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Welcome to our quarterly investment review.  Here’s a quick summary of the key elements (but to read the full report, click on the link at the bottom of the page):

  • UK government policy results in international disapproval
  • ‘Risk free’ government bonds demonstrate historic levels of volatility
  • The pound falls in value against the US dollar to the lowest level in almost 40 years
  • Higher inflation set to become normalised

A very volatile Q3, thanks to former Chancellor, Kwasi Kwarteng’s ‘mini-budget’ in late September, caused disorder in UK financial markets, in particular within the highly liquid government bond market that many large pension funds rely upon to meet their liabilities. Without temporary intervention from the Bank of England there was the potential for a more widespread financial crisis. In the end, global outcry for the proposed policies cost the Chancellor and Prime Minister, Liz Truss, their jobs.

It seems likely when the new Chancellor Jeremy Hunt, having already reversed most of the proposed tax cuts, steps up to the plate and delivers the Autumn budget on 17th November (this time with expected independent analysis from the OBR) there will be far fewer surprises.

Despite the slowing economy, global share prices have been relatively poised compared to fixed interest investments this quarter, but for UK investors this has mostly been due to the weakness in the pound and the benefit received from holding overseas assets. The dominance of the US dollar looks set to continue as the US central bank leads from the front in continuing to raise interest rates to quell inflation.

Markets are set to remain choppy as negative headlines continue to come through and investors are well advised to remember that the temporary loss of value seen is very different from a permanent loss of capital.

Click here to access the full version of Mike’s report: Q3 2022 Investment Review