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  • By Steve Monks
  • 05 Sep, 2017

August is a month that is usually typified by low trading volumes and a sense of disinterest from market participants, many of whom, legend has it, are on holiday. Perhaps this is true or perhaps the expectation that it is true makes it so. In any case this August has been no exception – trading volumes are markedly lower, albeit perhaps not as muted as we have seen in previous years. With St Legers day approaching fast it is likely that we will see volumes normalise in the near term.

 

In spite of lower volumes the FTSE 100 has experienced comparatively low volatility with the index opening at around the 7,425 level and closing out roughly flat albeit with intra-month highs of 7,540 and lows of 7,310 which equates to a high/low split of around 3%. Note that a lower volatility environment creates the conditions in which extreme market moves are more likely due to a lack of liquidity, so August has by no means been an outlier.

 

Although who would be surprised if it had been? Consider for a moment that August has seen North Korea and America engage in a war of words regarding the former country’s nuclear weapons procurement and testing while the latter has been subject to what some are referring to as being a 1 in 1,000 year storm which has resulted in widespread destruction and loss of life. In amongst this on the home front the Monetary Policy Committee voted 6:2 in favour of interest rates remaining where they are: at 0.25%.

 

It would be understandable if the market reacted negatively to the news that the UK economy remains so weak as to require exceptionally low interest rates to survive. Exceptionally low rates were implemented as an emergency measure in the aftermath of the financial crisis and lowered further following the outcome of the Brexit referendum last year. Of course at some stage the exception becomes the rule and we may have already crossed that particular Rubicon from a policy perspective. Again we reiterate that the longer this period of ultra-low rates continues the greater the impediment to normalising interest rates, particularly in an environment of stagnant wage growth and inflation. On the horizon the storm continues to brew and underlines our stance on fixed income, where we remain underweight relative to WMA indices.

 

There was clearly a negative market reaction (drop of around 3%) to the North Korean missile threat to Guam. This is understandable in the context of American foreign policy being visibly conducted via the novel medium of Twitter which, as we have previously noted, restricts the user to a mere 140 characters. For reference the previous sentence is about 200 characters, so I think it is safe to reiterate our view that Twitter is perhaps not a sufficiently nuanced tool to articulate complex foreign policy. Therefore the temporary nature of the drawdown implies that the threat of military intervention was seen by market participants as minimal and diminishing, which in turn indicates confidence in soft diplomacy (i.e. that which is not conducted via social media). Note that this is not intended to be wholly pejorative of Trump’s use of social media, but instead to reflect that the machinations of government are more subtle than he seems to be- diplomacy must have been continuing in the background. So in that sense the market reaction to the American/North Korean spat was short lived which is probably a good thing for everybody whether they have market interests or not.

 

Finally Hurricane Harvey in Texas has had unwelcome echoes of Hurricane Katrina in terms of impact and apparent lack of preparedness. The market impact has been muted although the region’s importance as an oil producer should not be overlooked. Indeed US officials have already released a significant proportion of their strategic reserves to account for anticipated supply going off-line and hence oil prices have remained broadly stable. In addition to this the clean-up operation could have repercussions for insurers although again we have seen little in the way of market reaction.

 

These three events and the subsequent market reaction imply that security prices at these levels remain well supported and weakness is identified primarily as temporary and therefore a buying opportunity rather than inflection point which would result in a trend reversal. One remains vigilant, however, to the threat of overall market complacency- particularly after such a strong run of performance and especially in the context of the apparent lack of progress in Brexit negotiations and therefore longer term domestic economic uncertainty. This is embodied in our reduced allocation to domestic equity (see June’s monthly update for more detail if required) and a more general “risk off” approach at present.

 

Finally we have been reasonably active at portfolio level and sought to take advantage of early month market weakness where appropriate. At security level the second profit warning in Provident Financial came as a most unwelcome surprise and will have held back overall performance somewhat. 

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By Steve Monks 05 Sep, 2017

August is a month that is usually typified by low trading volumes and a sense of disinterest from market participants, many of whom, legend has it, are on holiday. Perhaps this is true or perhaps the expectation that it is true makes it so. In any case this August has been no exception – trading volumes are markedly lower, albeit perhaps not as muted as we have seen in previous years. With St Legers day approaching fast it is likely that we will see volumes normalise in the near term.

