What caught my eye this week.
Another quiet week in British politics. And thank goodness for that. Maybe it’s time to recant?
After all, for the past six years I’ve been lamenting how the full-spectrum delusions of Brexit [1] – the toxic campaigning, economic self-harm, and Alice in Wonderland contradictions – were causing real distress to both our economic prospects and our civil society.
How far from seeing a ‘Brexit dividend’ that politicians still had the gall to lie about with a straight face, our economy was weakened [2] to the tune of £100bn in lost GDP a year.
How worst-case scenarios were inching towards the table that you wouldn’t want to wake up to in the morning.
But what a fuss about nothing!
Turns out there was – as my critics so often retorted – nothing to see here. Just a harmless bit of political roister-doistering, MPs implementing the will of the people, and Westminster ticking along as usual.
And how great is it to see our MPs hard at work with their heads down? Tackling the actually important issues like climate change and energy security, safe in the knowledge that we have crown stamps securely back on our pint glasses (thank heavens [3]!)
The strong and steady hand of the Conservative party on the tiller, cleansed of its factionalism.
Our international credibility [4] definitely just where it was in 2015.
So bad it’s good
Given the absolute 100% normality of British politics that vision-less, tofu-guzzling Remoaners like me have been squawking about for no good reason, let’s turn instead to the markets.
Because something interesting might be going on, unless my spidey senses deceive me.
Which, to be clear, they often do. No-one tingles – or times the market – perfectly.
But for those that do like a bit of speculation, it feels like we might be approaching the turning point in this fairly lengthy global bear market.
I began to think this a couple of weeks ago, when markets initially plunged on higher-than-expected US inflation but then turned around and ended higher.
True, things were choppy after that. But again this week there’s been a bounciness that’s hard to credit to the news flow – or even slightly less hawkish [5] words from any given Fed official.
Don’t get me wrong. Equities are still going two steps forward and more or less two steps back.
But I’m seeing signs that investors are getting almost bored of bad news. That’s potentially a signal of a bear market bottoming [6], as is the fact that the kinds of shares that led the market lower have been more or less flat since summer.
Has everyone who is going to throw in the towel already let it go?
Rate expectations
It’s very hard to tell, always. Capitulation is one of those things you tend to see if you look for it – only for even more sellers to emerge from the sidelines when things get worse still.
For example – and to my embarrassment – I correctly noted growth stocks selling off [7] late last year might presage a wider market decline.
But I also thought the apparently discarded disruptive stocks might now be an opportunity.
Oops!
Reader, I bought some. And some of that money halved or more.
I’ve also stubbornly stuck to the belief all year that most of the inflation around the world was caused by lockdowns rather than government handouts. Maybe in ten years we’ll have a perspective that shows that was right too. But the fact is we’ve laboured on with high inflation – and ever-higher rates – much longer than I for one thought likely.
That is the main reason why stocks have fallen so far.
But now – partly thanks to all those rate hikes – Wall Street sees [8] inflation coming down steeply.
And while I’ve assumed since the summer that a big recession in the crucial US economy was the inevitable cost of raising rates so far and fast, the excellent macro-blogger at Calafia Beach Pundit [9] offers plenty of evidence that things aren’t so bleak there either.
In other words, the rate hikes that drove the 2022 regime change might almost be done [10].
Perhaps by Christmas the Federal Reserve will be ready to pause?
Better yet, while rate rises definitely work with a lag so it’s too soon to be sure, the US economy might see a slowdown more than a slump. Which would be bullish for assets more generally.
Even the Bank of England took a moment out from supervising the kids to say it might not [11] need to hike Bank Rate beyond 5%.
Darkest before the dawn
As ever, most people’s best response to all this will be to smile and say “that’s nice” and to keep on automatically investing into their balanced portfolios.
Maybe smiling extra hard on remembering that besides cheaper equities, you can also look forward to better returns from bonds to come, too.
Just don’t put all your eggs in a basket made in Britain. Just in case, you know, it gets a bit wobbly again.
Have a great weekend all.
