Discretionary income and inflation #financefriday

Inflation is eating away at our discretionary income. Many people have no discretionary income when they have paid for all the essentials like food, housing, energy, taxes and telecoms. We can keep tabs on our energy consumption and we need to do that as winter approaches. Changing our habits can shave bits off our energy consumption. Having the thermostat 1 degree lower in autumn will help us get used to cooler temperatures. Not over-filling the kettle will save on electricity. Simple draught-proofing can save on energy too. This week I have been watching my smart meter and thinking about where I can save. I am also aware that Europe probably won’t have enough energy this winter. Despite Brexit, the UK is still tied to the European energy market so we could be affected by shortages.

The Stock Market

What to invest in now that the pundits are forecasting a recession? I’m still favouring banks and oil majors, Shell and BP. If by some miracle the oil supply is increased and it is time to sell oil majors then we could pick up bargains around the rest of the market. I bought a few shares in Natwest this week. I think that banks will benefit from higher interest rates. They are raising mortgage rates but they aren’t raising rates for savers! The low value of the pound is favouring pharmaceutical companies too but that could quickly reverse so they are a good investment now. But be ready to dump them if the GBP starts to climb against the USD.

Asia

Standard Chartered and Prudential are invested in Hong Kong and China so keep an eye on those two stocks and maybe buy if the covid situation settles down in HK and China. I already have a few shares in STAN, I’ll keep watching the PRU.

GBP: USD

If you are an investor it is worth keeping an eye on the GBP: USD pair. It is $1.20 today and favours exporters. I also watch the price of gold which gives us an indication of which way the world economy is heading. It is down a little today at £1476.79 an ounce. When investors sell stocks they buy gold. They are now favouring black gold; oil.

Please note the ideas in this post are simply ideas and observations, not financial advice. For financial advice see a qualified financial advisor.

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