Jeff Lewis takes a look at the challenges facing the economy as we start the new financial year.
It has been a difficult start to 2022 with a number of economic issues weighing heavily on investment markets before the geo political crisis with Ukraine.
What can we take from what is happening and is what should/can we do?
In general terms the US is looking quite strong economically with less impact of gas prices and a larger well of unspent consumer cash saved through COVID still to be applied. Its estimated that even if only 50% of this saving was spent over the next 2 years it would add 3% to US growth prospects , that is a pretty good indication of a robust outlook for the US economy even if interest rates continue to rise to perhaps the “new normal” of around 2.5%.
Across the world China still has an issue with COVID in shutting down whole city regions if larger outbreaks occur , who knows if this policy will work but it will effect the supply chain in manufacturing at times .
The UK has a cost of living crisis in our midst albeit demand from accumulated COVID cash may also feather us a little as demand for goods and services remains positive, with a bit of luck the inflation issue will ease as we go through the year.
Europe has the biggest problem with its dependence on Russian Gas supplies , it will take more than a year or two to replace this and in the meantime industry especially in Germany , Holland and Italy will have to ration use whilst consumers are protected.
These are uncertain times with some volatility in returns for clients over the last few months however we do know that generally remaining invested even during difficult times is rewarded as being in the right place when markets improve.
It is really not possible to move in and then out and then back in again, invariably you’ll be out too late and then too late coming back in which results in accentuating a loss whilst missing out on the gains.
We always focus more on the longer term and how investing in the best companies/assets will meet the objective of making money over and above interest rates and inflation all the way through the economic cycle.
If any of our clients do have any concerns please contact us to discuss any of these issues.
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