supermarket Trader Joe’s has been marketing the ‘Puff Dog’ – a beef sausage wrapped in puff pastry. Yes, ladies and gentlemen, the United States has finally invented the sausage roll…


Savings, investments & the political climate

Wednesday, June 14th, 2017

Whilst the country takes in the latest developments in the ongoing saga that is contemporary British politics, one question that many will be looking for answers to, is how the result of the general election is likely to affect them financially. It’s inevitable that savings and shares will be impacted upon in some way by Theresa May’s failure to convert her confidence in April into a larger majority in June and the resultant Conservative/DUP deal, as well as the wider ramifications the election outcome might have for the upcoming Brexit negotiations.

Following the election and the slight fall in the value of the pound, shares in many of the largest British companies went up. As companies dealing in dollars and other currencies benefit from a weakened pound, the FTSE 100 initially rose. However, ‘local’ companies dealing in sterling, such as Lloyds Banking Group, housebuilders Crest Nicholson and retailer Next all came out worse off, as did smaller companies linked to the UK economy.

As such, those with diversified pensions and ISA funds are likely to be no worse off than before the election, and doing significantly better than this time twelve months ago. However, it’s worth remembering that the uncertainty and volatility that are likely to be seen in UK politics in the coming days, weeks and months could result in shares and investments shifting further.

Whilst interest rates on both savings and mortgages were at historic lows before the election, capital markets pushed these still further down the day after polling day in order to absorb some of the shock of a result most had not predicted. This is just the latest setback for savers in a period which has seen rates declining consistently since the Bank of England lowered the Bank Rate from 0.5% to 0.25% in August 2016. With little competition between lenders, it’s more likely that rates will fall further than begin to climb any time soon.

The housing market too has been slowing since well before the election, making it a good time for those looking for a great deal on a mortgage to find one – but only if they meet the increasingly fastidious lending methods being used by lenders. The economic instability the country could potentially see in the coming months mean that criteria may tighten further, so those hoping to benefit from a low mortgage rate should do so sooner rather than later in order to avoid missing out.

June market commentary

Wednesday, June 7th, 2017

As we wrote last year, ‘It is tempting to think that Brexit is the only game in town.’ Cross out ‘Brexit’ and replace it with ‘General Election’ and the sentiment holds good. But the rest of the world keeps turning – or in May, grinding to a halt as the WannaCry ransomware attack hit more than 250,000 computers in more than 100 countries, with our own NHS being particularly badly hit.

Once the computers were back up and running, UK growth for the first quarter of 2017 was revised down, whilst US growth for the same period was revised sharply upwards. In France, new President Emmanuel Macron presumably had a small sip of champagne to celebrate his victory over Marine Le Pen.

Who knows what Kim Jong-un drinks, but he may have raised a glass of it to toast another successful missile test in North Korea, further adding to tensions in the Far East.

As to world stock markets, four of the major markets that we cover made good gains in May, whilst two – Russia and Brazil – suffered significant falls. As always, let’s look at the world’s various regions in more detail.

May started with the now regular dose of bad news for traditional British retailers as Sainsbury’s profits fell by 8.2%. House prices were also heading in the same direction, with the Halifax reporting that prices fell by 0.2% in the three months to April, the first quarterly fall since November 2012.

The news was even worse if you are a diesel car owner, with a warning that many cars bought on finance deals could be heading for negative equity as their resale value continues to fall.

BT deepened the gloom by announcing plans to shed 4,000 jobs and the EY Item Club forecast that the UK jobless numbers would start to rise in 2018. The rate is currently 4.7% but the forecasting group is expecting an increase to 5.4% next year and 5.8% in 2019. In particular the Item Club’s report singled out Scotland, where it said automation posed a threat to 1.2m jobs.

By the middle of the month, the Bank of England had cut its growth forecast for the UK economy from 2.0% to 1.9% for this year, with Governor Mark Carney warning of a spending squeeze as inflation rises and real wages fall. Energy price rises saw the UK’s inflation figure up to 2.7% for April.

