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Financial Markets October 2017

(Accurate as of 19/10/17 @ 09:48)

In the Financial Markets this October 2017, International Monetary Fund has upgraded its global growth forecast for this year and next by 0.1% to 3.6% and 3.7% respectively.

In its latest economic outlook, the crisis lender said that the global economy is enjoying a ‘welcome cyclical upturn after disappointing growth over the past few years‘. However, it cautioned that the current upswing is still fraught with obstacles and should not be taken for granted.

Keith Wade of Schroders makes reference to Investment Markets sitting in a Goldilocks state. Recently, Bill McQuaker of Fidelity said that the economy is ‘healthy enough to stave off recession but not strong enough for inflation to take hold‘. McQuaker stated that he now had concerns that a change is taking place. Is the economic cycle ‘hotting up’ to the point of needing to let off steam?

Is the economic cycle ‘hotting up’ to the point of needing to let off steam?

Around the World 

  • Last week saw a spate of fresh highs.
  • The UK’s FTSE 100 and 250 indices broke new ground last Thursday.
  • The Asian markets edged towards a 10-year peak on Friday.
  • Japan’s Nikkei climbed to its best level in 21 years last week.


Words of Wisdom

As confirmed last week, American economist Prof Richard Thaler was awarded the Nobel prize based upon behavioral economics. His view attempts to explain why people mentally categorise money into separate accounts – which affects the way it will be spent. For example, money earmarked for holidays will be spent differently (and most likely, more freely) to money saved for a child’s education.

If discipline is required for long-term savings, he recommends to set up a specific programme so that the plan is structured and the goal is achieved.


Storm Approaching

Storm Ophelia arrived this week (and the wind certainly picked up in this neck of the woods), 30 years on from the ‘Great Storm of 1987’ and our politics remain in the eye of a storm. PM May has found herself inside the eye of a storm ever since the general election results. From finding her popularity falling inside and outside of her party, to even facing a prankster handing her a P45 at her recent speech.

Chancellor Hammond is also having a tough ride with calls for him to resign.

Is he going to compromise prudence, with the impending Autumn Budget? Will he be tempted to loosen the purse strings? Meanwhile, Labour leader, Corbyn, seems to be riding the crest of a wave. Politics change so very quickly!

Whether you are alarmed at the prospect of ‘Bozza’ or ‘Jezza’ as PM is a matter of personal taste but sterling would be expected to react badly either way. When Sterling reduces, our goods and assets get cheaper and we collectively suffer in relation to global currencies. The Labour party confirmed an expected ‘run on currency’ if they come to power.

What will start a change in the economic sentiment? Is this likely to be the national and/or global politics we see and experience or is it likely to be monetary policy change?


30 Years On

Today is the 30-year anniversary of ‘Black Monday’ (October 19th), where the global stock markets crashed, shedding a huge amount of asset value in a very short time. The crash is also referred to as ‘Black Tuesday’ due to time zone differences. The crash began in Hong Kong and spread west to the USA, with the Dow Jones Industrial Average falling back 22.61% in that day. By the end of October financial markets had fallen between 22% and 60%. The importance of remaining invested became clear as the economy was barely affected and growth actually increased through 1987 and 1988 with the Dow Jones Industrial Average recovering its pre-crash closing in early 1989.


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