A Gloomy Outlook For The UK. Do You Agree?

THE MIDWEEK TRADING REPORT:

Things look pretty bleak across the board according to, well, pretty much everyone.

Today’s midweek trading update ends with a search for some good news within the bad. We don’t have to look far for the bad.

Here is the current situation (the bad news):

The UK economy is set to be the worst performer in the G20 bar Russia over the next two years, the OECD said on Tuesday, underlining the lasting impact of high energy prices on Europe as a whole.

The OECD said in its latest economic forecasts that UK gross domestic product would fall 0.4 per cent in 2023 and rise a mere 0.2 per cent in 2024. That would be a longer and deeper downturn even than the forecast for Germany, whose manufacturing-intensive economy is particularly vulnerable to high energy prices.

In an apparent reference to Brexit, álvaro Santos Pereira, the OECD’s acting chief economist, said the economic adjustment under way in the UK had compounded longstanding concerns about the country’s low productivity growth.

The Portuguese chief economist singled out from their headquarters in Paris, Britain’s need to forge post-Brexit commercial relations with the rest of the world, with “trade deals that you need to export and so on high on the agenda”.

The UK is already the only country in the G7 where output has not yet regained its pre-pandemic levels. Britain’s Office for Budget Responsibility said last week that households were facing the steepest fall in living standards on record as the economy entered recession.

The Paris-based organisation also hit out at the UK government’s pledge to hold average household?energy bills?at ￡2,500 until April, saying the untargeted support would “increase pressures on already high inflation in the short term”, leading to higher interest rates and debt service costs. The UK’s price cap could cost up to ￡150 billion over the next two years. But by the way:

-??????Germany has also introduced a price cap for consumers which will last until March 2024 which will cost around ￡175 billion.

-??????The French government capped prices as part of a ￡46 billion scheme to support households.

-??????Italy’s energy price support package is expected to cost around ￡42 billion.

All we’re saying here is that we aren’t alone. Electricity prices are very very high for everyone, not just us and the more the government spend, the lower the price.

As if the energy crises couldn’t get any worse, Russia is now squeezing Europe even harder.?Gazprom threatened to cut gas to its pipelines running through Ukraine—the last remaining route bringing Russian gas to western Europe. Meanwhile the European Union watered down its latest sanctions proposal for a price cap on Russia’s oil exports.

In the land of crypto?Sam Bankman-Fried outlined a $51 billion decline in the value of collateral at the now collapsed crypto exchange?FTX?in a letter detailing the company’s financial position.

A combination of a credit squeeze, a further selloff in virtual coins and a “run on the bank” dragged collateral from $60 billion to $9 billion ahead of FTX’s Nov. 11 bankruptcy, he wrote.?“I didn’t mean for any of this to happen, and I would give anything to be able to go back and do things over again.”?

But then isn’t that what they all say after the event. It is a lesson to be learnt for the rest of the ‘Crypto Giants’. It isn’t a game and it isn’t yet built on solid foundations. It is still just the beginning for crypto and they need to work a lot harder on making it safer for their investors.

Joining in because you fear missing out isn’t a great investment strategy. Bitcoin is currently down over 70% in the last 12 months with many cryptocurrencies down even more than that.

It’s not just crypto crashing. For more than 160 years,?Credit Suisse's stone-clad headquarters on Zurich's moneyed Paradeplatz?exuded power, stability and quiet wealth.

Sadly those days are over. Behind the colonnaded facade, operations are suffering deeply and its ability to bounce back hangs in the balance.?Here's how?a bastion of Swiss banking’s share price has declined:

On the face of it, let’s be honest, things a looking pretty bleak. If stocks do fall again, and of course they could,?most users of The Portfolio Platform should do well. Most of our active strategies are now short, many of our buy or flat strategies are flat.

This means that a drop would be beneficial. Drops give those who are flat the chance to get back in at better prices, while those who are short provide a good hedge for the portfolios.

This is what we can do, that nobody else can. A multi strategy portfolio built for the long term and looking to make returns of at least 2x the benchmark.

Most portfolios have a?tracker, this means all moves up are captured. Most then have a?buy or flat?to give heightened returns at the right time, and then our active strategies will add the cherry on top providing the occasional short position. A well rounded actively traded portfolio is now a thing of the present, not the future.

As we said at the top, we didn’t want to only talk about bad news today, so we have searched out some good. Most of the good news is actually a case of ‘not as bad as we thought’ but that’s just semantics.

Here are some economic figures that have been released over the last 10 days or so that could almost be positive!

German economic sentiment?came out last week quite a bit better than expected. Still negative, but not as negative as predicted.

Eurozone economic sentiment?also came out better than expected. Turns out that in Europe spirits are not as downbeat about the economy as you might think.

Eurozone GDP?for Q3 came out positive 2.1%.

US PPI?was flat month on month (a sign that inflation has peaked).

German PPI?was negative -4.2% month on month meaning a huge drop in purchasing prices when the markets expected an INCREASE of 0.9%. Inflation must be about to start its decline.

NY Empire State manufacturing?came out positive when predictions were negative meaning business conditions are improving in New York contrary to popular belief.

US Retail Sales?was better than expected with an increase of 1.3% for the month.

UK Retail Sales?were also better than expected with an increase of 0.6% month on month.

UK manufacturing and services PMI?beat expectations this morning. They haven’t quite reached the level that indicates growth, but they aren’t far off and they aren’t downbeat.

All of these figures have been released since last Monday and all were better than expected. Nobody else will talk about them because they aren’t headline grabbing news; maybe they should be, the world could do with hearing something positive.

We aren’t saying the worst is necessarily over BUT, these figures are an indication that everything is still ticking over, and maybe, just maybe, the global economic climate will fare better over the next 12 months than those gloomy projections made by the OECD from their castle in Paris.

If you have an underperforming portfolio or are residing in cash currently and waiting to enter the market- please contact our team to find out how you can build a portfolio that aims to make a minimum of 2 x market performance per annum.