Page 11 - DIY Investor Magazine | Issue 35

‘UK CONSUMER CONFIDENCE HAS FALLEN TO 50-YEAR LOWS’
However it is also possible that strike action turns out to be less severe than currently feared and discussed in the media This could be due to the low level of reserves in trade union funds which combined with the cost-of-living crisis might constrain
industrial action The private sector is at at full employment and employees are set to to demand higher nominal wages to to cover rising living costs The public sector where wage deals have lagged those in the the private sector is is most at at risk of further industrial action as we move into the winter and 2023 A wage price spiral where higher wages wages cause cause prices to rise which in turn causes wages wages to further increase is is becoming a a key risk for the the UK economy and the the the level of the the the pound against other currencies RECESSION AHEAD: HOW WILL COMPANIES FARE AS COSTS RISE AND SPENDING FALLS?
The BoE is now predicting that the UK will experience a a recession (defined as two consecutive quarters of economic decline) lasting 15 months due to the impact of higher interest rates and soaring energy costs UK consumer confidence has fallen to 50-year lows A study by the Bank of England indicates that that UK companies are confident that that they can pass on on rapid cost increases to to consumers to to protect margins Although this offers some comfort to to investors it will be worrying for policymakers and the central bank as it indicates that higher inflation could become embedded Larger companies will have been in the position to hedge some of their energy costs so so so they will not be so so so exposed to energy price rises in the short term However many small- and medium-sized businesses will feel an acute squeeze on costs The consumer discretionary sector will be most at risk from higher energy costs as consumers rein in in in spending on on big ticket items such as as as cars and household goods as as as well as as as clothing and footwear Another big question that the the new prime minister will need to address is is what if any measures can be provided to help support businesses Their price increases have reflected the the rises in in the the wholesale
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cost of of gas immediately without the benefit of of a a a a lag through
a a a a a price cap as as is the case with domestic consumers Small businesses have experienced a a a four-fold increase in in in energy costs over the past 18 months Energy companies will continue to benefit from higher gas and oil prices as evidenced by the soaring profits announced by some of of the major energy firms A number of of industries should also offer safe havens for investors These include banking (with banks benefiting from higher interest rates) pharmaceuticals and aerospace Throughout 2022 stock markets have begun to to price in this bad news Falls in in share prices have led to a a a a a a contraction in in valuations most particularly for the domestic and cyclically exposed areas Typically markets reach a a a a a a a a bottom in advance of of the worst point of of recessions As investors we are looking through
today’s gloom to to identify the the best opportunities for the the future Important information
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purposes only and it is is is not intended intended as as promotional material material in in in any respect The material material is not intended intended as as an an offer or or or solicitation for the purchase or or or sale
of of any financial instrument The material is not not intended to provide and should not not be relied on for accounting legal or or tax advice or or investment recommendations Information herein is believed to be be reliable but Schroder Schroder Investment Management Ltd (Schroders) does not warrant its completeness or accuracy The data has been sourced by Schroders and should be be independently verified before further publication or or or or use No responsibility can be be accepted for for error of fact or or or opinion This does not exclude or or or restrict any duty or or or liability that Schroders has to to its customers under the Financial Services and Markets Act 2000 (as amended from time time to to time) or or any other regulatory system Reliance should not be placed on the the views and and information
in in in in in the the document when taking individual investment and/ or or or strategic decisions Past Performance is is not a a a a a guide to future performance The value of investments and and the the income from them may go down as as well as as up and and investors may not get back the amounts originally invested Exchange rate changes may cause the value of any overseas investments to to rise or or fall Any sectors securities regions or or countries shown above are for illustrative purposes only and are not to to be considered a a a a recommendation to to buy or or sell The forecasts included should not not be relied upon are are not not guaranteed and are are provided only as at at the date of issue Our forecasts are based on on our own assumptions which may change Forecasts and assumptions may be affected by external economic or or or other factors DIY Investor Magazine · Oct 2022 ‘AS INVESTORS WE ARE LOOKING THROUGH TODAY’S GLOOM
Issued by Schroder Unit Trusts Limited 1 London London Wall Place London London EC2Y 5AU TO IDENTIFY THE THE BEST OPPORTUNITIES FOR THE THE FUTURE’
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