As we noted above, UK growth for the first quarter of the year was revised down from 0.3% to 0.2% and Government borrowing rose more than expected in April – it spent £10.4bn more than it received in April (£1.2bn more than in April 2016) as tax revenues stalled.

Something else which emphatically stalled was British Airways planes. The company was hit by what it described as a ‘massive system outage’ over the bank holiday weekend, leading to chaos at Heathrow and Gatwick – and ultimately to millions of pounds in compensation.

Despite all the gloom around in May the FTSE-100 index of leading shares enjoyed a good month. It broke through the 7,500 barrier for the first time and closed the month up 4% at 7,520.

There was little to report on the Brexit front in May. There were, of course, a lot of words, negotiating positions and posturing, but with substantive talks due to start eleven days after the UK General Election May was something of a ‘phoney war.’

One interesting development was a poll in Germany which showed 88% of those asked, were in favour of the UK paying its debts to the EU, which are currently put at between £50bn and £100bn depending on who you believe. More than any other European nations the Germans want the EU to adopt a tough negotiating stance. With new French President, Emmanuel Macron, also saying he does not want the EU to compromise we can expect the two sides to be a long way apart when the negotiations begin.

A bad month all round for national carriers as Alitalia went into administration at the beginning of the month, albeit with the approval of the Italian government.

Emmanuel Macron comfortably defeated Marine Le Pen to become France’s youngest leader since Napoleon, but the level of abstentions and spoiled ballot papers suggested that Monsieur ‘None of the above’ would have had a real chance of winning had he been on the ballot paper.

The Euro predictably strengthened on the news of Macron’s victory – and the German economy predictably produced another thumping surplus. Figures for March showed exports at €118.2bn while imports climbed to €92.9bn. These were the highest figures ever recorded and gave a trade surplus of €25.3bn for the month. Angela Merkel said the surplus was due to the weak euro.

Meanwhile, Portugal, one of the countries originally considered likely to follow the same economic path as Greece, was pronounced back to fiscal health by the EU, as its budget deficit fell below 2% of GDP last year.

It was a quiet month for Europe’s major stock markets: the German DAX index was just 1% higher at 12,615 while the French index – having anticipated a Macron victory last month – was virtually unchanged at 5,284.

POTUS – the President of the United States – continues to make waves, headlines and enemies in equal measure. Last month, found him in Saudi Arabia signing trade deals which were worth an initial $110bn and may ultimately rise to $350bn. He promised to slash government spending on health and education and signalled the start of renegotiations of NAFTA – the North American Free Trade Association.

He did take time off to fire FBI director James Comey and global stock markets briefly fell in the ensuing turmoil which all led to the ‘will he be impeached?’ speculation. Never a dull moment…

Away from the peace and calm of the White House the unthinkable happened: sales of iPhones fell. Apple sold fewer iPhones in the first three months of the year – just the 50.8 million – which was down 1% on the same period in the previous year. Apple CEO, Tim Cook, said it wasn’t really a fall, just a “pause” as customers waited for a new phone to be launched.

But there was no pause for Facebook as it reported profits of just over $3bn in the first quarter – up 76% year-on-year as it nears 2 billion users worldwide.

There was however, gloom for the US retail sector – or at least that part of it which trades from bricks and mortar stores. US retail sales were up 4.5% compared to a year ago, but all the growth was online with the US Commerce Department reporting an 11% year-on-year increase. In contrast, ‘traditional’ retailer JC Penney reported a 3.5% fall for the first quarter, with Macy’s and Nordstrom also reporting declining sales.

There was more gloom as Ford – facing weak sales and declining profits – offered voluntary redundancy to 15,000 workers in a bid to shed 1,400 jobs worldwide. But there was some good news at the end of the month as US growth for the first quarter of the year was revised upwards from 0.7% to 1.2%.

Wall Street reacted to the mix of good and bad news as you might expect: having started the month at 20,941 the Dow Jones ended it at 21,009 for a rise of just 68 points.

