Last week, the papers were all reporting the volatile week for those who hold shares – sharp falls in the US stock market sent shockwaves around the financial world and the FTSE 100 closed below 7000 for the first time in six months, having peaked at 7,877 in May. Meanwhile, the European Stoxx 600 closed at its lowest point of the year.
The problem? Although there is rarely one single factor, one of the reasons could be that investors are worried that further US interest rate rises will be at a pace that the world economy is not prepared for. They are also concerned that the US trade war with China and Europe will act as a drag on the global economy.
As an article in The Times explains, the problem with rising interest rates is that this causes government bond yields to rise (and bond prices to fall). This means that if you can get a similar yield on ‘safer’ government bonds as you can on shares, why take the higher risk – so people may switch out of shares and into bonds.
But, as Jeff Prestridge reminds us in The Mail on Sunday, the golden rule as markets wobble is: do nothing. That’s because a loss is not technically a loss until it is crystallised by selling. But what if it gets worse?
As Adam Williams in The Daily Telegraph reminds us, as well as being a fearful time for those invested, a market correction can actually be a great opportunity to buy at a lower price.
According to Ian Cowie in The Sunday Times, October can often be a painful month for stock market investors (remember 1987?) – although he too suggests that it’s important to ride out the storm. He says that although short-term stock market shocks are harmful for day traders or speculators, they need not necessarily matter to medium and long-term investors.
Although the torrid stock market news dominated the weekend press, there were some other stories – even some about savings accounts.
A couple of the papers reported that the launch of Marcus by Goldman Sachs has sparked a bit more competition, although I’d say that the launch of the RBS Savings Builder is a little cynical. It pays the same rate as the Marcus Online Saving Account and offers easy access to your money. But it also comes with a raft of terms and conditions that mean many will surely not receive the 1.50% AER – it’s certainly NOT a normal easy access account. See our article for a bit more detail about what to watch out for.
More RBS news as, ten years after the bank was rescued by a Government bailout, it has finally paid a dividend to its long-suffering shareholders. The bank said that, at 2p a share, the dividend was worth around £240m to 190,000 shareholders - including UK Government Investments, which holds the taxpayers’ 62%.
The Mail on Sunday featured a big article about National Savings and Investments (NS&I), in particular why we all love Premium bonds.
And as detailed in our Budget summary, there were also some articles about what we might expect from the Budget on 29th October. The Sunday Telegraph calculated that taxpayers will miss out on saving as much as £860 a year in tax if the Government continues with an expected U-turn on a manifesto pledge to continue to increase the personal allowance and higher rate threshold. Meanwhile the FT mused on what the Chancellor might have in store for pensions, potentially a radical change to the rates of the tax relief on deposits made – or once more reducing the annual allowance.
Finally, while Christmas has yet to make it into the financial pages, where to go skiing has!! The FT says to head to Bulgaria and Italy for the best value.
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