Hi, I’m Emily,
Your undercover reporter on the financial markets. I surface the things that matter to your investment portfolio. Each week I’ll scan the news and you’ll be able to read about the top things impacting your financial health. From Asia to the US and every market in between, I won’t just tell you what’s happened, I’ll tell you why its important. Feel free to send in questions if you want me to explore anything in particular. This column only works if it helps you.
This week Central Banks from both Japan and the US decided to hold interest rates, and the markets breathed a sigh of relief. The Bank of Japan are keeping rates at -0.1%, whilst the US Federal Reserve is keeping a range of 0.25-0.50%. Central Banks are currently under pressure to avoid any disruption of the financial markets, there’s been a lot of volatility this year and achieving balance is quite tricky. This is good news for those in the UK with a loan or mortgage; it means borrowing rates will be low. This is also great news for investors; when borrowing rates are low businesses are more likely to invest in growth. Unfortunately for anyone saving in cash this isn’t great news; the interest rates on most cash accounts are shockingly low. I recommend you look at the rates you’re receiving and consider investing more of your cash.
There was more good news coming out of Europe. The leading indicators for growth are showing that they’re on the right track. The Markit Eurozone Composite printed at 52.6 (anything above 50 indicates growth). This was a little lower than the expected 52.8 but what’s most interesting is the services and manufacturing data behind it. Whilst services were a little below expectations, manufacturing was above. After the volatility that we’ve faced recently that has been, quite frankly, a little scary for most investors, we’re heading towards a lower volatility environment. That means investors will see less risk than they’ve seen over the last couple of weeks.
UK inflation expectations provide vital information for anyone looking to their financial future. Inflation impacts the real value of our money, if inflation is positive we’ll be paying more for the same goods. The expectation on inflation (priced by UK government bonds) has increased by 0.27% since the EU referendum result on 24 June. That means market participants expect inflation to be an average of 2.6% over the next five years. Savers and investors need to ensure they’re protecting their real wealth from inflation; that might mean taking on more risk (volatility) but the real risk is that you won’t have enough saved for the future.
