Life has been getting more expensive. Anyone in doubt (not very many people at this point, I think) need only look to the latest releases on the matter from the Office for National Statistics. In the latter half of 2021, households in all income brackets saw their costs rise substantially – higher-income households by slightly more, thanks in part to rising transport prices (the better off drive more than the worse off), but everyone by well over 5%.
The British Retail Consortium had numbers out this week, too: according to its latest Shop Price Index, prices in the UK’s major outlets are rising at their fastest pace since 2011 – up 2.7% overall in the 12 months to April (food was up a little more at 3.5%). This doesn’t sound too bad in the great scheme of things. But look at the underlying cost pressures (all manufacturers report higher price rises in their inputs), and at last month’s numbers (2.1% and 3.3%), and you get a sense of the trend. Up.
These prices are important (we feel them immediately). But investors will, I’m afraid, be starting to feel rather more pain from a different price – the price of money. Interest rates are rising everywhere – Australia has, for example, just seen its first rate rise in a decade. That will be making life mildly more difficult for those wanting to buy houses and those with variable-rate mortgages.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
I say mildly because in most countries, rates remain ridiculously low relative to inflation – new mortgages come in at around 1.7% in the UK. It will also be making life very much more difficult for those with portfolios of once-overpriced growth stocks (a group which I hope does not include too many MoneyWeek readers). That bubble has begun to burst – albeit rather more dramatically for some than for others (for example, the miseries that are Meta and Netflix).
No one can save you – look for value
The media has been looking to the state for a solution to all of this. They won’t get one. Chancellor Rishi Sunak might not be quite the savvy political operator some thought, but he does seem to want to repair some of the fiscal damage he caused to the UK during the pandemic.
Actual austerity might not be on the agenda for this government (or any) but there are unlikely to be tax cuts (expect rises instead) or new cash handouts either. There is also going to be very little in the way of new ideas: that Boris Johnson’s latest policy suggestion is the return of the very expensive and horribly short-termist right-to-buy policy tells you all you need to know.
Central banks can’t really help either: what is left of their inflation-busting credibility relies on them raising rates from here. There is, I am afraid, no one to protect us from rising prices or falling markets. All you can do, then, is to look for a degree of protection.
That means buying things that are not bonds (the prices of which fall as interest rates rise) and that are not valued as growth stocks. Metals are still a good bet. And keep looking for value. It does exist – this week, for example, we look at Singapore, which after years of underperformance can offer the one thing most markets cannot: prices that make some sense.
-
M&S and Tesco among those warning of a £7bn Budget hitSeventy-nine UK retailers have written to Chancellor Rachel Reeves about possible price rises and job cuts - here is what it means
-
How much does it cost to move home under the Labour government?Home-moving costs are rising and could get more expensive once stamp duty thresholds drop in April 2025
-
UK wages grow at a record paceThe latest UK wages data will add pressure on the BoE to push interest rates even higher.
-
Trapped in a time of zombie governmentIt’s not just companies that are eking out an existence, says Max King. The state is in the twilight zone too.
-
America is in deep denial over debtThe downgrade in America’s credit rating was much criticised by the US government, says Alex Rankine. But was it a long time coming?
-
UK economy avoids stagnation with surprise growthGross domestic product increased by 0.2% in the second quarter and by 0.5% in June
-
Bank of England raises interest rates to 5.25%The Bank has hiked rates from 5% to 5.25%, marking the 14th increase in a row. We explain what it means for savers and homeowners - and whether more rate rises are on the horizon
-
UK wage growth hits a record highStubborn inflation fuels wage growth, hitting a 20-year record high. But unemployment jumps
-
UK inflation remains at 8.7% ‒ what it means for your moneyInflation was unmoved at 8.7% in the 12 months to May. What does this ‘sticky’ rate of inflation mean for your money?
-
VICE bankruptcy: how did it happen?Was the VICE bankruptcy inevitable? We look into how the once multibillion-dollar came crashing down.
