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With salaries stagnating and inflation hitting record highs, UK households are feeling the squeeze, according to the Resolution Foundation. In particular, it is renters and those with young children who are most severely impacted.

According to the Resolution Foundation, household disposable income growth for working families dropped to just 0.7% a year in the 15 years leading up to the outbreak of the Covid-19 pandemic.

The data also shows a drop in living standards across the UK. Between 1961 and 2004-5,  typical working household incomes increased by 2.3% per year, on average, or 25% per decade. However, between 2004-05 and 2019-20, typical income growth slowed to just 0.7% per year.

Adam Corlett, Principal Economist at the Resolution Foundation, commented: “Households across Britain – and across many other countries – are currently grappling with high levels of inflation that we haven’t seen for generations.”

“But while many of the causes of the current crisis are global in nature, it is Britain’s recent history of low income growth and high inequality that has left so many households really struggling to cope.”

“Britain’s poor recent record on living standards – notably the complete collapse of income growth for poor households over the past 20 years – must be turned around in the decade ahead.”

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The recent Ukraine war has been the touchpaper for a multi-national cost of living crisis that had in fact been some time in the making. COVID-19, commodity prices and the environmental imperative, to name but three factors, have coincided to push prices of goods and services across the board to all-time highs. The result has been a surge in inflation, with the UK alone now hitting 9% in April.

Just as it was with the pandemic, the question on everyone’s lips is ‘when will this be over?’. Key institutions are scrambling to respond, and governments are introducing short-term, palliative measures in the hope of staving off recession. But the true answer may be that increased prices are here for good. It may be that the world needs to adjust to new realities in the way we buy and live. But what are the key costs causing this crisis for consumers, and how are they likely to change over time?

Energy

The first major culprit in the cost of living crisis is energy. This increase was underway well before the recent war, as wholesale prices had steadily risen in response to increased global demand, and the push towards greener but more expensive energy production.

These factors are here to stay, and while we may see a stabilising over the next two-three years, a return to previous levels is highly unlikely – and that means a new and more challenging ‘normal’ for consumers. This gloomy prognosis is even more likely for Europeans, now deprived of Russian energy sources that will continue to be shut off or severely curtailed for the foreseeable future.

Food

Next comes food. Myriad factors are driving up shopping basket prices, but at the highest level, changing weather patterns around the world are responsible for significant disruption in the way the world farms and produces. Critical foodstuffs have been massively affected by atypical weather events over the past few years. Supply chain disruption caused by COVID-19 is another major contributor, with factories and logistics facilities having to limit and re-configure labour usage to limit the spread of infection. Finally, the drive towards sustainability has seen great increases in production costs, as the world increasingly demands that food is produced in a greener way and under improved labour and animal welfare conditions.

All of these are long-term factors - adjusting to changing weather patterns, for example, could take the world decades to solve, and environmental concerns are unquestionably here to stay. Again, prices may stabilise in the medium term, but a return to previous levels is almost out of the question.

Interest rates

Many central banks, including in the UK and the US, are raising interest rates in an attempt to combat inflation. But while those with savings may benefit, the result is also a significant increase in the cost of consumer borrowing. Mortgage rates are going up, as is the cost of credit at just the time when consumers are having to rely on it more than ever.

These actions could potentially be reversed in the medium term. If inflation can be stabilised, governments might in 2-3 years be in a position to reduce rates once more – but that ray of hope is dependent on a host of other factors in the wider economy.

The value of financial understanding

It seems almost certain that a higher cost of living is here to stay. But that doesn’t mean there’s nothing we can do about it.

W1TTY is a young finance brand with a growing customer base amongst students and young people. As quickly as we’re taking off, we’re also acutely aware of what our customers are facing in managing their finances as the cost of living crisis continues.

In-depth educational services are needed right now to help young people deal with these issues. With so many facing a tougher challenge in balancing their budgets, it’s never been more important that they’re equipped with the understanding, know-how and responsible signposting that will help them to make prudent decisions about their money.

Young people deserve to have bright financial futures. Through a combination of loyalty and reward schemes, gamified learning and personalised features, W1TTY is about empowering our customers with accessible, engaging education and saving incentives. By doing so, it’s our aim that we can help insulate them from some of the worst impacts of the current crisis.

About the author: Ammar Kutait is the CEO and Founder of W1TTY.

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Key to my approach to markets is that they require political stability to thrive – hence the most remunerative markets tend to be found within the most stable nations. They tend to have robust and enforceable legal systems, solid financial infrastructure and a culture enabling transactions and risk-taking. That’s the key to understanding the fundamental strength of the City of London – centuries of stability.

