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Daily Mirror
17 hours ago
- Business
- Daily Mirror
Inflation is killing your savings - what you must do to combat it
Multi award-winning Chartered Financial Planner, Certified Coach, author of The Money Plan, and Sunday Mirror columnist The American economist Milton Friedman once said: 'Inflation is the one form of taxation that can be imposed without legislation.' Yet for most people, it slips under the radar, affecting our spending power without us giving it a second thought. In recent years, inflation has made headlines more than usual, from the post-COVID stimulus surge to its gradual retreat. I first raised concerns about the risk of rising inflation over three years ago. To me, it felt inevitable. Professional investors and economists should not have been caught off guard by its rise. What was surprising, however, was just how far and how fast it went. Get the best deals and tips from Mirror Money Inflation is a normal part of the economy, and it shouldn't be feared. However, when it gains momentum, it can spiral out of control, leading to a rapid increase in prices. This is what we have recently experienced, which led to the cost-of-living crisis that affected everyone. Inflation and its impact on wealth is often overlooked. I tell my clients that inflation is one of the biggest risks to their money. Why? Because inflation is effectively a constant tax on the value of your pounds and assets, a tax that we all collectively pay. Consider this: since 1989 inflation has averaged around 3%, which to most people would seem modest. But this means you would need to achieve at least a 3% return on your cash savings and investments, after tax and costs, each and every year, to maintain the value of your money. In other words, you need £189 today to buy the same goods which would have cost you £100 at the turn of the millennium, just because of inflation. That's why I advise against keeping excessive amounts of money on deposit for prolonged periods of time. Inflation is like carbon monoxide to your money: it's a silent killer of wealth creation, of which few people are aware. So, what's the solution? The answer lies in investing rather than maintaining cash deposits (savings). The MSCI World index, which is a collection of the world 's largest companies in developed countries, has delivered 10.5% pa average return over the last 20 years for UK investors. Even after accounting for fees and tax, you'll comfortably stay ahead of inflation. This is one reason why the wealthy get richer during inflationary times: they understand that companies can increase their prices and profits, which helps share values rise. You too can participate and grow your wealth over the next 20 years, even if you start small, but you must start. Now, more than ever, it's crucial to focus on the importance of investing to combat the negative effects of inflation. The recent high inflation rates serve as a stark reminder of this necessity.
Yahoo
28-03-2025
- Business
- Yahoo
Trading Day: 'Tariff Man' flexes muscles, markets cower
By Jamie McGeever ORLANDO, Florida (Reuters) - TRADING DAY Making sense of the forces driving global markets By Jamie McGeever, Markets Columnist Nasdaq slumps 2%, tariff fears intensify It was really only a matter when, not if, tariff fears cast a pall over Wall Street and global markets again, and so it proved on Wednesday as investors braced for U.S. President Donald Trump's latest announcement on auto tariffs. The Nasdaq fell 2% and the MSCI World index shed 1% for their biggest declines in two weeks. Earlier, British finance minister Rachel Reeves delivered an update on the country's fiscal and economic health, and as I will explore below, it's a challenging outlook for sterling and UK bonds. I'd love to hear from you, so please reach out to me with comments at . You can also follow me at @ReutersJamie and @ Today's Key Market Moves * It's a sea of red on Wall Street at the close, led bythe Nasdaq's 2% slide. Tech is the worst-performing sector inthe S&P 500, losing 2.5%, and with tariff and inflation fearsflaring up, consumer cyclicals lose 1.7%. * Major tech firms are among the biggest single stocklosers: Super Micro Computer -9%, Nvidia -5.7% and Tesla -5.6%. * Sterling is the biggest mover in G10 FX, shedding 0.5%against the dollar after UK inflation figures come in weakerthan expected. * Oil hits a three-week high on U.S. inventory data andmounting concern about tighter global supply. Crude futuresclimb around 1%, their fifth rise in six days. * The 'risk off' environment drags emerging market FX loweracross the board. Investors in Brazil also grapple with risingpolitical uncertainty after the Supreme Court says it will putformer President Jair Bolsonaro on trial for an alleged coupattempt. "Tariff Man" flexes muscles, markets cower "We're going to go with the tariffs on cars," Trump said on Wednesday ahead of the formal announcement in the Oval Office later in the day. It's a reminder that the self-styled "Tariff Man" isn't bluffing, or at least appears not to be. If he presses ahead with these and other tariffs, like the reciprocal ones planned for April 2, investors face the lousy prospect of faster inflation and slower growth. With that April 2 deadline and the quarter-end looming into view, investors may choose to trim risk exposure and play it safe. It would be an understandable approach, given current levels of economic and policy uncertainty. After some surprisingly high U.S. consumer inflation expectation surveys recently, it was the turn of UK consumers on Wednesday. A Citi/YouGov survey showed the public's inflation expectations rose to 4.2%, the highest in two and a half years. Consumer inflation expectations are a notoriously poor barometer for actual inflation outcomes. But policymakers