In this end of week article Mark Watson-Mitchell gives a quick view of property prices, food prices and where the market is going.
He also puts forward a quite unique suggestion for patriotic savers.
Property easing back
UK property prices are still easing back, despite several of the mortgage lenders now dropping their rates.
Several would-be buyers have pulled out of planned transactions, either because the lenders rate increases scared their wallets or because they are fearful of further price falls.
A considerable number of transaction chains have been kiboshed in the process, which then sees vendors pulling their ‘asked-for’ values down a peg or two.
As for housebuilders, well they too are having it rough, with higher mortgage costs severely limiting the number of new build sales.
In fact, there is general pain being felt around the whole of the UK housing market.
The latest data from the Royal Institution of Chartered Surveyors found the outlook for the UK housing market is reaching negative levels not seen since 2009.
Food shoppers with tighter purses
Food shoppers are now getting used to the branded goods that they regularly purchase, are smaller in size and very much more expensive – continuing examples of ‘shrinkflation’ making the ‘shopping basket’ increases a massively higher inflated rate than the Government 7.3% rate.
Higher prices are very much an accepted feature of household expenditure and, with interest rates expected to stay in the current range for quite a while, they will be a ‘take or leave it’ cost.
Doesn’t this sound depressing?
Actually, I believe that the British people have a great ability to wear such discomforts and then attempt to cope with matters and get on with their lives, despite the hassles.
Similarly in the UK stockmarket – a certain fortitude is being shown by UK Corporate against operating pressures and that shows through in practically every piece of news coming from British quoted companies.
Their growth paths were obliterated by Covid in 2020 and 2021, while the Russian invasion of Ukraine was the next significant hurdle in 2022.
However long that conflict endures, it will continue to be reflected in higher prices, particularly in fuel and grain.
We should expect the OPEC producers to restrict supplies again in the near future, especially under pressure from Saudi Arabia, whose Aramco business is not faring so well of late.
As a nation we will cope with such economic hassles and attempt to overcome its issues.
So where now for the Market?
I do sense that, after the normal August period of market inactivity is ended, the UK equity market will return to show its strength again.
Several times over the last five years we have seen peaks on the FTSE100 at around the 7600 level.
The highest level at which it has peaked within the last year was 8,047.10.
I suggest that within the next few months up to the end of the year and then immediately afterwards, we will see a strong attempt by the market to push up to and above that previous High.
The market loves to see items of good news upon which it can elaborate and extend its bullish reactions.
Swings of 100 to 150 points in a day could well become more commonplace leading up to the year end, before the New Year Tips season adds to possible froth.
We may see some political gaffs, some economic hurdles and international crises along the way helping to cause the big swings.
However, I do foresee a much stronger equity market evolving very soon.
My message in conclusion is that investors should as always, have researched their existing positions.
Would those stocks be bought again today?
If not, then look rapidly for others to gen up upon before making sure that you are ready to run the next phase forward, fairly well invested in stocks that give you no nightmares.
And now for something completely different
I have an idea.
How about either the Government or even one of the banking groups floating a specific NHS Loan Bond?
In times of crisis the UK, like so many other countries across the globe, has issued bonds to raise funds to pay for this, that or the other, with the British War Loan being perhaps the most famous.
So, I am now suggesting that one of those organisations raises £2.5bn of NHS 5% 2048 bonds.
The issue would be at a discounted £95 per £100 redeemable stock, with £50m of the bonds being redeemed each year until 2048 – which is when the NHS would be 100 years old.
The funds could not only attract the institutions but also private investors, especially those wishing to protect their savings while supporting an incredible body that gives us all medical back-up from cradle to grave.
At a time when the banks are not playing fair with savers, I do believe that patriotic support would be quickly visible.
I am not in favour of privatising the NHS, but I do encourage a substantial outsourcing of its activities to private and public companies, which needs to be at ‘arm’s length’ and totally commercial.
But then the questions will be what will the fresh funds be used for?
Certainly not to be propping up any inefficiencies in Government, even though the Government would be guaranteeing the Bond and paying down the £50m each year to redemption.
Instead, a sensible independent body could be established to apportion the funds raised and where they will be spent.
This would not be a ‘money fountain’ for the arbiters involved and certainly no ‘gravy train’ or platform for peerages.
More efficient operations
I believe that there are significant savings that can be made in operational costings across the NHS, but this new body would monitor required expenditure before being granted.
Success in getting such issue away in one year could be repeated in subsequent years.
However, a stringent indication must be that the raising of such funds must be directly for aiding the NHS and must not be considered to be an Exchequer tool for Government to circumvent its ongoing commitments to the NHS.
So, who is up for this suggestion – does it have merit?
And are the terms right for the patriotic investing public enough to dwarf institutional investors?