All around the world, we are now seeing a rise in instabilities – triggered by supply chain breakdowns, the supply shocks in Energy and Food, and now wage demands. Nations are struggling with inflation, rising interest rates, higher debt service costs on borrowing, rising bond yields, currency weakness, and how to address multiple vectors of financial instability as they try to hold their financial sovereignty together.

It’s occurring at a time when we seem to have reached the lowest common denominator in the political cycle. That’s a critical problem – voters need leadership in crisis, and they can easily be fooled by populists.

Confidence in a nation’s political direction and leadership is one of the key components of the Virtuous Sovereign Trinity, my simple way of explaining how Confidence in a country, the value of its Currency, and the Stability of its bond market are closely linked. When they are strong – they can be very strong. Strong economies rise to the top.

But, if any one of the Trinity’s legs were to fracture, then the whole edifice could come tumbling down. Which is why we should be concerned sterling is down over 10% this year. It strongly suggests global investors have issues with the UK.

Key to my approach to markets is that they require political stability to thrive – hence the most remunerative markets tend to be found within the most stable nations.

The UK is a good example of what might go wrong. If confidence wobbles in the government’s ability to handle the multiple economic crises now upon us, particularly the rising tide of industrial unrest as workers demand higher salaries to cope with inflation or servicing the nation’s debt, then the UK’s currency and bond markets could come under massive pressure. Investors will demand a higher interest rate to account for the increasing risk inherent from investing in the UK, while the currency could tumble as investors sell gilts to buy less vulnerable more stable nations.

At least the UK is financially sovereign. We control our own currency. Sterling may weaken, but we can always print more to repay debt… Except that would probably cause a global run on sterling as confidence in the UK would further tumble. If the currency leg were to fracture, interest rates would have to rise, wobbling confidence further.

The Virtuous Sovereign Trinity sounds stable, but experience shows it can quickly turn chaotic if issues are not swiftly addressed.

Clearly, the UK has some current confidence “issues” regarding the incumbent political leadership. The growing perception that Boris is a “lame duck” magnifies internationally held concerns about how his government has failed to seize the opportunities (such as they were) from Brexit, doubts about energy and food security, and the apparent dither in policies are all perceived as reasons for sterling weakness and are another reason bond yields are rising as global investors exit.

While the UK’s debt quantum should be manageable – Italy is somewhat different. As part of the Euro, Italy is no longer financially sovereign. It has rules on Debt/GDP to observe (and ignore). But effectively Italy borrows in a collective currency it has no real control over. It has to plead with the ECB for the right to borrow money and will rely on the ECB to announce special measures to make sure its debt costs don’t turn astronomical. Without the ECB, Italy would be heading straight for a debt crisis.

That’s why ECB head Christine Lagarde is desperately trying to guide the ECB towards the establishment of anti-fragmentation policies to stop Italian debt instability leading to a renewed European sovereign debt crisis. Fragmentation means Italian bond spreads widening to Germany – the European sovereign benchmark. It’s a political issue because Lagarde is no central banker, but a politician sent in to lead the ECB to the inevitable compromise that rich German workers will pay Italians’ pensions.

In the USA there is an even larger political impasse developing. The US Supreme Court’s decision – by 4 old men and one catholic woman appointed by Trump – to deny women the right to control their bodies by undoing abortion rights highlights the increasingly polarized nature of US politics. Republicans, and their fellow travellers on the religious right, are delighted. Democrats are appalled.

US politics simply doesn’t work. All efforts by Biden to pass critical infrastructure spending have been stymied. There is zero agreement between the parties – each has destroying the other at the top of its to-do list, rather than rebuilding the economy. The result is increasing doubts on the dollar. It’s a battle the Republicans are winning by dint of managing to stuff the Supreme Court with its appointees. It’s no basis for democracy or market stability.

At the moment the dollar is the go-to currency, and treasuries are the ultimate safe haven. It could change. The world’s attitude to the US is evolving. The West may be united on Ukraine, but global support is noticeably lacking. 35 nations representing 55% of the global population abstained from voting against Russia at the UN. The Middle East and India see Ukraine as a European problem and a crisis as much of America’s making. As the West lectures the Taliban on schooling girls, the Republican party has moved the US closer to a dystopian version of The Handmaid’s Tale of gender subjugation.

As the World increasingly rejects America, then America will reject the rest of the World. Time is limited. The Republican Administration, run by Trump, or kowtowing to him, will likely pull the US from NATO and isolate itself. That’s going to become increasingly clear over the next few years. The dollar, the primacy of Treasuries… will leave a massive hole at the centre of the global trading economy.

