Over the last six months inflation has started to take a hold on the world economy. This has been brought on by issues with supply chains, the pandemic, and exasperated by the war in Ukraine.
We have seen UK inflation rise to 9.1%. Food and fuel are the main contributors, but when you consider a large amount of freight passed through Russia via rail from China, you can see why shipping costs have increased and low value items are finding it hard to get passage to the west.
The latest movements:
Last week the federal reserve in the US raised interest rates in the US by 0.75% (the highest rate rise in over 20 years) to 1.75%, and the Bank of England by 0.25%, taking the bank rate to 1.25%. These interest rates are still historically low but after 14 years of abnormally low rates there is almost a generation of people who are used to low rates. It appears the central banks are trying to stop inflation in its tracks, but with a risk of destroying consumer confidence and causing a recession.
Recent inflation has caused disruption in client’s portfolios. Against normal risk measures and beliefs, we have seen bonds fall further than equities. Consequently, a lower risk portfolio may have underperformed a higher risk portfolio in a falling market, which turns our basic risk understanding on its head. These disruptions in the supply chain and inflationary pressures have, in the last few months, brought the US market down by over 20% (a bear market indicator) and the UK market down by around 10%.
How can we help?
As financial advisers here at Temple Wealth, we help clients navigate the bad and the good times, helping them understand the background behind the volatility both down and up.
Depending on a client’s suitability, we have various options for clients from passive, active, or a blend of these. Discretionary managed portfolios are also becoming more mainstream where dynamic changes can be made by fund managers as and when required, balancing your risk whilst taking market opportunities.
If you would like to talk through your investments with one of our independent financial advisers please contact us using our Facebook or Contact Us page, or by calling our office on 01329 282882 where we’ll be happy to help.
Your capital is at risk. The value of your investment (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