Far East
May did not get off to a great start in China, with news that output had slowed in the country’s factories and mines. There was better news a few days later as China’s first domestically built passenger plane – built by the state owned Comac – made its maiden flight in Shanghai. Better news, that is, unless you are Boeing and Airbus…

Of even more long term significance was the launch of China’s ‘Belt and Road’ trade plan – an investment of $124bn in an ambitious economic plan to rebuild ports, roads and rail networks. The plan – which aims to expand links between Asia, Africa and Europe – was first unveiled in 2013 and has been described as a new Silk Road.

Elections were held in South Korea, which saw Moon Jae-in become the new president, but it was someone not bothered by trivialities like elections that captured the headlines. As we noted above, North Korea launched a successful missile test, to the widely photographed delight of Kim Jong-un. This put immediate pressure on President Moon, who had campaigned for better relations with the North.

Attention switched back to China at the end of the month as ratings agency Moody’s – worried by the ‘debt mountain’ – cut China’s credit rating for the first time since 1989. For those of you who like credit ratings, it was cut by one point from A1 to Aa3.

The Shanghai Composite index duly took note, falling 1% in the month to 3,117. However, it was the only Far Eastern market to fall, with Japan up 2% to 19,651 while the market in Hong Kong rose 4% to 25,661. Star of the show, though, was South Korea: clearly, the stock market approved of President Moon at it rose 6% to close May at 2,347.

Emerging Markets
As we wrote in the introduction, two of the world’s major emerging markets had poor months in May. The Russian stock market fell by 6% to close the month at exactly 1,900 – it is now down by nearly 15% for the year as a whole, having started 2017 at 2,233.

In Brazil, trading on the stock market was briefly halted mid-month following corruption allegations against President Michel Temer – long since seen as the man to ‘clean up’ the country. Trading was stopped with the market down 10%, as the President was forced to deny allegations that he had given his consent to paying off a witness in a huge corruption scandal. There are plenty of those in Brazil, so expect to hear more of this story. Meanwhile, the stock market finally closed the month down 4% at 62,711.

There were no such worries in India where the stock market enjoyed an excellent month. Having started May at 29,918, it finished the month up 4% at 31,146.

And finally…
Prime Minister Theresa May was roundly condemned for refusing to appear on the BBC’s election debate. Meanwhile in Oxfordshire, a retired politician smiles and slips into his new ‘man cave’ to begin work on his memoirs.

Yes, our former leader, David Cameron, has splashed out £25,000 on a ‘shepherd’s hut’ which he intends to use as a writing room. Unfortunately, competition in the Cameron household appears to be just as fierce as in the Palace of Westminster: Cameron’s son, Arthur, has apparently won the battle to be the first to sleep in the hut. Hopefully, our former leader will soon be able to return to his writing room, as the nation waits with bated breath for his memoirs, reputedly worth £1.5m.

So a splendid return for Mr Cameron on his £25,000 investment. But if he wants really stellar returns he should perhaps invest his money with the Church of England, who apparently made a 17.1% return on their investments last year and whose fund has averaged 9.6% over the last 30 years – comfortably beating many expensively managed city funds and comprehensively outstripping the top-rated Yale University endowment fund.

As we all know in financial services, ‘past performance is not necessarily a guide to the future.’ Or perhaps it is with a little Divine Fund Management…


May Market Commentary

Wednesday, May 3rd, 2017

It’s difficult to know where to begin this month. In France? Where we now know the French Presidential election will be a straight fight between Emmanuel Macron and Marine le Pen. In the UK? Where, having declared several times that she saw no need for a General Election, Theresa May summoned everyone to the polls on 8th June. Or in North Korea? Where the simmering tensions between Kim Jong-un and Donald Trump threaten peace and stability in the region.

Politically, the world was a volatile place in April – but the world’s major stock markets reacted with studied indifference. The French index was the biggest gainer, up 3% in the expectation of a victory for Macron on 7th May. Two markets – the UK and China were down by 2% – and the rest inched ever-so-slightly upwards.