It will be particularly tough for Europe. As we seek alternative energy sources, what happens when Trump 2.1 proves as pernicious as Putin and shuts off supplies?

The supreme court decision was clearly timed to come at the Nadir of this US political cycle – a weak president likely to lose the mid-terms in November – when the Roe vs Wade news will be off the front pages. It means the damage to the Republicans in the Mid-Term Elections could be limited – they will still make the US essentially ungovernable for the next 3 years.

If the US was a corporate, it would be a massive fail on corporate governance. But it’s not. It’s the current dominant global economy and currency. Politics and markets can’t be ignored.

As a technology company, SmartFinancial simplifies the insurance-buying experience with a transparent insurance-technology platform that matches shoppers with the right insurance products. This makes the entire process of shopping for insurance simpler and more efficient.

With inflation on the rise and so much uncertainty with the economy, budgeting and saving money is more important than ever. A smart way to save is to make sure you shop and save on your insurance. Below are some common questions and answers that can help you do just that.

With prices soaring, what are the best ways consumers can save money on insurance?

Compare prices for all types of insurance every six months because each insurer rates each person differently and rates change daily. Use a comparison site like SmartFinancial to save time.

What types of insurance coverage changes lead to the biggest savings?

Raising your deductible is the easiest way to see big savings for both home and car insurance. Also, ask your insurance agent about the types of discounts the carrier offers.

How much money can consumers save by updating their insurance yearly?

You can even save by comparing insurance rates every six months. Why not? You can save up to 40% on premiums.

When are the best times to compare insurances? Is there a specific season or life event that signals a chance to save money on insurance?

Many life events may make you eligible for a lower rate. You may end up saving with an existing policy or a new one, if you get married or move to a better neighbourhood or if you get a new job or buy a home. If your credit score improves, make sure to compare insurance rates. If your rates increase, you should shop around to see if another carrier can offer you a better deal. If you haven’t compared prices in over six months, you’re probably paying too much for insurance.

Is the cost of insurance also rising with inflation?

If you’re buying insurance now, you may be paying more due to inflation, but not if you shop around for a competitively priced policy. If you’ve been insured for over six months, you may be underinsured as a result of inflation so that your limits are too low to cover an accident without you being responsible for an outstanding balance. Inflation is heavily affecting insurance coverage limits, which are no longer adequate for rising prices in parts and labour. You may want to consider increasing your limits in case you do need repairs on your car or home.

How is SmartFinancial utilising technology to help consumers adjust to inflation?

You can still find an affordable insurance policy despite inflation if you compare rates and insurers. SmartFinancial takes away the legwork of comparing prices, which can help you find the most affordable policy available in your area. After users share their information one time, they are offered competing rates from the larger insurance companies all the way to the small local ones.

With inflation on the rise and so much uncertainty with the economy, budgeting and saving money is more important than ever.

Do consumers receive any negative consequences for switching insurances, such as financial penalties or other fees?

Whether or not you’ll be fined with penalties and fees depends on a few factors. Different insurance companies have different policies. You may or may not get your policy prorated for the amount of time your policy was active. You may or may not get fined for cancelling, depending on the terms of your contract. The best time to switch is just before your renewal date to make sure you don’t get fined. Also, make sure to have an active policy before cancelling your old one so you have no gaps in coverage.

How does SmartFinancial keep the human element in an industry and world, that is vastly increasing the presence of automated and chatbot solutions for customer service?

SmartFinancial is built by people and powered by technology. We have call centre concierges all across the country for people who would rather speak with a live agent for a free quote rather than filling out a questionnaire online.

What is the one thing you wish everyone knew about insurance? 

Insurance is not meant to be used unless it’s a cost that would otherwise be a great financial burden. Use it when you can’t afford to pay out of pocket. As a rule of thumb, never file a claim for any repairs that are below or slightly over your deductible amount. It’s just not worth it. Several claims can lead to a higher insurance rate.

Inflation. It is in the headlines, your local shop, your costa coffee, your work lunch, your energy bills, your date nights - it is making financial life for most people pretty miserable, and with the highest rise in the cost of living for 40 years, it is understandable. But if you cannot beat them, join them, thus, I am on the lookout for investment options for my portfolio that can benefit from the rising prices.

The financial markets are in turmoil currently, partly as a result of the challenging economic conditions, so my ISA value relative to this time last year is not a welcome sight. 

Why investors are worried

With inflation expected to continue rising, income investors like me are worried. Particularly as the FTSE 100’s yield is only 3.73% currently. To put this into context, the maximum dividend yield of the FTSE 100 index over the last 20 years was back in 2020. At one point during that year, it was at 7%, which would have at least been commensurate with the current level of inflation investors are faced with today.

