A falling market
We saw a failing stock market on two days this week and yesterday was particularly dire. The Federal Reserve raised US interest rates on Wednesday and predictably the Bank of England followed suit, yesterday. That appeared to negatively affect investor sentiment. I found it strange that the stock markets were plummeting but the gold price wasn’t going up. Were investors preferring cash? It can be a good idea to sell stock and prefer cash but I only do that when I sell for a good price and then wait for the bargains to come along.
Investors weren’t buying gold and didn’t appear to be buying oil either. President Biden has appealed to oil companies to ramp up production and the refining of oil. I hope they can ramp up gas production too. We need to really cut Russia’s income from gas and oil and give them an incentive to get out of Ukraine. The oil price on eToro is $116.15, up 1.35% on yesterday, so I think oil companies are still a good bet. Biden’s intervention could see them increasing production and making even bigger profits if governments give them the licenses and assistance they need.
On the London market, it appears to be calm after the storm. The FTSE 100 is up 0.90% at 10:44 am. The oil majors are still out of favour, which is curious. The banking sector is up and despite the interest rate rise, Taylor Wimpey is up too. I’m still favouring banks and I can see Taylor Wimpey recovering well too. The pundits on the financial pages are tipping Rolls Royce and their share price is still low and worth a punt. I think there are a lot of upsides there. I have a very small investment in Unilever on eToro and I made that investment so I would keep an eye on the price, more than anything else. I think with its share buyback program Unilever could be a good bet but the share price hardly moves. Investors aren’t keen yet but we need to keep a close eye on that one.
We all need to keep tight control of our finances so I checked my gas and electricity accounts. Strangely, the account balance for today matched the account balance for the beginning of May despite payments going in since then. It appears the account balance is only being updated every 3 months and they put the direct debit up higher than needed. It will work out fine in the end but it is a bad practice when people are struggling. I think my account will be a lot in credit when my fixed tariff ends in August so I won’t be struggling next winter. I expect that lots of people won’t be so lucky and will struggle to pay their bills through the winter. With food prices rising and prices at the pump high, people will be cancelling holidays and buying their beer in the supermarket and not the pub. With higher mortgages, we can expect changes in spending patterns. I always see a queue for Ikea on Sundays but not in the past few weeks. People will delay major purchases now and think twice before embarking on large DIY projects. As investors, we need to identify the winners and losers as spending patterns change. I don’t think brewers will lose out much, alcohol is addictive and so is socialising. People will be making difficult choices. Discretionary incomes are falling fast so cancelling that trip to Ikea not only saves money that people might spend there, it saves money on the fuel people use just to get there too.
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