Hugh Lambert No Comments

As we finish quarter one, I just want to write a little bit today about what happened in quarter one and what we might see in quarter two and into quarter three.  

As we started quarter one at the start of the year, global stock markets moved into negative territory pretty quickly and that was on the back of inflation concerns, which were supply chain issues from lockdown and lack of consumer goods and parts for consumer goods and we would have seen that a lot in materials for housing and for cars.  

That forced central banks to have a look at how would they would curb inflation and the US and their central bank, the Federal Reserve, started to increase interest rates and were due to finish their bond buying by the end of March.  

What that means is that it’s going to increase the cost of borrowing for businesses and consumers, which typically will slow an economy down.  

In the EU, there isn’t any sign at the moment of increasing interest rates, but they will reduce bond buying.  

The ECB have been buying the bonds of countries, which means it’ll make it more expensive for government to borrow and so and they will have to borrow less.  

We then saw the Russian invasion of the Ukraine and the horrendous hardship and destruction that put on the Ukrainian people.Global stock markets dropped further on the basis that the conflict might broaden out and involve more countries, and it didn’t in the end, but that’s not say that it won’t.  

At this point in time the stock markets have recovered most of the losses that they incurred at the start of the invasion.  

But it (the invasion) also created further inflationary pressures as Russia and Ukraine are exporters of a lot of foods and fuels, and a lack of supply of these will push up the prices and of foods and  fuels as we’re seeing in our shopping bills and in our fuel bills.  

On the local side, we saw a timeline for Auto Enrolment, which is the automatic enrollment of individuals who aren’t involved in company pension schemes into company pension schemes. The timeline given was January 2024 but they’ve (the Government) given themselves the option defer it, but that’s the timeline given.  

As we move into quarter two, I’d expect inflationary pressures to continue, as there hasn’t been a lot of resolution in terms of supply chain issues.  

We’re going to see a longer period of time with less foods and fuels available, and I think governments and businesses will be able to source other foods and fuels as a replacement.  

But if you have got a reduction in supply, unfortunately that’s just going to keep prices up.  

And stock markets, I think will continue to be quite volatile, and I think a lot of what’s there (Inflation, Invasion, Interest Rate Increases) has been factored in by investors as it is.  

So unless the conflict does broaden out or inflation gets worse, I think we should hopefully not see anything further to the downside.  

Depositors will be under pressure this year because inflation is so high and there’s no sign of deposit rates coming up anytime soon.  

The Department of Finance have said they still expect economic growth of 2 to 2 1/4 percent this year, which I think is pretty good all things considered.   

Unfortunately the Russia Ukraine conflict looks like that’s going to continue for quite a while yet. 

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