From Monevator – Monevator
Transaction costs: how they bloat fund charges – Monevator [12]
From the archive-ator: A political day is a long time in the markets – Monevator [13]
News
Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!1 [14]
Average London rent hits record £553 a week amid property shortage… – Guardian [15]
…with some areas of the country seeing advertised rents up 20% year-over-year – Guardian [16]
State pension could rise by 10.1% next year if triple-lock remains – Which [17]
Many remote workers could qualify for Portugal’s new ‘digital-nomad visa’ – Insider [18]
The Covid situation is looking complicated this winter – Guardian [19]
[20]
What would a UK housing crash look like today? [Search result] – FT [21]
Products and services
Time is running out to claim up to £200 from the best current account switches – Guardian [22]
HSBC’s best buy easy-access savings account pays 3%, but only up to £10,000 – This Is Money [23]
Changes to SEIS and EIS are a win for UK investors and startups – Crowdcube [24]
11 tips to save on the cost of your subscriptions – Which [25]
Open a SIPP with Interactive Investor and pay no SIPP fee for six months. Terms apply – Interactive Investor [26]
Amazon set to launch online insurance portal for customers – Amazon [27]
Townhouses for sale, in pictures – Guardian [28]
Comment and opinion
Why 2022 is a uniquely bad investing year – The Best Interest [29]
Money games people play – Banker on FIRE [30]
There are no no-brainers in investing – The Motley Fool [31]
The perfect time to start investing – Darius Foroux [32]
Back where I started – Humble Dollar [33]
Bear market opportunities for every generation of investors – A Wealth of Common Sense [34]
Walking in forest green is better than staring at blood red screens – A Teachable Moment [35]
Saving versus spending: striking a balance – Humble Dollar [36]
15 years on [gulp [37]!] from the fall of Northern Rock [Podcast] – A Long Time in Finance [38]
Retirement can mean a loss of identity – MarketWatch [39]
Puppy love – Humble Dollar [40]
Brexit reality bites mini-special
The Brexit effect: how leaving the EU hit the UK [Excellent video] – FT via YouTube [41]
Trade from UK to EU 16% lower than if Brexit had not happened, study funds – Guardian [42]
Uncertainty delays investment. If only the UK government grasped this [Search result] – FT [43]
When populism fails – Coppola Comment [44]
Naughty corner: Active antics
Strategies that beat the market – Compounding Quality [45]
We will see the return of capital investment on a massive scale – The Market [46]
1987 Q&A with Phil Fisher shows even geniuses should be wary of big macro – Investment Talk [47]
No grand strategy: the financial history of Berkshire Hathaway – Neckar’s Minds and Markets [48]
Misadventures in Bondland [Search result] – FT [49]
Value investors should try harder to hold on to their winners – Klement on Investing [50]
[As discussed in August [51]] dry powder is drying up in VC-land – Harvard Business Review [52]
Kindle book bargains
Mastering The Market Cycle by Howard Marks – £0.99 on Kindle [53]
Go Big: How To Fix Our World by Ed Miliband – £0.99 on Kindle [54]
Talking To My Daughter: A Brief History Of Capitalism by Yanis Varoufakis – £0.99 on Kindle [55]
My Life, Our Times by Gordon Brown – £0.99 on Kindle [56]
Environmental factors
A rare victory in the war on corporate eco-guff [Search result] – FT [57]
Blackrock and Vanguard tell UK they won’t phase out fossil fuels – Advisor Perspectives [58]
Marina Hyde mini-special
Britannia rechained – Guardian [59]
Tories on their knees… and here comes Boris Johnson. Look away now – Guardian [60]
Off our beat
Russia’s population is in a historic decline – Fortune [61]
The one true benchmark – Prime Cuts [62]
Boris Johnson’s Covid laws took away our rights with flick of a pen. Don’t let that happen again – Guardian [63]
Just how safe is great art? – MSN [64]
No more Boris Johnson: how to write to your MP – Simple Living in Somerset [65]
And finally…
“Democracy is like a tamborine – not everyone can be trusted with it.”
– John Oliver, comedian [66]
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