 

In spite of lower volumes the FTSE 100 has experienced comparatively low volatility with the index opening at around the 7,425 level and closing out roughly flat albeit with intra-month highs of 7,540 and lows of 7,310 which equates to a high/low split of around 3%. Note that a lower volatility environment creates the conditions in which extreme market moves are more likely due to a lack of liquidity, so August has by no means been an outlier.

 

Although who would be surprised if it had been? Consider for a moment that August has seen North Korea and America engage in a war of words regarding the former country’s nuclear weapons procurement and testing while the latter has been subject to what some are referring to as being a 1 in 1,000 year storm which has resulted in widespread destruction and loss of life. In amongst this on the home front the Monetary Policy Committee voted 6:2 in favour of interest rates remaining where they are: at 0.25%.

 

It would be understandable if the market reacted negatively to the news that the UK economy remains so weak as to require exceptionally low interest rates to survive. Exceptionally low rates were implemented as an emergency measure in the aftermath of the financial crisis and lowered further following the outcome of the Brexit referendum last year. Of course at some stage the exception becomes the rule and we may have already crossed that particular Rubicon from a policy perspective. Again we reiterate that the longer this period of ultra-low rates continues the greater the impediment to normalising interest rates, particularly in an environment of stagnant wage growth and inflation. On the horizon the storm continues to brew and underlines our stance on fixed income, where we remain underweight relative to WMA indices.

 

There was clearly a negative market reaction (drop of around 3%) to the North Korean missile threat to Guam. This is understandable in the context of American foreign policy being visibly conducted via the novel medium of Twitter which, as we have previously noted, restricts the user to a mere 140 characters. For reference the previous sentence is about 200 characters, so I think it is safe to reiterate our view that Twitter is perhaps not a sufficiently nuanced tool to articulate complex foreign policy. Therefore the temporary nature of the drawdown implies that the threat of military intervention was seen by market participants as minimal and diminishing, which in turn indicates confidence in soft diplomacy (i.e. that which is not conducted via social media). Note that this is not intended to be wholly pejorative of Trump’s use of social media, but instead to reflect that the machinations of government are more subtle than he seems to be- diplomacy must have been continuing in the background. So in that sense the market reaction to the American/North Korean spat was short lived which is probably a good thing for everybody whether they have market interests or not.

 

Finally Hurricane Harvey in Texas has had unwelcome echoes of Hurricane Katrina in terms of impact and apparent lack of preparedness. The market impact has been muted although the region’s importance as an oil producer should not be overlooked. Indeed US officials have already released a significant proportion of their strategic reserves to account for anticipated supply going off-line and hence oil prices have remained broadly stable. In addition to this the clean-up operation could have repercussions for insurers although again we have seen little in the way of market reaction.

 

These three events and the subsequent market reaction imply that security prices at these levels remain well supported and weakness is identified primarily as temporary and therefore a buying opportunity rather than inflection point which would result in a trend reversal. One remains vigilant, however, to the threat of overall market complacency- particularly after such a strong run of performance and especially in the context of the apparent lack of progress in Brexit negotiations and therefore longer term domestic economic uncertainty. This is embodied in our reduced allocation to domestic equity (see June’s monthly update for more detail if required) and a more general “risk off” approach at present.

 

Finally we have been reasonably active at portfolio level and sought to take advantage of early month market weakness where appropriate. At security level the second profit warning in Provident Financial came as a most unwelcome surprise and will have held back overall performance somewhat. 
By Steve Monks 23 Jan, 2017

Ok, so the dream of retiring young enough that you still have your health to enable you to maximise those golden years is, well let’s face it, exactly that. A dream. For most, if you ask them at what age would they wish to retire, more often than not they answer “Retire?!? I can’t ever see me being able to retire let alone early!
So what’s the answer?

Well, unfortunately there are no secret short cuts to funding a fruitful retirement, unless you win a substantial amount of money or inherit it. Either way not exactly guaranteed.

However, you can do your best to give yourself a fighting chance. The first thing that would be suggested is:

1. Start young . Very young. If you have children or Grandchildren, why not look at starting something for them, ok so it wont help you, but if you do it they may do it for their children and grandchildren.

