It’s proving to be the best of summers, one which will be looked back on with nostalgia for decades to come.
The weather in most of the UK has been the best for nearly 50 years, social life has not just recovered but is making up for lost time, and there has never been such a profusion of entertainment on offer.
Full or partial working from home, increasing the flexibility of employment and reducing commuting time, has enabled much of the working population to fit more in.
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People have been able to holiday overseas without endless testing and form-filling and the vast majority of holidaymakers have been able to fly away with minimal delays and inconvenience. French officialdom for those on wheels has been as awkward as usual, but, elsewhere, travellers have been welcomed back.
Here on the Suffolk coast, the beautiful, sandy beach at Sizewell is almost empty. The sea has never been warmer or as inviting, yet the air temperature is made pleasant by a cool sea breeze. The strawberries have never tasted better and the hedgerows are loaded with free fruit. Anglian Water has no plans to restrict water use, so even gardeners and farmers are happy.
Inland, there are three years of celebrations to catch up on – weddings, landmark birthdays and notable anniversaries. Music festivals from Glyndbourne to Glastonbury are back better than ever and without the rain. Literary and history festivals have returned, as have flower shows, and the Edinburgh Fringe.
London theatre leaves us spoilt for choice: Mark Rylance is back in another run of the outstanding “Jerusalem”, and “Cabaret,” even without Eddie Redmayne, is surely the best musical ever. With “As You Like It” and “The Glass Menagerie” still on and “The Doctor” and the Ukrainian Ballet’s “Giselle” still to come, there is more on than it is possible to see.
Such a eulogy would probably have got me fired by most of the media but MoneyWeek is not a slave to the prevailing doctrine of gloom and doom. Perhaps, as in the Noel Coward song, “there are bad times just around the corner” but so pessimistic are the forecasts that the reality will surely be better than expected. So “leave your troubles outside. Here, life is beautiful…” and so on (Cabaret).
Things aren’t as bad as many would have you believe
The wind over the North Sea is powering the turbines just visible on the horizon and solar energy is having a bumper year. Sizewell C has, at last, been approved – maybe the government will even get round to decommissioning the out-of-action eyesore that is Sizewell A. Household energy usage has crashed, allowing us all to build up sizable credits to carry us through the winter months.
The petrol price is following the oil price down, raising hopes that inflation has peaked. While many prices have risen dramatically, some haven’t, notably booze. There can be little doubt that inflation is deeply unpopular, which means that tolerating it isn’t a viable strategy for the government or the Bank of England. Every cloud has a silver lining.
Interest rates are rising but there is little doubt that they are not heading to the levels above 5% once feared, at least not in this cycle. Most mortgages are on fixed rates and more Britons own their homes outright than pay mortgages, reducing the effect of higher rates.
Unemployment is at the lowest rate for 50 years and is exceeded by the number of vacancies. Earnings growth has lagged inflation on the way up but so will it on the way down as inflation falls. The budget deficit is falling fast, as is the UK’s debt to GDP ratio. Sterling has fallen against the strong dollar but is stable against the European currencies.
The Covid epidemic rumbles on but there is no chance of any democratic government bringing back lockdowns or authoritarian restrictions. Who knows? Maybe the NHS won’t collapse this winter. For all its structural and governance problems, it employs plenty of able, experienced and dedicated people.
The rail strike, we are told, has “brought the country to a halt” but so few people rely on railways nowadays that if it weren’t for the media coverage, few would have noticed. Naturally, workers want to protect their living standards but most of the disputes have been resolved away from the glare of publicity.
The determination and heroism of Ukraine has saved us from direct involvement in a major European war and exposed Russia as a paper tiger.
The move away from hydrocarbons and all the attendant benefit in terms of geopolitics, the global economy and the environment it brings will accelerate. Despite all the posturing, China has taken note of Russia’s failure and has more than enough domestic problems to worry about.
Stockmarkets are rising and investors are recovering the losses incurred in the first half of the year. The bears haven’t given up (they never do) but it is worth remembering Nick Train’s maxim: “I am habitually bullish because I know that stockmarkets go up in three years out of four.” This year may not be one of them but the current uptrend promises a good 2023.
What can go wrong?
The biggest risk is that the doom-mongers in the media, both professional and social, and the focus groups that reflect them propel the government into really stupid policies.
In terror of the “cost of living crisis”, the government is in danger of sabotaging energy transformation with windfall taxes, seeking to cushion households with bungs and handouts and throwing a toolbox full of spanners into market mechanisms which, if allowed to operate, will return the UK economy to stability.
In 1976, James Callaghan, the newly-appointed prime minister, addressed the Labour Party Conference with the following; “we used to think that you could spend our way out of recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists and in so far as it did exist, it only worked on each occasion by injecting a bigger dose of inflation into the economy followed by a higher level of unemployment as the next step.”
That speech marked a turning point, when the government stopped claiming it could protect the population from the global economic cycle. Perhaps, 50 years on, a new prime minister will again quash the statist conceit. Ignore the predictions of “a summer of discontent,” now morphed into an autumn or winter of discontent. The end of the world is not nigh.
Max has an Economics degree from the University of Cambridge and is a chartered accountant. He worked at Investec Asset Management for 12 years, managing multi-asset funds investing in internally and externally managed funds, including investment trusts. This included a fund of investment trusts which grew to £120m+. Max has managed ten investment trusts (winning many awards) and sat on the boards of three trusts – two directorships are still active.
After 39 years in financial services, including 30 as a professional fund manager, Max took semi-retirement in 2017. Max has been a MoneyWeek columnist since 2016 writing about investment funds and more generally on markets online, plus occasional opinion pieces. He also writes for the Investment Trust Handbook each year and has contributed to The Daily Telegraph and other publications. See here for details of current investments held by Max.
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