Consumer price rises, currently at 9% compared to the same point last year, are expected to trend even higher this year. So, with persistent price rises looking like the medium-term norm, where can I turn to find investments that may provide an inflation-protected income, or growth, in the meantime?

Three places to consider investing

I would not normally invest in single stocks. But considering my portfolio is well-diversified, across assets, sectors and regions, mainly through a range of open-ended funds and investment trusts, a tactical move is justified considering the current market challenges. 

Imperial Brands (LSE:IMB) is a good place to start. Tobacco stocks are cheap, and the British cigarette maker is one of the cheapest. The stock trades around 6.8 times projected 2022 earnings, significantly lower than the sector average of 11.4 times. It is also one of the highest yielding income stocks in the FTSE 100 currently, at 9%. 

Alternatively, Phoenix Group (LSE:PHNX) is a stock with a yield in line with inflation, with additional growth potential. Its shares are now yielding over 8%. As interest rates rise, an insurance company’s liabilities (in the form of life policies) decline. In addition to this, the company is now writing more new business than the decline in its legacy business, so it is likely that the current dividend has the potential to grow from here.

These are two relatively high-income-producing stocks, which perform as well, or if not, better, in a high-inflation environment. As an income-focused investor, I ideally need returns yielding real returns above inflation. These stocks have the potential to provide this for me in the medium to long term. 

Finally, core infrastructure stocks are another option that offers better inflation protection qualities than the wider stock market. Research and index providers, LPX AG, ran the numbers to prove this (up until May 2022). Core infrastructure stocks, as measured by the NMX Infrastructure Composite, have returned  9.9% per year since 1999. Seven percentage points more than the average inflation rate. It dwarfs the performance of the MSCI (6.6% per annum). The data shows that these stocks (as measured by the index) perform even better when inflation edges higher. For example, when the average inflation rate is above three per cent, the average excess return of infrastructure stocks over the MSCI World is 8.1 percentage points. 

Final thoughts

There are no guarantees here, but these are the types of businesses and assets that seem more capable of defending against the effects of inflation than others. This is a key reason why I intend on buying these shares. Of course, all this is assuming that inflation will remain a problem and interest rates are going to rise on a sustained basis. Those are both possibilities but not certainties. 

Nevertheless, I am dependent on my portfolio income and believe inflation will continue to persist. This requires me to seek out undervalued stocks to add to my portfolio that still has the ability to pay out growing income despite the volatile market environment.

If the current climate persists, assets that yield real returns (an investment return above inflation) will be vital to me maintaining my income and capital growth objectives. 

About the author: Henry Adefope is an Associate Director at global communications and advocacy firm, SEC Newgate UK, and an investment commentator. He directs communication activities for major investment brands across a host of strategies and asset classes. Clients have included Vanguard, State Street Global Advisors, BNP Paribas, Barings, and RBC Global Asset Management. He began his career at Goldman Sachs and Broadwalk Asset Management and is a Chartered MCSI member of the Chartered Institute for Securities & Investments, as well as a member of the CFA Society. 

Disclaimer: This article does not constitute financial advice. All investments are made at the reader’s own risk.

There was also an increase for similar keywords, such as “Bitcoin is dead”. 

This search trend reflects increasing anxiety for the crypto markets after weeks of relentless selloffs.

There are several theories behind why Bitcoin and other cryptocurrencies are crashing. Its downward spiral may have been caused by a shift in Federal Reserve policy, which placed downward pressure on risk assets.

However, many experts are putting the crash down to the wider global climate. Recessions are on the horizon, inflation is soaring, interest rates are up, and many people are battling with rising living costs. In turn, these factors cause demand for crypto to slide.

Recently, Microsoft co-founder Bill Gates described NFTs and cryptocurrency as “100% based on greater tool theory”, implying that overvalued assets will go up in price when there are enough willing investors. 

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The first of three 24-hour walkouts by 40,000 RMT members will commence after midnight on Tuesday morning. The members include signallers, train staff, and maintenance workers. Only one in five trains will run on six days of disruption.

The strikes are over pay and attempts to reform the rail industry. The RMT said thousands of maintenance roles were at risk and criticised plans to close ticket offices. On top of this, the RMT condemned planned pay freezes amid a period of spiralling inflation.

Transport Secretary Grant Shapps responded to criticism from former Labour party leader Jeremy Corbyn that rail worker pay was inadequate by saying: "The median salary for a train driver is £59,000, compared with £31,000 for a nurse and £21,000 for a care worker."

Last week, Shapps warned rail workers that they risked striking themselves out of their jobs. Bosses for Network Rail expect the strike action to cost the industry around £150 million in lost revenue.