…Or maybe we should start this commentary in the corridors of Brussels, where the EU was busy setting out its negotiating position for Brexit – negotiations which are not now expected to begin in earnest until after the UK General Election. For good or ill, Brexit is going to dominate the news agenda between now and March 2019, the supposed date when the UK will leave the EU. Clearly we need to report on Brexit in this commentary and – rather than distort the UK or Europe sections – it seems more sensible to introduce a separate ‘Brexit’ section from this month. Naturally we have placed it between the UK and Europe…

As Chancellor Philip Hammond led a trade mission to India there was disappointing economic news to start the month in the UK. Figures for February confirmed a fall in output in both the industrial and construction sectors, down by 0.7% and 1.7% respectively. The pound duly fell back on the weak economic data and the Halifax announced that house prices were growing at their slowest rate for four years.

But all this paled into insignificance when Theresa May changed her mind and called a General Election. She’d spent the previous week walking in Wales, and clearly views Jeremy Corbyn as somewhat less of a challenge than Mount Snowdon. All the indications are that she can expect to be back in Downing Street with an increased majority, allowing her to pursue the Brexit negotiations without needing to worry about the House of Commons.

Back with the economy, cheaper air fares held inflation steady at 2.3% and there was finally some good news as the International Monetary Fund upgraded its forecast for UK growth, lifting it to 2% for the year from the 1.5% it had forecast in January.

Good news too for the UK taxpayer, who has now recouped the £20.3bn used to bail out Lloyds Bank. Could the same eventually happen with RBS, with the troubled bank posting its first quarterly profit – £259m in the first three months of 2017 – for nearly two years?

There was also good news from British car manufacturers, with March being their most productive month for seventeen years, as they produced 170,691 vehicles and exported a car every twenty seconds.

…But sadly, the bad news returned at the end of the month with overall growth slowing to just 0.3% in the first three months of the year, and retail sales falling at their fastest rate since 2010. With online sales continuing to grow, you can unfortunately expect future commentaries to be reporting ‘yet more job losses on the nation’s high street.’

Eventually, the bad news won out with the FT-SE 100 index of leading shares being one of only two major markets to fall in April, dropping by 2% to end the month at 7,204. It was a different story for the pound, however, which ultimately rose by 3% against the dollar to $1.2952.

April was the month when Theresa May decided to seek the clear Commons majority she apparently needs for the negotiations – and when Europe set out its position that the divorce must be settled before there are any talks on a future trade deal.

As we noted above, substantive talks will not begin until the result of the General Election is known so – in public at least – the next six weeks are likely to see a lot of sound and fury and little of real significance. You need no more evidence of this than the recent meeting over dinner, which according to the German press, led Jean-Claude Juncker to describe Theresa May as ‘delusional,’ whilst UK Government sources said they simply did not recognise that version of events.

Even after the Election result is known it remains to be seen whether any genuine progress will be made before the summer holidays and the subsequent German elections in September. With twenty-two months to go to the March 2019 deadline, it’s easy to see the negotiations being concluded in one very late night sitting on 28th March 2019…

The big story in Europe was, of course, the French Presidential Election with Emmanuel Macron (23.9%) and Marine le Pen (21.4%) finishing first and second in the initial poll, and going through the run-off on Sunday 7th May. That is widely expected to see a comfortable victory for Macron, and both stock and currency markets duly breathed a huge sigh of relief. The ‘Macron rally’ added $290bn to the value of world stock markets, and the euro jumped to a five month high against the dollar.

Whoever wins on 7th May is going to face some big problems as they walk into the Elysee Palace. Clearly terrorism and immigration will be high on the list, but so too will be unemployment. While France has a high standard of living and high productivity, it also has a high unemployment rate – around 10% with some 3m people out of work. This is roughly double the rate of neighbours like the Netherlands and Austria, whilst the rate is below 5% in the UK and below 4% in Germany.

There are, however, some encouraging signs for the wider European economy, with the Purchasing Managers’ Index in Germany recently hitting its highest level since May 2011: the indicator for the Eurozone as a whole also stands at a six year high. Consumer confidence also appears to be improving, with indicators such as retail sales and new car registrations all moving in the right direction.

There was even good news on Greek debt as Eurozone finance ministers finally agreed terms with the Athens government, allowing them to ‘unlock’ a delayed bailout programme. For those of you that haven’t been keeping up, Greece is now part of the way through its third Eurozone bailout programme, with this one worth up to €86bn.

