News and Events
So what has happened? Initially economic data from the year’s second quarter was not as good as expected. Indeed the Bank of England, already having reduced our growth expectations to 1.7% this year, has reduced it further to 1.4%. the market doesn’t like surprises like that. It also caused some economic commentators to talk about a second recession. I believe the majority opinion, however, is that this is unlikely to happen.
I recently had an opportunity to hear a talk by one of the City’s top economists. Usually these talks are full of doom and gloom but not this time. Key indicators show that the markets are good value, the US economy is looking strong and interest rates look likely to stay low - at least until late this year but possibly until November 2012 or beyond. Talk of a double-dip recession seemed a distant memory.
It is said that in economics, if you understand the concept of supply and demand, you can understand economics. The same could be said of investment. If you understand the concept of risk and reward much of the mystery of investments is unravelled. That is, the greater investment return you are looking for, the greater risk you will have to take to achieve it. However, the turmoil of the past couple of years has, in some cases, turned this on its head. Is your bank safe? Are your government securities totally guaranteed? It would seem that most banking institutions are safe, and Governments won’t fall, but there was a period when we weren’t really sure.
In mid September 2008, Lehman Brothers filed for bankruptcy, and the world changed. Two years on we are still unsure quite what will be affected and by how much. One thing we do know is that the current Government has decided to pay back the debt caused by quantative easing (pouring money into the economy by shoring up the reserves of the banking sector) as quickly as possible. This has meant a number of austerity measures being announced, which will impact not just the public sector but pretty well everyone.
Almost two years after the collapse of Lehman Brothers is a good time to take stock of where we are economically. Gross Domestic Product (GDP) fell some 4.75% in 2009 and we spent most of last year in recession. At last, however, it was announced that in the last quarter of the year we moved out of recession by the smallest measurable amount of 0.1%, although the official GDP growth figure was 0.3%. Better news in the second quarter showed growth up to 1.1%. We await third quarter figures with interest although it will be too early to tell whether the policies of the new Coalition have helped or hindered progress.
I am sure that, like me, you have read many articles in the press recently about equality for women and minority groups and it is easy to see how people in these groups could feel discouraged from taking any steps to plan for their future.
Life is never boring in the financial world, although most of the excitement has been of the negative variety recently. Therefore after a difficult year, it was great to get some good news for a change in June.
Firstly, as referred to elsewhere on this site, we did extremely well in a “mystery shopper” exercise. My colleague Ruth showing the importance that we place on client care. However it was even more important that we survived the scrutiny of our regulator, the Financial Services Authority (FSA). All smaller advisory firms in the country will, at some point, have to meet up with the FSA to discuss with them, whether they are “treating customers fairly” (TCF). This was a major initiative that was rolled out by the FSA some 2 years ago. All firms were to have implemented certain procedures by now. Our appointment was two days after I returned from holiday, on 16 June.
I think you would have needed to live life as a hermit not to have realised that the past year has been an incredibly difficult one for the economy and investments generally.
This time last year, we knew that the banks had problems, but no-one really believed that any of the significant institutions would be allowed to fail. Therefore many believed that the stock market valuation of various financial institutions had fallen as far as it was likely to.
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