Charities have already been tested and stretched by two years of restrictions on fundraising and the closure, whether temporary or permanent, of their retail operations. Now they are facing increased costs at a time when they are also going to see the value of their assets eroded by growing inflation.

Help from the government

The government’s measures to help charities through the pandemic, while not universally felt to be adequate, did include some very welcome provisions including, of course, the ability to furlough staff and relief from business rates.  The recent announcement of measures valued at £37 billion to help households to cover rising fuel and food costs is also welcome, but charities, to whom increasing numbers of people will turn for support as they feel the pinch, are not likely to be offered any new grant schemes, loans or furlough deals to help them weather the storm, and nobody really knows when or where this inflationary spiral will peak, when and how much it will come down and how long it will take to do so.

It is striking that more than 40% of the mutual aid groups that were formed to help communities when COVID-19 hit are still operating, with their focus now shifting from helping those who were forced to isolate to providing food banks and community kitchens, and many of them have now become more formally established as charities. They join the growing numbers of food banks serving those who struggle to put food on the table; the Trussell Trust reports that food banks in its network across the UK provided more than 2.1 million food parcels in the year to the end of March 2022, 14% more than the year before the pandemic.

Donor behaviour

At the same time, there is a real possibility that donors will cut back on what they choose to give to charities as they find their disposable income no longer stretches as far as charity.  Having said that, many donors stuck by their favourite charities through the pandemic as they realised that new needs were emerging, and they may well continue to support them through what is looking increasingly like a recession in the making.  

Flexibility and resilience

Let’s also not forget that charities can show great resilience in times of crisis, and an ability to adapt and innovate to survive. I recall predicting a wave of charity mergers and closures in the wake of the 2008 banking crisis, which I am glad to say never materialised, and it may well be that this capacity for flexibility and responsiveness will see charities through the storm.

We have seen some great examples in the sector of charities that responded to the pandemic in a highly organised way, acting quickly to identify risks and put mitigating measures in place. While they may still have some way to go before they are back at pre-pandemic levels of income, charities are likely to find ways of coping with a period of high inflation and low economic growth. Some will, we are sure, explore new sources of funding or modify their approach to any investments they may be fortunate enough to have, and the measures in the new Charities Act 2022 that will make it easier to unlock capital may help in this regard.

Others may find new ways of releasing value from their properties, whether by renting them out during any periods when they might otherwise not be needed (of particular interest to charities that manage educational premises) or by disposing of property that may have become surplus to requirements in the new era of remote and hybrid working.

More mergers?

Mergers may become an attractive option for some charities, as there are significant savings to be had in the medium to long term if they can find the right partner with whom they can share some of their functions.  A merger is unlikely to be the answer to a financial crisis, as any partner organisation will be aware of the dangers of taking on the liabilities of a charity that is struggling to stay afloat, but if steps are taken early enough, it can be an effective way of ensuring the continuity in the delivery of services to beneficiaries.

Should the government do more?

Thinking beyond the question of what charities can do to help themselves, I have also been reflecting on the extent to which the charity sector has changed since I first became involved, with increasing volumes of services that were previously delivered by local authorities now being outsourced to the voluntary sector.  I am all in favour of deploying the expertise of charities, and their knowledge of local needs, to help communities.  However, when I see contracts awarded to charities with no scope for price increases to keep pace with the rising wage bills or other costs, or charity balance sheets showing potentially crippling pension scheme deficits inherited from the public sector, I do wonder whether the central government may have to reverse (at least on a temporary basis) the process by which local and central government passed these risks to the charity sector.  Shouldn’t we be urging the government to put more resources into a sector on which it has come to rely so heavily for core infrastructure and services?

About the author: Paul Ridout is Partner at Hunters Law.

When the Federal Reserve made the unprecedented move in March 2020 to pump trillions into the economy, it was a global milestone. Because USD is the world’s reserve currency, the Fed is effectively the world’s central bank, overshadowing all others. 

With such a drastic increase in circulating supply, the USD lost value, coupled with low-interest rates which resulted in cheap access to borrowing, we saw a worldwide inflation spiral. The UK closely follows the US inflation rate, as both have reached 40-year highs. 

The UK Economic Woes A Mirror Of The US

While the US inflation reached 8.6% in May, UK inflation outpaced it even further, at 9% in April, the highest of the G7 nations. The cost of fueling up a family car in the UK is now £100.27, according to Experian Catalist’s database.

Compared to the US, this means that a gallon of gas in the UK is equivalent to ~$8.8, which is 76% higher than the US gas price national average of $5. This has had such a huge impact on the cost of living that one in four people have resorted to skipping meals, according to a Sky News survey.

