November remains a positive month in capital markets, although equities had a neutral week and longer bond prices have fallen back. UK government bonds (Gilts) have been the best performing bond market in the past few weeks, but the tax cuts announced in Wednesday Autumn Statement, although relatively minor, were enough to push the ten-year Gilt yield back up above 4.25% (rising yields mean falling bond prices).
The common adage 'buy low, sell high' might seem like a fool proof strategy for maximising investment returns. However, the reality is far more complex than simply trying to predict market fluctuations. Timing the market involves anticipating its highs and lows to buy when prices are at their lowest and sell when they peak.
Last week was another good one for most investors. In sterling terms, the strongest equity markets were in Europe with the DAX up 4.5% since last Friday afternoon. The biggest winners have been small and mid-sized firms; the FTSE 250 has stormed up by 4.3% compared to a 1.4% increase for the FTSE 100. Likewise, the Russell 2000 (America’s most-watched market index for small and mid-sized companies) is up 5.1% in US dollar terms.
The turnaround rally in stock and bond markets – started by the previous week’s dovish central bank comments – petered out towards the end of last week, with central bankers seemingly at pains to reverse their messaging or at least reaffirm their continued commitment to keeping interest rates high however long it takes to get inflation back to their 2% target.
Just how much change a week can bring to markets was amply visible during the last seven days. Last week, we wrote about how negative sentiment in stock markets can turn into a self-perpetuating destructive force for an entire economy as the investing public feels the heat of being poorer (at least on paper). At the end of last week, we look back at pretty much a reversal of the previous week’s perspective after stock markets staged an impressive bounce back. Monday’s rally was still dismissed as an entirely predictable trading-based short-term reversal from oversold levels.
According to recent research, higher rate and additional rate taxpayers in the UK leave millions of pounds of pension tax relief unclaimed yearly. This amounts to a staggering total of £1.3 billion over a five-year period. This unclaimed money could be in your pocket instead!
A potentially meaningful change in correlations happened last week. In recent times, a fall in yields (and therefore a rise in bond prices) would go alongside rises in equity prices, particularly the mega-cap growth consumer-related techs like Amazon, Alphabet (Google), Microsoft and Apple.
While we hold our breath over the Middle East tragedy, markets return to interpreting if bond yields are just enough to eradicate inflation or if their volatility points to something bigger.
Investing in your child or grandchild’s future is a thoughtful and responsible step towards securing their financial stability. In the UK, initiating an investment early for a child makes sense and can be highly beneficial in the long run.
Investing can feel like navigating uncharted territory, particularly for those new to the field. With many options and strategies available, it's crucial to grasp what you aim to achieve with your investments clearly.
Historically September has on average not been great for investors, and as it turns out this year is no exception to that norm. Both equities and bond valuations have declined and even though equities have not materially moved up or down when looking across the past four months, there is increasing sentiment that the 2023 market recovery is running out of steam or may even be turning.
Investment bonds offer several benefits that some investors may be missing out on, and have become even more beneficial due to recent changes in tax regulations.
The European Central Bank (ECB) raised rates yesterday, with the majority of its Governing Council members concerned that the inflation parasite may be alive for a while longer. Of course, parasites can continue to be robust while their host becomes pale and wan.
Markets have been generally quiet at the start of September but energy is again becoming an issue for equity and credit markets. Oil prices have risen since the start of the summer, with Brent crude having bounced along a bottom of $73 per barrel for the first half of 2023.
Summer is officially over, but we are none the wiser regarding the direction of the economy. Or are we? Well, we quite likely are, but just a bit and not enough to know if next month’s equity markets will be higher or lower than right now. Indeed, we never actually know that with a high degree of certainty.
We don’t seem to be able to get away from writing about how bond yields have been driving equity markets due to their influence on underlying valuation dynamics. We wrote about it previously, on many occasions over the past two years, and we have to say that last week is no different.
August has undone much of what July brought to equity investors, yet the latest correction looks more technical than fundamental.