End Of An Era As The UK Mourns The Death Of Queen Elizabeth II

This week we learned that the end is nigh, or at least the era of rock bottom interest rates and sub-2% inflation. The

Last week the news was dominated by the death Queen Elizabeth II. During a reign marked by periods of turmoil, rapid change and progress, the queen was more than a head of state but a source of stability. A unifying figure in an increasingly fractured country, a constant amidst rising uncertainty and a symbol of strength during periods of weakness. While the institution she embodied endures, it will never be the same.

As tributes pour in from around the world, it reminds us that she was one of the most respected and experienced diplomats in the world. Her reign covered 15 UK prime ministers, she met 13 US presidents and was head of state in 15 countries. Respected and admired by allies and adversaries alike. A great loss for all of us, and felt deeply here at Private Office Asset Management. Our thoughts and best wishes are with King Charles III and family.

GLOBAL: OIL & GAS PRICES FALLS AS DEMAND SUBSIDES OVER FEARS OF RECESSION

It is clear that the central banks are aiming to burden the working and middle / upper middle classes with the task of b

The EU put an energy price cap at the heart of its plans to tackle the energy crisis. The proposal will see energy producers paid a per unit amount at roughly half the current rate with governments picking up the bill. European leaders also agreed in principle to a price cap for Russian gas following the G7’s plan to impose a cap on Russian oil.

Russia did not reopen the Nord Stream 1 pipeline and is using its gas supplies to blackmail Europe, stating the pipeline will remain closed until EU sanctions are lifted. Meanwhile, OPEC announced it is reducing its production target – reversing the 100,000 barrel a day increase it agreed last month – as it attempts to stabilise oil prices. However, energy markets are looking at the prospect of recession in the West and weaker Chinese demand due to latest round of lockdowns. Brent Crude fell to $87 last week down from $120 a barrel in June and the price of natural gas in Europe is around 35% lower than its recent highs.

 

UK : STERLING FALLS AS TRUSS REVEALS NEW ENERGY PRICE CAP

The new Prime Minister wasted no time in announcing plans to tackle the UK’s energy crisis. Liz Truss’s plan will freeze domestic annual energy bills for the “average household” at around £2,500 for two years by capping the price energy companies can charge, with the government paying the difference. Businesses will have their bills capped for six months. Truss has stuck to her campaign pledge to avoid a further windfall tax on energy producers and intends to pay for the support with additional government borrowing. Truss also restated her intention to reverse April’s increase to National Insurance and cancel the planned rise in corporation tax.

Initial estimates put the cost of the energy price assistance at £150bn and the prospect of a surge in additional gilt issuance has contributed to a further sell-off this week. Tax cuts could also raise inflation fears and has led to speculation that the Bank of England may have to raise rates more aggressively. Although capping energy will reduce UK inflation, sterling has fallen again this week which will add to price inflation for imported goods. If you would like more information and guidance for the safety of your assets during this volatile economic climate, visit our dedicated wealth management webpage. 

UK : HOUSE PRICES FALLING AS RATES RISE

Is the household consumer and small business owner (those most adversely affected with raising interest rates) to

Estate agents have reported a steep drop in new buyers as rising mortgage rates and the rapidly rising cost of living affect demand. The Royal Institution of Chartered Surveyors said new buyer registrations fell 40% in August as it predicted a falling volume of house sales over the next 12 months and house price inflation slowing to 0.3%. The average house price increased 0.4% in August according to the Halifax House Price Index and the annual rate is slowing down.

The falling number of house buyers has been affected by the increased cost of mortgage borrowing, as well as inflation eroding affordability. The average rate for a 2-year fixed mortgage has risen above 4% for the first time since 2014. Barratt Developments reported reservations for new homes continue to fall and and the Construction PMIs point to headwinds for the housing sector. Although the PMI for August rose to 49.2, new orders remain at their lowest level since the early months of the pandemic in 2020.

Since the financial crisis 13 years ago, the USA’s debt mountain has increased from US$9.4Trillion (2009) to

Following our September Investment Committee Meeting, we continue to advocate that around our core holdings which will remain at their allocated percentages, we need to be active in attempting to buy low and sell high to take small ongoing profits as the markets major continue to fluctuate with the news flow which is largely market negative in the short term.

That said, we have identified 8 direct (single) stocks that we believe represent a buy and hold over this investment period for a given weighting subject to individual client risk profile, where the P/E (price per share divided by earnings per share) Ratio is very reasonable which currently offer annual dividends up to 7.01% – and with consensus analyst views over the short term being favourable for underlying price increases.

Our revised Asset Allocation and Rebalancing proposals are currently being out together and will be with our clients over the coming days.

 

Please note that nothing written here by the author should be construed as giving advice, it merely outlines our thinking.  Any advice will be discussed and proposed on an individual basis with each client when any advice that is given should be fully discussed with us before proceeding with any proposals made.

If you enjoy reading this weekly update, please feel free to share it with your friends and / or family who may also find the contents of interest, and do not hesitate to contact us if you need any help, information or advice yourself about any of the areas covered this week. 

Yours sincerely,