Consequently, both the Federal Reserve and the Bank of England have started raising interest rates to lower consumer spending and borrowing, which levels down inflation. The latest FOMC meeting placed the target interest rate at 3.4% by the end of 2022. At the same time, the Bank of England is hiking its interest rate for the fifth consecutive time, to 1.25%, which is the highest it has been in 13 years.

Unfortunately, the hikes themselves, as a remedy to inflation, are decimating stocks and cryptos alike. Blue-chip representatives for Europe and the US are both down by over -20% year to date. On the upside, London’s “Footsie” index (FTSE 100) has been outperforming them.

Trading view graph

Unquestionably, these are withdrawal symptoms of a market habituated to cheap, near-zero interest rate capital. Furthermore, the housing market is getting hit, as higher interest rates on mortgages are anticipated to price millions of individuals out of home ownership.

In other words, a remedy for inflation can trigger a recession—a period of declining output and hiring freezes as companies consolidate their capital under new conditions. 

Funds To Escape The Inflation Vice

While this economic cycle seems particularly harsh, they come and go as they always do. For this reason, one must adopt a long-term outlook. An outlook, so to speak, that aims for a 5-year investment gain. More importantly, it is crucial to consider assets that are in demand regardless of either inflation or a recession.

In the UK, open-ended investment company (OEIC) funds are equivalent to open-ended mutual funds in the US. They are priced once per day, diversifying investor money across a wide range of assets. For this reason, they are considered a long-term investment, of up to 10 years, spreading the risk widely so the growth outweighs the potential of losing the principal.

Because OEIC funds are professionally managed and diversified, their maintenance is relatively higher. The funds are generally available through many of the leading apps for trading stocks in the UK. They typically charge an annual management charge (AMC) between 1% to 1.5% of the allocated shares’ value. Here are three OEIC fund candidates for your consideration.

1. VT Gravis Clean Energy Income

By 2030, the UK will no longer allow for new gas-operated vehicles to be sold on the market. This speaks volumes about the relentless regulatory green push. Moreover, energy investments have been a historical safe haven against inflation. 

In the near future, the UK government announced that it will phase out Russian oil imports as a result of the Ukraine-Russia conflict. This will be as early as the end of 2022. Both the intermediate geopolitics and long-term legislation translate to a mass adoption of renewable energy. 

At $459.26 million and targeting 4.5% annual income, VT Gravis counts on that future by diversifying investor money on smart grids, energy efficiency, storage and other zero-emission alternatives. The fund charges 0.81% AMC.

2. LF Ruffer Diversified Return

Although launched in September 2021, it is based on the time-tested Ruffer Investment Strategy. Having received a “cautious balanced” rating, LF Ruffer is on the lower end of the risk spectrum. Its portfolio diversification is focused on times of market distress. 

Specifically, high inflation is currently plaguing the world. LF Ruffer ties precious metals, energy stocks and index-linked bonds in a capital-protection bubble that are least likely to lose money on an annual basis. At a size of $751.29 which targets above 4% annual income, RL Ruffer charges 0.93% AMC.

3. M&G Global Listed Infrastructure

Infrastructure goes hand-in-hand with energy stocks, precious metals and renewables as guardians against inflation. Although high inflation impedes new infrastructure projects, all governments are aware that the cost of not building and maintaining roads and civic and utility buildings is higher in the long run if left behind.

That is why M&G Global covers infrastructural assets that are critical for any nation - social and economic. Furthermore, the fund counts on the growth of emerging markets - smart gridding the cities, data centres and communication towers. However, its portfolio does include a tighter range of investments, so a drop in one could significantly impact the fund’s value.At $634.96 million size and targeting 3% - 4% annual income, M&G Global charges 0.70% AMC.

Taking Advantage Of The Davos Agenda

In prior decades, it was more difficult to pick the right fund. One had to choose between an actively managed or a passively managed (index) fund. The latter typically have lower annual fees but are less likely to take advantage of changing market conditions. A strong case could be made that actively managed funds are also superior to life insurance policies, in terms of financial protection.

There is also the credit rating and default risk to consider. While all of these metrics still stand, the concentration of economic power has grown to the point where one metric is more important than others. Does the fund cater to the Davos Agenda?

Whether it is the World Economic Forum, UN’s 2030 Agenda or the World Government Summit, they all tie every economic act worth of note in a unified front. Furthermore, they deploy ESG framework - environmental, social, governance - to rate them above the immediate profit-return considerations. 