cannot afford to be complacent, and on Wednesday Bank of Japan Governor Kazuo Ueda reiterated that interest rates will go up if needed to prevent rising food prices from fueling broader inflation. Minneapolis Fed President Neel Kashkari was more measured, noting the counter forces of low growth and high inflation should keep the Fed on hold a while longer. What's increasingly clear is tariffs and trade wars are bad news for stocks. Early signs from the handful of U.S. companies that have reported first quarter results show earnings per share growth has plunged, and on Wednesday Barclays became the latest brokerage to slash its year-end target for the S&P 500. Meanwhile, British finance minister Rachel Reeves blamed swirling global uncertainty for the deteriorating growth outlook, as the independent fiscal watchdog halved its 2025 GDP growth forecast to 1%. It's an increasingly challenging backdrop for holders of UK assets. Sterling may be vulnerable to foreigners' gilt trip The overriding message from British finance minister Rachel Reeves on Wednesday was simple: the challenges facing UK policymakers are mushrooming, and their margin for error is rapidly shrinking. The UK spring fiscal update made it clear that Britain faces dismal growth prospects this year and still needs to boost public borrowing. This means investors may start demanding higher returns for lending to the government, or the exchange rate may need to weaken to draw them in. This raises the risk that a weaker pound could fuel even greater inflation, creating something of a doom loop. So Reeves has to navigate a very challenging environment for sterling and the UK bond market, to put it mildly. SHORT-TERM REPRIEVE Markets got some short-term relief on Wednesday, as the UK budget update included more spending cuts than had been flagged and slightly lower debt issuance plans than investors had expected. But the reality is that UK public finances will be under heavy strain in the years ahead. Government borrowing over the next five years is set to be 47.6 billion pounds ($61.4 billion) more than what was expected only five months ago, according to new forecasts from the independent Office for Budget Responsibility. And it doesn't look like growth is coming to the rescue, at least not any time soon, as the OBR halved its 2025 GDP growth forecast to just 1%. On top of this are growing concerns that UK inflation will rise toward 4% later this year, further above the Bank of England's 2% target. And then, of course, there is the looming threat of tariffs from Washington and a global trade war. Put it all together, and risks to growth in the coming years are skewed to the downside with no guarantee that borrowing costs will fall commensurately. KINDNESS OF STRANGERS This is hardly the most attractive offering for the overseas investors who play a critical role in funding Britain's twin trade and budget deficits. Official figures show that foreign investors owned 32% of the British government's 2.08 trillion pound debt pile at the end of the third quarter last year. That's the biggest share since 2009 and, excluding the Global Financial Crisis, the largest percentage on record. On the one hand, that suggests overseas investors aren't too worried about Britain's fiscal health. But it's also a risk, as foreign investors are likely to be the first to sell in the event of a shock or crisis, and therefore demand an attractive premium to stick around. As former Bank of England Governor Mark Carney famously said in 2016, Britain relies heavily on "the kindness of strangers" for its funding. And as the gilt selloff in late 2022 showed, that kindness can't be taken for granted. Right now, owners of gilts are enjoying the highest bond yields in the G7 group of countries, a reflection more of Britain's testing inflation and public debt dynamics than a positive growth outlook. Vikram Aggarwal, fixed income investment manager at Jupiter Asset Management, says this suggests the gilt market is cheap and represents an attractive buying opportunity. But this "cheapness" has persisted for a long time, and the weight of borrowing requirements on the market is getting heavier. "The deterioration in UK public finances can't be underestimated," Aggarwal said on Wednesday. Reeves won't be underestimating it, that's for sure. What could move markets tomorrow? * Industrial and Commercial Bank of China results (full year2024) * U.S. GDP (Q4, final estimate) * U.S. 7-year Treasury note auction * U.S. weekly jobless claims * Several U.S. Fed officials speak, including: Vice Chairfor Supervision Michael Barr, Governor Michelle Bowman,Cleveland Fed President Beth Hammack, Philadelphia Fed PresidentPatrick Harker, Richmond Fed President Thomas Barkin, and KansasFed President Jeffrey Schmid * British Prime Minister Keir Starmer meets U.S. PresidentDonald Trump in Washington If you have more time to read today, here are a few articles I recommend to help you make sense of what happened in markets today. 1. Trump tariffs on Venezuela crude buyers are a potent newtool of US pressure 2. Trump tariffs loom over Britain's debt-laden economy 3. FX markets still suspect Trump is bluffing: Mike Dolan 4. 'This is not the time to go it alone,' NATO's Ruttetells U.S. and Europe 5. Brazil Supreme Court to put Bolsonaro on trial foralleged coup attempt Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Trading Day is also sent by email every weekday morning. Think your friend or colleague should know about us? Forward this newsletter to them. They can also sign up here. (This story has been corrected to change the day to Wednesday, in paragraph 1)) (By Jamie McGeever, editing by Nia Williams) Sign in to access your portfolio
Telegraph
17-03-2025
- Business
- Telegraph
This Microsoft spin-off survived the dotcom bust – is it about to boom?
