What has changed in the last two weeks? For one thing the oil price has fallen further, to less than $28 a barrel, and many now believe $20 is in sight (including our Sipp diarist David Stevenson, who’s positioned himself as defensively as his naturally sunny worldview allows him). RBS goes further still, suggesting $16 could be on the cards.
Yet there is something not quite right in blaming the market slump on a falling oil price – after all, cheap oil is supposed to provide an economic tailwind. The conclusion many are instead drawing is that we are instead witnessing the early symptoms of another global recession. Not everyone agrees - many suggest the sell-off is the mucky byproduct of an overemotional market, and that the strength of the US economy will steer the world out of trouble. I’m afraid that argument doesn’t hold much water for me given the US strength has partly been built by weakening everyone else. And a presidential election introduces another element of unwelcome uncertainty – we’ve looked at the impact the campaign trail has on markets here.
I also still believe its rate rise was a face saving exercise that came too soon; our own central bank seems far less inclined to hurry, a better sign that escape velocity has not been reached yet. That’s reflected in Markit’s latest household finance index, which suggests UK households are growing increasingly nervous. Despite a helping hand from low rates and rising wages, fears for job security are on the up. Staying safe seems to be everyone’s very sensible concern right now, whether on the markets or in the workplace.
There was, at least, some good news this week in the form a report from of the department of Business, Innovation and Skills (BIS) on the structure of UK share ownership. The department finally seems to be coming around to the view that it is, quite simply, not fit for purpose – a view that we have held for some time and which I am regularly encouraged by readers to push further. So well done to ShareSoc and UKSA, which have both been working tirelessly to expose the iniquities of the nominee structure - even if markets aren’t getting any easier, they might at least become fairer.
