It’s the start of another year and once again politics looms large in the minds of investors. At this point in 2019, it was “hard Brexit” (not to mention the spectre of a Jeremy Corbyn-led Labour government). This year, it’s an escalation in the temperature of the conflict between Iran and the US. In this week's magazine, we look at what the latter could mean for markets and investors (we also look at the political fallout and delve into the workings of Iran’s economy ).
It’s worth remembering that geopolitics often doesn’t have the market impact that people fear. It’s easy to over-react, particularly when headline-writers have an incentive to grab our attention by being as aggressive as possible. Last year’s big concern is a case in point – for all of the hysterical columns that talked about “cliff edges” and imminent recessions, following the election of Boris Johnson last month we no longer need to worry about a Corbyn government and we should be heading for a relatively smooth Brexit (although there’ll be plenty of overhyped ups and downs throughout the process).
Similarly, there have been tensions in the Middle East for as long as I can remember. The latest bout is hardly something to shrug off, but nor is it the worst, not by a long way. It’s quite possible that by the end of this year we’ll all have forgotten all about Iran. Remember when we were all worrying about North Korea in late 2017? At the time, that was going to turn into World War III as well.
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However, the reaction to such incidents can be useful in terms of what it suggests about the market mood. This, I think, is where the real significance lies. Investors have been keen to shrug off the conflict, sending US stocks higher after an initial dip and continuing to act as if oil prices will remain capped by US shale production and frail economic growth. This is where I think they are too complacent, particularly on the latter point. Markets seem to believe we’ve already hit “peak oil demand”. Yet for all that the environment and climate change will increasingly provide interesting investment opportunities (Max King gives his take on one such investment this week), I’m pretty sure we’ll need fossil fuels for a while yet. Oil prices are one of the main things I’ll be keeping an eye on this year.
Tips for 2020 and zen investing
Elsewhere in this week’s magazine we have our usual roundup of the share tipsters’ New Year picks. As with any tips, you should view these as a starting point for further research rather than racing straight to your broker. I personally like the look of some of the stocks in the Daily Mail’s UK-heavy portfolio.
And if you are already failing in your New Year’s resolutions to be a more positive, centred human being, revel in Jonathan Compton's bracing dose of cynicism, as he looks askance at the faddish rise of the “happiness twins” – mindfulness and wellness. I’ve got nothing against the odd bit of meditation, but I agree with Jonathan when he suggests that, as an investor, you should focus on companies that are making genuine medical advances, rather than dressing up old business models with New Age-style flimflam (a prime example being last year’s trendiest company, WeWork). Jonathan suggests six healthcare-related investments to buy instead.
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How to boost your pension by £33,000 by paying it an annual Christmas bonusContributing an extra £400 into your pension pot this festive period will give the gift of compound interest and should make your retirement feel more jolly and bright
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Japan’s medium-sized stocks provide shelter from trade warsNicholas Price, portfolio manager of Fidelity Japan Trust, tells us where to invest in Japan
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Beat the cost of living crisis – go on holidayEditor's letter As inflation rages, energy bills soar and the pound tanks, what’s a good way to save money this winter? Go on holiday, says Merryn Somerset Webb.
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How capitalism has been undermined by poor governanceEditor's letter Capitalism’s “ruthless efficiency” has been undermined by poor governance, a lack of competition and central banks’ over-enthusiastic money printing, says Andrew Van Sickle.
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Don't be scared by economic forecastingEditor's letter The Bank of England warned last week the UK will tip into recession this year. But predictions about stockmarkets, earnings or macroeconomic trends can be safely ignored, says Andrew Van Sickle.
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The biggest change in the last 17 years – the death of the “Greenspan put”Editor's letter Since I joined MoneyWeek 17 years ago, says John Stepek, we’ve seen a global financial crisis, a eurozone sovereign debt crisis , several Chinese growth scares, a global pandemic, and a land war in Europe. But the biggest change is the death of the “Greenspan put”.
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The wolf returns to the eurozone’s doorEditor's letter The eurozone’s intrinsic flaws have been exposed again as investors’ fears about Italy’s ability to pay its debt sends bond yields soaring.
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Things won't just return to normal – that's not how inflation worksEditor's letter You might think that, if inflation is indeed “transitory”, we just need to wait and everything will return to “normal”. But this is a grave misunderstanding of how inflation works, says John Stepek.
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Car hire and the strangeness of the post-pandemic economyEditor's letter A global shortage of hire cars and unusually high hotel occupancy rates sum up the post-pandemic global economy in a nutshell, says Merryn Somerset Webb, with enhanced demand meeting restricted supply.
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Why we need to get a grip on our governmentEditor's letter Our government is trying to do too much, enacting policies that are destructive to the private sector. It needs to drop the the feel-good nonsense and create policies that lead to long-term wealth, says Merryn Somerset Webb.
