Q3 Investment Update – Memories of the 70s

Bare shelves, queues at the pumps, rubbish not being collected, rising inflation and the prospect
of rolling brown-outs, what a time to be alive. The only plus side is that we are not having to
suffer the music of the 70s (Matt’s view), even if everything else is copying that particular
decade.

Global markets ignored the UK’s woes in Q3 even if the foreign media did not (here, here, here). They did however react to the US Federal Reserve making noises about a slowing of their money printing.
It should be remembered that the FED are currently still buying USD 120billion per month of US
Treasuries and Mortgage Backed Securities, which is still a huge lake of liquid something, even
once the flow slows.


Interest rates are not likely to rise until this ‘tapering’ has been tested and has started in earnest
so as not to hit markets with a dual-shock. In the meantime the cost of everything is soaring and
we are having to adjust to ‘getting back to normal’ not being so straight-forward when we are
living with a virus that is now endemic.


Counter to this negative market news, is the fact that 2021 GDP, Sales, Gross Income and
Earnings for the S&P 500 are substantially up, even on the pre-pandemic 2019 numbers.
Some of this is no doubt a catch-up from 2020’s lost year but there is also genuine growth,
albeit in different sectors than before.


The result of this uncertainty was that the market reacted well in the first part of the
quarter and then promptly gave back its gains in the second part, as some of the more
negative news filtered through. Again markets hurt the market timer, the pessimist and the
overly active. The key to growing your wealth, remains; invest globally, invest cheaply, invest
for the long-term, lose the password to your portfolio login and don’t read market
commentaries.

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