Both of Europe’s major stock markets were up in April: the German DAX index rose by just 1% to 12,418 while as we noted above, the French index – anticipating a Macron victory – rose 3% to finish April at 5,267. And we must put in a word for Greece – the Athens stock market was up 7% in April, reaching the giddy heights of 712 as it breathed a sigh of relief at the latest bailout.

Having announced a separate section for Brexit, it is tempting to do the same for ‘the pronouncements of the President.’ Donald Trump campaigned on drastic tax reform to stimulate the US economy, simplifying the tax system for individuals and slashing US corporation tax from its current level of 35% to just 15%. In April, Treasury Secretary Steve Mnuchin appeared to pave the way for this reduction, calling it “the biggest tax cut ever.”

Meanwhile, his boss was promising a “haircut” for US banking laws – at the moment, it seems that this may involve the separation of retail and investment banking – plus a renegotiation of the North American Free Trade Agreement.

Let’s turn to some concrete news: the US economy added only 98,000 jobs in March – far fewer than economists expected and only half the number for January and February. Despite this, though, the unemployment rate fell to 4.5%, the lowest since May 2007. Perhaps the low number of jobs created was a function of the US economy growing by only 0.7% in the first quarter of the year – the slowest rate of growth since the first quarter of 2014 and leaving the President some way to go to meet his election pledge of raising growth to 4%.

In company news there was another sign of the ‘new’ economy as the increasing share value of electric car maker Tesla saw it overtake General Motors in total capitalisation, having passed Ford in late March. Tesla’s total valuation is approximately $52bn: next up is Honda, which is currently worth $53bn.

Like all other world markets the US Dow Jones index rallied after the first round of the French Presidential election, and eventually finished the month up by 1%: having started April at 20,663 it ended at 20,941.

Far East
Tesla may be moving upwards but Toshiba seems to be heading in exactly the opposite direction. Having reported a loss of 532bn yen (£3.8bn) for April to December 2016, the company delayed publishing its audited accounts and admitted that its future may be in doubt.

Meanwhile, there was much better news in China, where growth in the first quarter of the year beat expectations. Growth was 6.9% according to official figures, compared to a target of 6.5% for the year as a whole. State-led infrastructure investment, demand for new property and an increase in consumer spending were all responsible for the higher growth rate, with retail sales in February up 10.9% on the same period in 2016.

Having spent his campaign criticising China for using an artificially low currency to “rape” American industry, the newly diplomatic President Trump had a meeting with Chinese leader Xi Jinping and said that China “was not a currency manipulator.” In truth, the almost weekly missile tests in North Korea are giving both men far more to worry about than currency manipulation.

Despite the tension in the region three of the four leading Far Eastern markets rose by 2% in April. Hong Kong was up to 24,615, Japan rose to 19,197 and the South Korean market advanced to 2,205. The one exception was China, where the Shanghai Composite index was down by 2%, ending April at 3,155.

Emerging Markets

April was a quiet month for the three major emerging markets we cover, but the corruption scandal in Brazil centring on the state oil provider Petrobras continues to have repercussions. A US judge has now fined Brazil’s engineering giant Oderbrecht $2.6bn in a case inevitably connected with Petrobras, as the engineering company agreed to a plea bargain deal with the US, Brazilian and Swiss authorities, pleading guilty to bribery in twelve Latin American countries.

Other than that a quiet month, but a pleasantly uniform one. It may be some time before this happens again, but all the three emerging markets we cover in this commentary saw their stock markets rise by 1% in April. India was up to 29,918: Brazil rose to 65,403 and the Russian market had its first positive month of the year, ending April at 2,017 – although it remains down by just over 9% for the year as a whole.

And finally…
Last month was, of course, a vintage crop for the ‘and finally’ section of this commentary. We were worried how this month would maintain the high standard – but it got off a good, slithery start with news from the Association of British Insurers that an anorexic python had swallowed £790 in vet’s bills. This was in their annual report, which revealed that the average cost of a claim on your pet insurance is now £757 – something of a shock for those of us that spent the bank holiday watching re-runs of James Herriot and thought it was seventeen shillings and sixpence.