This creates a streamlined investment outlook in which emerging infrastructure, renewables, digitisation and smart grids take priority regardless of market upheavals. From this perspective, the three listed funds pose the least risk in these uncertain times.

This article does not constitute financial advice. The author and Universal Media Ltd. are not qualified financial advisers. All investments are made at the reader’s own risk.

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The pound was down as much as 0.5% against the dollar to $1.2290 after it reached a one-week high of $1.2405 just a day earlier. 

The dollar index was up 0.23%, with the dollar gaining against the Japanese yen after the Bank of Japan chose to keep its monetary policy unchanged. Meanwhile, against the euro, the pound sterling traded flat at 85.46 pence.

On Thursday, the pound had gained 1.4% against the dollar thanks to the Bank of England’s 0.25% interest rate increase. The rise caught some investors by surprise. Many had expected a more aggressive move by the UK’s central bank amid soaring inflation in the country. 

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What is the Bank of England interest rate rise?

In the fourth increase since the start of December 2021, when the base rate was 0.1%, the Bank of England has raised interest rates to their highest level in 13 years. The base rate is now 1% - a 0.25% increase. This increase is in response to inflation with the Bank of England trying to regulate the economy.

What happened the last time the Bank base rate was 1%?

The last time the Bank base rate was 1% was back in 2009 when it was cut from 1.5% to 1% during the so-called “credit crunch”. The next month it was reduced to 0.5% and remained stable until August 2016. At that point, it was cut again in order to offset Brexit’s impact on the UK economy. Since then, UK borrowers have benefited from relatively low interest rates.

What will happen to mortgage payments?

Your mortgage payments will increase but only if you have a variable rate mortgage. This could be a tracker mortgage (one which follows a base rate) or a standard variable rate (one in which the interest rate is defined by the lender).

The amount that your mortgage payment will increase will depend on the type of loan. For example, a tracker mortgage will directly follow the new base rate set by the Bank of England. Reading the small print of your mortgage, you can find out how quickly the increase will be actioned. However, it is likely that by next month your payments are already likely to go up. For example, on a tracker mortgage with a current rate of 2.25%, the new rate would be 2.5%; this equates to an additional £18 per month over the next 20 years for a mortgage of £150,000.

Interestingly but also concerning is the increase in searches online for short-term loans. For example, searches of ‘payday loans near me’ and other search terms relating to high-cost-short-term finance have seen increases in the last few months and with increased costs of living, coupled with rising interest rates, this trend is expected to continue.

What does the interest rate rise mean for those on a standard variable loan?

Data shows that there are currently 1,092,000 borrowers on a standard variable rate mortgage in the UK. This means that over 1 million borrowers in the UK are subject to the interest rate set by the bank or building society. Depending on the type of variable-rate mortgage that they have, the interest rate will either increase automatically as a direct link to the base rate or at the lender’s discretion.

It is estimated that those on a variable-rate mortgage will pay approximately £504 more per year as a result of the increase (figures from UK Finance based on a £200,000 loan). This is the equivalent of approximately £42 per month more in monthly repayments. 

The average standard variable rate charged by mortgage lenders is currently around 4.71% - only up 0.31% since December 2021 despite the jump in the base rate. This is because not all lenders have chosen to increase their interest rates in line with the new base rate.

Those on a tracker mortgage, with an interest rate directly linked to the base rate, are set to experience an increase of around £25.22 per month in their repayments. According to data from UK Finance, this jump will affect around 841,000 UK borrowers.

Will those with a fixed-rate mortgage be affected?

Those who have a fixed-rate mortgage, which is 75% of UK borrowers, will not be impacted by the increase in the base rate. However, they may face higher borrowing costs once their deal comes to its end and they may need to remortgage.

The cost of living squeeze

With the cost of living crisis still gripping much of Europe and the USA as well as further afield, rising interest rates are likely to add to the squeeze being felt by consumers. Although there are a few savings to be made, for example, the reduced need to purchase covid tests when travelling between countries, this has been more than offset by increases in fuel, living costs and interest rates.

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1. Dollar destruction

The value of the dollar against Bitcoin highlights the effect decentralised currencies such as crypto are having in this arena. When you look at how much the dollar has devalued against Bitcoin over the last five years, it sits at 96.53%. It took 50 years for it to drop in value by 50% against gold. This is because of a global debt crisis. Chief economists say that printing and devaluing more of a nation’s currency is the easiest way out of a debt crisis. Of the roughly 750 currencies that have existed since 1700, only about 20% remain, and those that remain have all been devalued. 

