7 April 2022

Out with the Old, In with the New

Read the latest market commentary from our specialists to understand more about the financial markets.

It wasn’t that long ago that I was reflecting on the Chancellors Spring Budget. Not that there was much to get one’s teeth into. But as in years past it was timed to coincide with the start of the new tax year. Quite why we end the period when our tax is due to be calculated just four days after April Fool’s Day escapes me. Mr Google tells me that it is all down to changing from the Julian to the Gregorian calendar, along with an issue over leap years, which were not accounted for in the calendar we were abandoning. Sounds as good a reason as any for such a strange date.

Most countries seem to work to a calendar year end, but I suppose one day is as good as any other when it comes to drawing a line under what we have been earning. Of course, the new National Insurance regime has now arrived, which will cost those in work more at a time when price rises are taking place across a wide range of goods. I well remember that period of high inflation that took place in the mid-1970s when the cost of living rose by some 25% at one stage. Some similarities with today spring to mind.

While the current hike in energy prices started before the conflict in Ukraine, there is little doubt that this war is exacerbating the situation. In 1973 the Yom Kippur war led to a quadrupling in the price of oil, while a banking crisis the following year hardly helped. Then there was a change of government which added fuel to the inflationary flames. Central banks are smarter at containing the forces of inflation these days, so we should not see a rerun of nearly half a century ago, though I doubt the ride will be that comfortable.

Against this background, markets have held up remarkably well. The modest recovery we saw on the back of renewed peace talks has held, despite a worsening situation out east. Interest rates seem set to rise to combat the rise in the cost of living, but again markets have largely shrugged this off – so far. Perhaps it is the lack of alternatives that are keeping buyers busy. Certainly, cash does not feel a safe haven when inflation is steadily eroding its purchasing power. As we start the new tax year, I for one will be topping up my ISA early.

Brian Tora

Bespoke Discretionary Portfolio Management

Discretionary Portfolio Management

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