2. Act while you can . You don’t have to put huge sums of money in to a pension. As long as you do it early enough. The effects of compounding can have serious effects on your future. For example, someone aged 25 who saves £100 a month that rolls up by 7 per cent a year can look forward to having a fund of more than £200,000 at the age of 65. But someone who waits just five years before saving the same monthly sum would retire with less than £145,000.

3. Make the most of the governments tax relief . While complex, in basic terms the government want to reward you for paying in to a pension, so for money that you pay in they will also contribute buy way of tax relief. Depending on your tax position will depend on how much they add.

4. Pay off any debt as early as possible . The longer you are paying debt the more that it will be costing in interest payments and the less you will be able to use from your income to fund that crucial pension pot.

5. Know what plans you have and keep them reviewed . In a lot of cases people move employer every few years and as such the pension pot that has been accrued will be forgotten about. It is important that you keep tabs on where your money is and how its performing. In addition, find out what charges are associated with each scheme.

6. Plan ahead . While none of us know the future we can make some educated guestimates and can plan on what we would like to happen in retirement. If we know what we want to happen we can then start to plan for how much its likely to cost.

7. Know what you are entitled to . The rules and figures for state pensions change, but there is no harm in contact them to find out what your state pension forecast may be based on your current contributions.

8. Lastly. Don’t bury your head . Ask questions and seek assistance if necessary. Don’t just expect that it will be ok when you get to later life, which will come around quicker than you may think. Don’t rely on parents or grandparents to fund it for you through inheritance. While possible, it isn’t certain. Lots of events out of your control can very quickly prevent that.

If you want to know more about the subject of retirement, contact us to make an appointment. The first meeting is free of charge.
By Steve Monks 05 Oct, 2016
The thought of managing your finances is probably quite daunting, not to mention boring, but without a tight handle on your money it can very quickly run away with you and before you know it, you’re a week from payday and you’ve run out of it! This may not seem that bad, but future mortgage lenders may think otherwise, and if you want to buy your first house or move to a different property this could cause you a problem….So, what can you do about it?

Take it in bite size chunks…… First of all, dig out the last few month’s bank statements and if applicable credit card statements and go through them in detail. Create a spreadsheet and work out some basic spending columns. You can refer back to it if needed and it will come in very handy if and when you do look to apply for a new mortgage.

Examples could include:

  • Mortgage/rent
  • Debts - credit cards etc
  • Utilities -things like Gas/ electric and phone, sky tv
  • Social – so the takeaways, gym memberships and coffee shop spends
  • Transport – petrol/bus fare etc
  • Insurances
  • Children – sports clubs / education
  • Miscellaneous – the irregular spending you may have like car insurance if paid annually or the tv licence. 
Once you’ve done this you should get a total spending figure per month that you can average. Hopefully that’s less than the total net income you receive every month. If it isn’t then you’ve very quickly worked out why you don’t have as much money as you’d like and then you can see areas where you can reduce spending. It could be that you spot things on there that you had totally forgotten you had.

The next section would be to look at areas where you can make that hard earned money go further as that is probably easier than increasing your monthly income! This could involve shopping at a different supermarket, moving your energy supplier or amending your phone and TV contract, even reducing the coffee shop visits. Some savings will be a lot easier to obtain than others, but it will all add up.

Another key is to look at your debt. You may need to contact the lenders, but it is important to find out what the interest rate is, how much you are paying monthly and what term is left. If you are making minimum payments, then look at trying to chip a little off every month. If you have a mortgage, the same applies. Find out if you are in a fixed rate period or are you on a variable rate, contact the lender for an up to date statement as this will detail the key points.

While you’re at it, now is as good a time as any to find out what employer benefits you have (if employed), if not what independent policies do you have in place and are they up to date. This would include pension and protection plans with your company or policies you’ve taken directly with insurers and pension providers. After all if you are in an accident or unable to work due to illness and you have insufficient protection in place, that list of spending you’ve just highlighted and more importantly your lifestyle could be in jeopardy.

Pensions and savings may not seem important now, depending on your life stage, but they are very important and it is key to try and budget for these where possible.

Lastly, there is no harm in asking for help. Seek the service of an independent expert who can go through this with you in detail, while also offering products and services that will really assist your financial wellbeing. Here at elite financial we have been offering financial advice for many years and pride ourselves on a good honest reliable service. So why not get in touch and arrange to see one of our friendly advisers.
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