This year started with the bull market that began in 2009 still going strong. While there was no lack of voices raising concerns about valuations looking pricey, particularly in the US market, other commentators pointed to parts of the world that were supposedly on the up. However, for a while in 2018 the reverse appeared to be true.
A new policy floated by the Labour party could see British companies with more than 250 workers forced to hand over 10 per cent of their equity to staff.
The Consumer Price Index (CPI) measure of inflation rose by 2.7 per cent year on year in August, up from 2.5 per cent in July. The alternative CPIH, which includes housing costs, rose from 2.3 per cent to 2.4 per cent, the latest data from the Office for National Statistics (ONS) show.
The rise in prices means that there are nearly no savings accounts that beat inflation. This means that the value of almost all savings languishing in savings accounts are being slowly eroded.
By all accounts, business investment should be booming. Profit margins are above long-run averages and credit, thanks to loose monetary policy, is still cheap. The labour market has tightened and government policies such as the National Living Wage and pension auto-enrolment have upped the cost of labour. At the same time, many firms are at or near capacity after nine years of economic expansion.
While we have witnessed a recent surge in FTSE stocks due to fresh falls in sterling, UK market companies have been stubbornly out-of-favour with global investors. Political uncertainty continues to linger, and investors are concerned about how potential interest rate hikes this year could affect the economy.
In the famous cult zombie film Night of the Living Dead and countless subsequent variants on the theme (most of them pale imitations, aside from the comedy parody Shaun of the Dead), the only way to ‘take out’ the zombie was to take out the head, one way or another. I was reminded of this visceral image after re-reading an Inside Money column from around this time last year, headlined ‘June signified a great deal more than the end of May’.
What is the outlook for the UK economy and UK interest rates? In his May press conference, governor of the Bank of England Mark Carney gave us only vague guidance. An array of factors are clouding the bank’s crystal ball and making it very hard to judge the future path of the economy.
Two years will have passed since the UK’s historic referendum on leaving the EU, yet the big questions over the future relationship with the UK’s biggest trading partner remain unanswered.
Will the UK remain in the EU’s customs union? Will it be a member of the single market? Will the UK face tariffs on its exports?
In the two years since the Brexit vote, small companies have been the most profitable place to invest within the UK economy.
While the FTSE 100 index returned 31.4 per cent over that time period, the FTSE Small Cap index managed 38.3 per cent.