Costing rather more than a trip to the vets was a trip from Taunton to Trowbridge. The towns are just 64 miles apart but that didn’t stop Great Western Rail offering a ticket for £10,000 on its website. The company blamed a (very expensive) ‘anomaly…’


April market commentary

Thursday, April 6th, 2017

It’s tempting to think that Brexit is the only story worth reporting: in fact, there was plenty happening in March, from elections in Holland to a rate rise in the US, new growth targets for China and – also in the Chinese capital – a park which spectacularly failed to live up to its name…

The main global news was that finance ministers from the world’s biggest economies have dropped an anti-protectionism commitment after opposition from the US. G20 ministers usually end their meetings with a commitment to bolster and support free trade and last year vowed to “resist all forms of protectionism.” That was, of course, before we had President Trump and his ‘America First’ policy…

It was a relatively quiet month on world stock markets: seven of the markets we cover were up and five were down, but none of them by very much. The best performing market was France, with good news on both the political and trade fronts seeing Europe’s two leading stock markets move higher.


On March 29th – two days before her self-imposed deadline – Theresa May formally sent a six page letter to Donald Tusk, President of the European Council, informing him that the UK would be leaving the EU. We will now have two years of negotiations before – in theory – the UK could leave the EU on Friday March 29th 2019. There will be plenty of twists and turns over the next two years and there will be good and bad news, whichever way you voted in the Referendum.

A prominent supporter of Leave, James Dyson, started the month by opening his second ‘tech campus’ in the UK at Hullavington in Wiltshire, as he looked to double his UK workforce to around 7,000 and pronounced himself “optimistic” about the country’s future.

Vodafone also announced plans to create 2,100 service sector jobs and UK unemployment was down to its lowest rate since 1975 as it fell to 4.7%. However, wage growth also slowed, falling from 2.6% to 2.3%.

One man who might now be worrying about unemployment is Chancellor of the Exchequer Philip Hammond, who delivered what he must have considered a jolly fine Budget speech, full of reassuring news and witty cracks at the expense of Her Majesty’s Opposition. Unfortunately, Hammond was swiftly forced to backtrack on his decision to raise Class 4 national insurance contributions.

The Bank of England’s Monetary Policy Committee kept interest rates on hold at 0.25% – and at that level it is little wonder that the UK savings ratio (the proportion of income which households save) has fallen to its lowest level since the early 1960s.

UK inflation went in the other direction, pushed higher by rising fuel and food prices. It reached 2.3%, the highest level since September 2013, with the Bank of England expecting it to peak at 2.8% next year. It was confirmed that the UK economy grew by 0.7% in the final three months of 2016, with the Bank now expecting the economy to grow by 2% in the whole of 2017.

The FTSE 100 index of leading shares closed the month up 1% at 7,323 having reached a record high of 7,424.96 in mid-March.


It’s important not to get fixated on Brexit: life in Europe went on perfectly well despite the UK’s formal decision to leave the EU.

The Dutch election saw Prime Minister Mark Rutte’s Liberal party comfortably win the most seats, pushing the far-right Freedom party into second place. It is also looking increasingly likely that Emmanuel Macron will defeat Marine le Pen in the French Presidential race, so there will sighs of relief through Europe’s corridors of power. Economists have been predicting that the euro will fall below the dollar if Le Pen wins.

There was more good news for Europe on the economic front with the influential Markit Purchasing Managers’ Index rising to 56.7 and suggesting that growth in the Eurozone was at its best level for nearly six years. The report’s authors also said that job creation was “at its best level for nearly a decade” – although obviously there remains a very long way to go, given the problems of youth unemployment in countries like Spain and Greece.

French carmaker PSA – maker of Peugeot and Citroen cars – reached a deal to buy Opel from General Motors. This also includes Vauxhall and its 4,500 staff in the UK and there will inevitably be worries about job losses.

