DIY Investor Magazine Issue 35

What the Dickens!

 
My dear old dad always had a heathy respect for money. I’m not going to say it was always a barrel of laughs, but we grew up knowing to ‘neither a borrower nor a lender be’ and that ‘mony a mickle maks a muckle. 

So, when I read that the economy was facing a ‘Dickensian period’ I took some comfort that we could be looking at a period of fiscal responsibility and a firm hand on the tiller – Ole Wilkins Micawber knew a thing or two about living within his means, and he would undoubtedly have been happy to share a pint of foaming mead with Mr Sunak at The Grapes.  

However, what nobody saw coming was the current Chancellor stumbling, bleary-eyed, out of a casino, having bet the farm on growth. 

Now, Neoliberalism is founded on deregulation, free market economics and privatisation; neoliberals believe implacably in the efficiency of markets, and that the creation of a successful elite will trickle down, delivering benefits to all. 

However, it is not unfair to say that last week’s ‘fiscal statement’ was not met with universal approval; money markets sent the pound to an all-time low against the dollar, the ‘re-energised’ mortgage market withdrew 925 products overnight and the Bank of England had to chip in £65bn to prevent the pensions industry collapsing. 

This is monetary policy clashing with fiscal policy like Rock‘em Sock’em Robots. 

My dad probably never knew what a ‘doom loop’ was or what ‘liability-driven investment funds’ were, but he’d seen Saving Private Ryan, and he knew what FUBAR stood for. 

So, time for a sheepish U-turn and a whispered apology? Not a bit of it; having presumably spent a few days in Boris’ fridge, the PM and her Chancellor came out swinging. 

Despite almost universal condemnation from seemingly anyone who knows how many beans make five, the unswerving commitment is to further tax cuts and growth at any cost. 

We are told that markets don’t like uncertainty, but I’d wager they’ll like what’s coming down the track even less. 

It is probably fair to point to the aftermath of Covid, war in Ukraine, and unusual events around the globe, such as the Japanese government intervening to prop up the Yen, but coming hot on the heels of Brexit, the current situation looks like a monumental own-goal. 

A YouGov poll yesterday indicates a potentially existential threat to the Tory party as it trails by a massive 33pts; a hefty price for the ‘Disgusteds of TW’ to pay for appointing a Maggie tribute act. 

So, what next? Well, almost inevitably, we will be facing another long period of austerity, with spending cuts all round as government borrowing approaches 100% of GDP. 

Just as the enormity of energy price hikes are being felt, people’s mortgage payments will spike, and government will put pressure on discretionary benefits; has the state pension or the NHS ever been in greater peril? 

From a DIY Investor perspective, never has there been a greater need to take personal financial responsibility; let’s not pretend it’s going to be easy to maintain a regular investment strategy, but building a nest egg is now much more than a nicety, those that fail to make provision could be looking at a miserable dotage. 

Given the complexity of events, the need for financial education has never been greater, and the case for maintaining a well-diversified portfolio has been powerfully made. 

And don’t be afraid to back your instincts and common sense; would you announce £45bn in unfunded tax cuts to gamble on growth? I know Dad wouldn’t have.  
 
In this issue:
 

• Why ESG considerations matter
• Key challenges facing the UK’s new Prime Minister
• Here comes the rain again
• Active vs passive investing: Use active to your advantage
• Less stocks, more diversification: Alliance Trust
• Recession: How bad will it be?
• Is it deep value’s time to shine?
• Investment theme: The digital economy
• A Value View: The Merchants Trust
• The ‘G’ in ESG under the spotlight
• Shoot at the elephant and miss…
• The funds benefiting from the energy crisis
• Investing Basics: How do ETCs work?
• ESG moving beyond the tick box
• About to buy the S&P? Here’s what you may miss
• Beginning to see the light: Financial statement
• Investing Basics: Five popular portfolio types
• Searches for ‘how to invest’ rise by 186%
• Survey shows investors moving away from ESG
• Investing Basics: A guide to risk profiled funds