Questor is The Telegraph's stockpicking column, helping you decode the markets and offering insights on where to invest. We all like to back winners, but sometimes a wiser move can be to back a laggard that's making up ground. Online travel group Expedia looks like it could be a case in point. The company is the grandaddy of online travel. Dreamt up by boffins at Microsoft in the mid-1990s, the venture was a result of the company brainstorming ways the then-fledgling internet could change consumer habits. The business was spun out during the white heat of the dotcom boom and, after surviving the subsequent bust, significantly diversified through a series of acquisitions during the 2010s. However, by the start of this decade management decided the group had become ridden with complexities and inefficiencies. A collapse in demand for travel after Covid struck provided breathing space to restructure operations with an aim to improve both margins and growth. Fourth quarter results last month gave a strong indication that this has begun to bear fruit. Encouragement can also be taken from the popularity of Expedia with the world's best fund managers – all among the top 3pc of those tracked by financial publisher Citywire – 14 of these elite investors back its shares. Not only does this level of smart-money backing make Expedia more popular with top managers than its bigger and more profitable rivals and AirBnB, it has also won it a place in Citywire's Global Elite Companies index, which has produced significant outperformance of the MSCI World index over one, three and five years by focusing on the very best ideas of top managers. Key to Expedia's restructuring has been a technology overhaul. Its various brands had previously run on several different tech platforms, which stifled innovation and increased costs. At the expense of some disruption to the business, the company has now unified all its tech – already this has shown up in margin growth and a recovery in bookings. Meanwhile, assisted by divestments, it is focusing on three key consumer brands: the eponymous Expedia, and home-rental site Vrbo. This is helping marketing spending to get more bang for its buck and Expedia is also winning business thanks to unifying its loyalty scheme across all its brands. These improvements are benefiting Expedia's rapidly growing business-to-business division, which accounted for 27pc of bookings last year. This operation provides third parties, from United Airlines to Walmart, with tailored inventory and technology. Management believes the business has huge growth potential. Its high-margin advertising revenues, while a small piece of the pie, are also growing rapidly. If the recent trajectory of self-help improvement continues, which Expedia believes it should, there should be plenty of upside. While there are some structural reasons for Expedia's operating margin being lower than rivals at 11.3pc, compared with 32pc for and 23pc for AirBnB, the extent of the gap shows there's plenty of ground to make up. There is a big valuation gap, too. Expedia's shares are priced at 11 times forecast earnings, versus 20 for and 28 for AirBnB. Yet Expedia's annualised earnings per share (EPS) growth over the next two years is forecast by brokers to be superior at 18.6pc versus 14.9pc and 12.3pc, respectively. The low rating also reflects uncertainties about the US economy – Expedia's shares have dropped by more than a fifth in the recent three-week market selloff. The fall has been exacerbated by several airlines trimming guidance, which suggests Expedia will be feeling the pinch. But while the risk is real, recent swings in policy and sentiment are so fluid that this may not prove a typical cyclical downturn. With impressive cash generation and a strong balance sheet, the share price should also be supported by ongoing buybacks. Shares in issue are down 17pc from when the company ramped up repurchases from late 2022 – the company has also displayed its confidence by reinstating quarterly dividends. While the payout is not large, forecast at a 0.5pc yield, Britons need to fill out the right paperwork to minimise the impact of dividend withholding tax. It appears to be a good bet that Expedia should continue to benefit from self-help based on the backing of so many top investors and the recent results. While the broader economic outlook is uncertain, the valuation offers compensation for the risk.
