Page 26 - DIY Investor Magazine | Issue 39

GET RICH SLOW: HALF EMPTY OR HALF FULL?
Nov 2023 26
DIY Investor Magazine ·
Richard Latter delivers his thoughts on the market – is his glass half empty or glass half full?
We all know that it’s tough out there. Everywhere!
The Bank of England’s outlook for the UK is poor with any economic growth likely to be minimal or flat in 2024.
The increased costs of borrowing and the potential of future energy shocks all remain real threats, but is there a case (however fragile) for optimism?
THE CASE FOR GLASS HALF EMPTY
Continued war in Europe and the escalating conflict in the Middle East, both with unimaginable amounts of human tragedy but also with continuing global implications, including seeing oil prices recently climb to $94 a barrel.
• Public markets, a few worrying statistics:
• The London Stock Exchange is set to lose as many as 30
£100m-plus firms from public markets this year alone. This doesn’t even include a slew of small-caps under the £100m threshold that have either gone private, bust or announced plans to delist.
• Up to the beginning of November, since hitting a high in September 2021, the FTSE 250 has declined by close to 30%.
In the UK, there are 70% fewer listed companies today than in 1996.
The decline of retail investors in the stock market: just 11% of UK households now invest directly in shares, half the number it was in 2004. In the US 40% of households’ financial assets are invested in the stock market.
Regulatory changes to address this are afoot, but can’t come quickly enough.
We should expect higher interest rates for longer. BlackRock recently forecast UK borrowing costs remaining high for the next 5 years, citing ageing populations, difficult geopolitical relations and costs associated with energy transitions.
Higher interest rates are, inevitably, beginning to feed through into mortgages.
For those whose fixed rate mortgages are coming to an end, the average 2-year fix is currently around 6.3% and the average 5-year fix is 5.9%.
It could have been worse (maybe) and might still be, but will be an increasing strain on many household budgets.
THE CASE FOR GLASS HALF FULL
Interest rates again. Having peaked, at least for now, at 5.25% we have a much needed breather and perhaps a little bit of certainty back into an uncertain world.
The UK is (probably) not in recession according to figures up to the end of September 2023.
Inflation is coming down: the next set of inflation figures are expected to be good news in that they will definitely be lower. September’s annual CPI inflation settled at 6.7%, but consensus expectation is for it to be below 5% when October’s figures are reported. The UK had positive growth of 0.2% in September, better than nothing (just).