Assessing an inflationary future. #financefriday

The banks and stock market are closed today in the UK for the Queen’s Jubilee. I still checked the oil price on eToro and it was up a little at 116.7. The gold price was down a little at £1482.57 per ounce. Those two indicators give us some idea of investor sentiment. When things look bad for investors they buy gold. The oil price feeds through into the economy as a whole so even on public holidays, it is a good idea to look at what the oil price is doing. I also looked at the US stock markets which were down.

Indicative

The US close today might be indicative of how the UK market might open on Monday but a better indicator might be Asian markets that will close before the London market opens. Higher oil prices might indicate an economic slowdown too. We now have to consider which companies will be able to easily increase prices as inflation soars and which companies are in such a competitive market that they will find it hard to increase prices. In the UK, we have seen energy companies go to the wall recently but now the price cap has been increased they might do much better. Oil majors will probably continue to make good profits despite losing money exiting Russia. Shell saw its share price fall a little on Wednesday after it lost the ability to buy Russian gas to sell in Germany. Russia wanted payment in roubles but that would break the sanctions. Despite such problems, I still see Shell and BP as good investments for the foreseeable future. They will also pay dividends this month.

Cost of living

The cost of living seems set to rise to about 10% this year and so any cash we have will be devalued. We need to get a better return on investments or we need to just accept the loss and make the best of a bad situation. I think the stocks that will give a good return this year are banks and oil majors. The worst ones to own will probably be the likes of Tesco and Sainsbury which are both in a very competitive market. People are going to have less money to spend so we need to ask what will they cut back on. I think people are already trying to buy less petrol and diesel at the pump. They are less likely to want to climb the property ladder and buy a bigger home. Companies might cut back too and maybe scale back buying tech.

Assessing an inflationary future.

Most people will be worse off in the future as energy prices soar. The government help won’t cover all the winter bills. We know the price cap will be higher after October and it will probably be adjusted again in April 2023. Will the government keep on supporting the most vulnerable? I went on the website of my energy supplier and increased my direct debit so I’ll build a credit balance through the summer. I have a price fix until August and by then I will have a good credit balance. We need to prepare for the price increases with the price cap increasing to around £2,800 in October. Celebrate now while we can?

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