Boosted by the election result in Holland and the news about growth, it was a good month on Europe’s stock markets: the German index was up by 4% to 12,313 while the French market rose by 5% to 5,123. Even Greece joined in the fun, with the Athens market rising by 3% in March: ominously, though, it closed at 666…


The month in the US opened with Chairman of the Federal Reserve Janet Yellen saying that ‘interest rates may rise.’ A week later it was confirmed that the economy had added 235,000 jobs in February and the rate rise was all but certain: it duly arrived at the monthly meeting of the Federal Reserve policymaking committee, as the rate moved up by 0.25% to a range of 0.75% to 1% – only the third rate rise in a decade.

In company news, Intel made a $15bn bet on driverless cars as it bought Israeli company Mobileye: working with BMW, they are planning to have 40 test vehicles on the road by the second half of this year.

No driverless cars for Uber – and plenty of problems for boss Travis Kalanick who was filmed swearing at a driver who had complained that his income was falling. No doubt Mr. Kalanick will console himself with the thought that the latest round of funding values Uber at $68bn – which makes the $24bn stock market debut of loss-making Snapchat (just the $516m in 2016) look positively pitiful.

Ford confirmed its further commitment to the US with a pledge to invest $1.2bn in its Michigan plant. And the month ended with good news as growth for the fourth quarter of 2016 was revised upwards from 1.9% to 2.1%.

There was no upwards revision on Wall Street though, as the Dow Jones index fell back by 1% in the month to close at 20,663.

Far East

It was a relatively quiet month in the Far East, both for news and for the region’s stock markets.

Chinese Premier Li Keqiang announced that the country’s growth target for this year would be 6.5%, down from last year’s 6.7% – when the country’s economy grew at its slowest pace for 26 years. Li said that the state would tackle ‘zombie enterprises’ – state enterprises which produce more coal and steel than the market needs which frequently leads to ‘dumping’ abroad – but in the past this has proved notoriously difficult to achieve.

In Japan, the beleaguered Toshiba Corporation continued to slide as it was given permission to delay announcing its earnings. The company is still struggling with huge cost overruns at Westinghouse, the US nuclear firm it bought in 2006.

There were struggles of a different kind for former South Korean leader Park Guen-hye whose impeachment over a corruption scandal was upheld by the courts: three people died in the ensuing protests.

On the region’s stock markets, both China and Japan fell back by 1% in March, to 3,223 and 18,909 respectively. The Hong Kong market was up by 2% to 24,112 whilst the South Korean market ignored its former Prime Minister and rose 3% in the month, closing at 2,160.

Emerging Markets

It was a difficult month for the emerging markets we cover. Regular readers will know that in 2016 Brazil was the best performing market of the ones monitored in this report, rising by 39%. It also started this year strongly, gaining 10% in the first two months alone. However, it has now been confirmed that the country has been in recession for two years, with the economy shrinking by 3.6% in 2016: it is now 8% smaller than it was in December 2014. The main reason has been the fall in commodity prices, and the recession has seen unemployment rise by 76% to 12.9m – equal to a rate of 12.6%. Not surprisingly, the stock market declined in March, falling 3% to 64,984.

Back in November, Indian Prime Minister Narendra Modi announced that 500 and 1,000 rupee notes (worth around £6 and £12) would no longer be legal tender, in a move designed to reduce corruption. March saw the deadline for handing in the old notes and there was predictable chaos in the banking system, with 40% of cash dispensers being empty. Having handed in their old notes, customers couldn’t then get new ones. But the Indian stock market is clearly an advocate of the cashless society: it was up by 3% in the month, ending March at 29,620.

There were relatively few dramas in Russia, where the stock market has had a miserable start to the year. It fell 2% in March to 1,996 and is down 11% for the year as a whole.

And finally…

There has never been a month like March 2017 for the ‘and finally’ section. The world may not have gone mad, but it certainly went quirky.