Another reason is inflation. It stands at a 40-year high. Many will look to the war in Ukraine and rent hikes for answers to gross inflation, however, many others disagree. These unpredicted events just happen to coincide with inflation after a record increase in printing dollars – 35% of all US dollars have been printed in the last 10 months. In practice, this means that as global economies begin to start up again after the pandemic, this record amount of dollar production is now catching up via inflation. This is also not a nuanced effect, nor endemic solely to the US, we are seeing it happening in the Eurozone too. 

There is actually very little a country can do to combat inflation. Its main option is to print more money, making the physical currency more expensive to store and move. This increases interest rates and lowers growth. However, if the growth is low, it pushes you into recession. We are seeing this economic trend play out, with Deutsche Bank informing investors that they are expecting the worst recession in history to hit towards the end of 2023. 

2. Age of exponentials and where to look

There are five areas of high growth that many investors should be looking at and these are Edtech, Medtech, Greentech, Space-tech and Fintech.

Obviously, these are all the major areas of tech that are disrupting and decentralising the current centralised systems. Society 4.0 is moving to Society 5.0, from the industrial to an age of impact. Societies are broken down into 1.0 – Hunter-gatherer, 2.0 – Agrarian, 3.0 – Industrial, 4.0 – Information. The transition is at first obvious but becomes embedded into our societal and economic systems, this is what we are currently seeing with big data. All of the fastest-growing companies and exponential technologies are now in this area. 

When we look at this trend, what is really interesting is how much it has grown in the last 12 months and the projections over the next decade. ARK Invest, an investment management company, has researched the market growth of exponential technology. Their research shows that, by 2030, these sectors are on track to grow to $210 trillion from $20 trillion in 2020. But as these areas of technology that are seeing this exponential growth are numerous, choosing ‘your wave’ is crucial. One area that has interested me and I believe has advantageous benefits is utilising AI in business. As AI becomes more prevalent in the marketplace, it will improve a company’s reputation and valuation as its products will become more customer-centric and drive engagement. When looking at ARK’s research in this area, they suggest that this is on track to grow from $2.5 trillion in 2021 to $87 trillion by 2030.

Personal experience of leveraging exponentials specific to interests in investments and business are usually easier to research and put into action as the passion is already there. Exponentials represent numerous factions of a 5.0 society, and as we move into it, we must all look to what we can leverage personally, whether it be investments or integrations of other exponentials such as battery technology, cloud computing or blockchain, for example. 

3. The digital decade

Everything that we do is being digitised and will encompass Society 5.0; in the digital decade, this will be apparent through a digital overlay on your day-to-day experience. Foresight and action have helped me as an entrepreneur stay ahead of this curve and pushed my interests into this field. We are now looking at partnering with some top-level partners for our ‘Metaversity’, which creates digital campuses for Edtech. 

When we look at the history of the web, it is broken down into Web 1.0: accessible content was read -only, Web 2.0: the emergence of blogs and social media, the public was able to create content, Web 3.0: what we are now transitioning into – allows users to have ownership. For example, music was incredibly difficult for artists to monetise, but through NFTs, we are now seeing this being challenged.

The merging of our digital and physical lives will look at Social Spaces (what you build to interact with), Digital Objects (NFTs) and Wallets & Identity - people will need to know that you are real and that they can pass something to you, ie, assets through blockchain or currency.

What this means when looking at investing is that it will shift the paradigm. In the integration of Web 3.0, we must start to ask ourselves not just what we want to invest in, but also, what is the social group or economy we want to invest in?  Right now, we are born into a nation with its own economy, so your assets and finances are by default, intrinsically linked. This is an incredibly important aspect, as Web 3.0 will negate citizenship and structured economies. Your wealth will not be linked to your physical citizenship, but to your digital citizenship. What this means in practice is that wealth will no longer be connected to place, but to purpose. Everyone will have the opportunity to build an economy around their individual purpose.   

The 2022 Global Impact Investor Summit hosted on the edtech platform GenuisU, saw keynote speakers Roger James Hamilton, Founder & CEO of Genius Group, world-renowned investor Jim Rogers, Marcus de Maria, Founder & Chairman of Investment Mastery, Simon Zutshi, Founder of property investors network (pin), and Mark Robinson, Founder of International Academy of Wealth, share their top 10 investment trends for 2022-2023. Roger James Hamilton, founder and CEO of Genius Group offered his detailed analysis and the whole summit can be viewed online.

About the Author: Roger James Hamilton is a New York Times bestselling author and Founder and CEO of Genius Group, a multi-million dollar group of companies, headquartered in Singapore, which currently includes companies such as GeniusU, Entrepreneurs Institute, Entrepreneur Resorts and Genius School and has an acquisition plan to add in a further 5 companies in 2022 to the Group. 

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