Brian’s Brainstorm

Negative News and Your Investments

The financial media have a bias towards reporting bad news.  When stock markets fall sharply, there are lurid headlines predicting financial collapse; announcements of catastrophic losses on pension fund valuations and images of disconsolate brokers staring at screens covered in red.  But on the other side of the coin the stories of stock markets making relentless incremental gains are not news.  It may have escaped some people’s notice but the UK stock market is up over 25 per cent since the financial media asked us to put our tin hats on after the Brexit vote.

If you were someone taken in by the gloom mongers at the BBC and Financial Times, you would be inclined to establish a cautious portfolio consisting of gilts together with some gold and overseas government bonds to provide protection against a sterling collapse and of course cash.  All these asset classes delivered positive returns in 2008; but over the last 5 years (2012 to 2016) these investments have been dire.  For sterling investors, gold delivered a cumulative loss of over 7%, cash pays a measly 0.5% a year and gilts and overseas government bonds have returned under 4% a year.  Indeed a portfolio split equally between gold, cash, gilts and overseas government bonds would have generated a return of about 1.5% a year, not enough to cover for inflation.

Contrast this with investments in developed stock markets around the world.  The FTSE All Share index delivered an annual total return of over 10%; European equities 11% a year; Japanese equities nearly 14% per annum and finally, the S&P 500 index in the US, generated a total return of 20 per cent a year for sterling investors.

Now we are not advocating a portfolio consisting of 100% equities, because such an asset allocation can potentially produce short term losses that are higher than a particular individual’s tolerance of risk.  But an exposure to developed equity markets is an essential ingredient for delivering returns comfortably above the inflation rate.  The moral of the story so far: preparing for Armageddon since 2012 has proved to be a very costly enterprise; while investing in equities in developed economies against the background of steady unspectacular growth plus low inflation has paid off handsomely.  A narrative mostly overlooked in the financial media.

Brian Durrant

Staff Matters

  • In a little over a month Ian Bromley, Martin Kettle, and Martyn Mulligan will be taking part in the Invesco Perpetual Snowdon Challenge. Awaiting our 3 advisers over the two days is a 27km hike, a 49km cycle and a 5km canoe.
  • Of course this temporary bout of insanity is being done for a good cause. The Youth Adventure Trust works tirelessly to help give young people the hope, confidence and life skills to meet the challenges in their lives through a journey of experience, adventure and fun.
  • A link to donate can be found by clicking on the Virgin logo. Please give what you can to a great cause.

Statistical Information

Last Month This Month Change
CPI 2.9% 2.6% -0.3%
RPI 3.7% 3.5% -0.2%


The Consumer Prices Index (CPI) fell for the first time since October 2016, a development that surprised a number of economic commentators and news outlets. The continued pressure on the pound, as the fallout from Brexit continues to bite, should have resulted in another month of inflationary increases as imports become more expensive and exports worth less. However the reality saw price falls in the transport sector for the fourth month in row, coupled with a large drop in the recreation and culture sector, causing an inflation fall.

Despite this drop, inflation figures remain high in comparison to those of recent years. Households are beginning to feel the effects of this as the price of the food and non-alcoholic beverages, furniture and household goods, and restaurant and hotel sectors all all at their highest rates since 2013.

UK Consumer Price Inflation

Jun 2017 Aug 2017 Change
Base Rate 0.25% 0.25% 0.00%


In a move that will shock almost no one, the Monetary Policy Committee (MPC) voted to hold the Base Rate at 0.25% again.

Despite the high levels of inflation prevalent in the economy, Mark Carney explained that the MPC were unwilling to raise the Base Rate in the face of economic uncertainty caused by Brexit. Until the issue of access to EU markets post Brexit has been clearly defined, firms are unwilling to invest large amounts nor offer substantial pay increases to their staff.

The MPC is next due to meet on 14th September.