A young man’s thoughts turned to spring and the thoughts of Mike Ashley, owner of Sports Direct and Newcastle United, turned to buying Agent Provocateur, the lingerie label which had gone bust. Given Mr Ashley’s penchant for publicity, the Newcastle players must be dreading next year’s first team kit…

Then there was the Indian washing machine introduced by Panasonic, which now comes with a special ‘curry’ button following customer complaints that they couldn’t get the stains off their clothes. Parents worldwide have written to Panasonic suggesting buttons labelled, ‘grass,’ ‘mud’ and ‘tomato sauce.’

…And finally, off to Beijing where a public park has introduced face recognition technology to ration loo roll. Visitors to the park were apparently tearing off extra loo roll and taking it home with them: the authorities acted swiftly and brought in the facial recognition software which now dispenses a fixed length of loo roll. The park is called the Temple of Heaven: let’s hope no one in the Temple of Heaven has eaten a curry…


ERNIE to get slimmer

Wednesday, March 1st, 2017

Premium bonds celebrated their 60th anniversary last year; whilst they’ve remained popular throughout that time, it’s not hard to see that what they offer is closer to a lottery ticket than a viable investment opportunity. The chances of winning the jackpot is 26 million to one, and as all the interest generated in money invested goes to the prize fund you won’t see any return on your investment unless you’re one of the lucky few to bag a top prize.

However, they’re set to become even less attractive later this year, when the chances of winning the bigger prizes will become slimmer still. National Savings and Investments (NS&I) has announced that from May 2017, the estimated number of tax-free £100,000 prizes will fall from three per month to just two. The £25,000 prizes will also be reduced, going from eleven to nine each month. The amount of monthly £10,000, £5,000 and £1,000 prizes is also set to go down with the total prize fund shrinking from £69.5 million to £63.8 million.

The reductions are due to NS&I making cuts across a range of saving products to reflect market conditions. Direct ISA and Direct Saver accounts will see interest rates cut from 1% to 0.75% and 0.8% to 0.7% respectively at the same time.

Whilst a drop in the number of big prizes is undoubtedly a disappointment for savers, the changes do little to change the positives and negatives of premium bonds overall. As an investment opportunity they offer no guarantees but the fact that any money put in is backed by the treasury means your investment is fully protected.

It’s not all doom and gloom for NS&I products, however. Last November, Chancellor Philip Hammond announced a new savings bond would become available in spring 2017, offering what was described as a “market-leading” rate of approximately 2.2%. The precise rate is set to be confirmed soon, and the three-year bond will be available for anyone over 16, allowing them to invest up to £3,000.

What could be the best way to provide for your grandchildren?

Wednesday, March 1st, 2017

With both property prices and the cost of living continuing to rise, as well as low interest rates making it difficult to save, the ‘Bank of Mum and Dad’ is increasingly becoming a partnership with the ‘Bank of Gran and Grandad’. If you have grandchildren, it’s only natural that you’ll want to provide for them in some way as you move towards your retirement years. But what’s the best way of supporting the younger members of your family in the long term as well as the short term?

One way that you could do this is to set up and regularly contribute to a pension in your grandchild’s name. As today’s younger generation are likely to miss out on the robust pension security enjoyed by their parents and grandparents before them, creating a pension for them early in their life will undoubtedly help them in the decades to come.

A key plus point of paying into a pension is the tax relief your investment will enjoy. Including the 20% boost this relief will provide, you can pay in up to £3,600 annually to your grandchild’s pension even if they’re not yet earning an income. Adding £240 a month will achieve this sum, with £2,880 paid in by you and a further £720 in tax relief claimed by the pension provider automatically.

Doing this for fifteen years will mean that a 21-year-old grandchild today could have a pension pot of £220,000 by the time they reach 57, and that’s without including any additional contributions. Assuming an annual net growth of 5% after charges, if the pension remains untouched until they reach 67 it could grow further, to around £340,000.

However, this highlights the one potential drawback of choosing to pay into a pension: the money won’t be available to your grandchild until they reach their 50s. Whilst this does mean it can be left to mature, it also means that any money paid in won’t be available should it be needed. As there are likely to be other forms of expenditure you might want to help grandchildren with, such as paying for a deposit on their first home or going to university, you should think carefully about how much you want to put away for their future and how much you want to make available to them in the short term.