Nigel Green, the chief executive and founder of deVere Group, explains that as Tehran threatens “revenge” on the US over the killing of Qassem Soleimani, the commander of Iran’s elite Quds Force, who was in charge of the country’s regional security strategy.
It remains uncertain how, when, or if Iran will respond, but any retaliation is unlikely until after the end of three days of mourning.
Last week we saw the price of oil jump as a result of political tension. This week, Bitcoin, the world’s largest cryptocurrency by market capitalisation, jumped 5% as news of the strikes broke around the world on Friday. Simultaneously, the price of gold – known as the ultimate safe-haven asset - also moved higher.
We’ve seen Bitcoin price surges before during times of heightened geopolitical tensions. For instance, in August it jumped as global stocks were rocked by the devaluation of China’s yuan during the trade war with the US.
According to Nigel Green, this latest Bitcoin price increase underscores a mounting consensus that Bitcoin is becoming a flight-to-safety asset.
“Bitcoin is living up to its reputation as ‘digital gold’. Bitcoin - which shares gold’s characteristics of being a store of value and scarcity and of being perceived as being resistant to inflation – could potentially dethrone gold in the future as the world becomes increasingly digitalised.”
He continues: “With an escalation in geopolitical turbulence, which typically unsettles traditional markets, it can be expected that a growing number of investors will decide to increase their exposure to decentralised, non-sovereign, secure currencies, such as Bitcoin, to help protect them from the turmoil.
“The serious concerns created by geopolitical issues, such as the US - Iran issue will likely prompt an increasing number of institutional and retail investors to diversify their portfolios and hedge against those risks by investing in crypto assets.
"This will push the price of Bitcoin higher. In turn, due to the market influence of Bitcoin, other major digital currencies will receive a price boost.”
The deVere CEO concludes: “Bitcoin was one of the best-performing assets of 2019 and we can expect to see its investment appeal further strengthen as it becomes known as a safe-haven asset during periods of heightened geopolitical tensions.”
Things have been looking okay for the US’ overall economy, and with implementing change in Washington, who knows what’s to be of the economy in months to come. Samuel E. Rines, Senior Economist and Portfolio Strategist at Avalon Advisors LLC discusses for Finance Monthly below.
The US economy currently finds itself in a familiar position. Following a weak start affected by statistical anomalies and an absent consumer, the economy is beginning to find its footing. But this does not mean that the US economy is going to suddenly take-off. On the contrary, the US economic outlook is heavily reliant on decisions made in Washington.
Recently, manufacturing, employment, and personal consumption indictors have been generally positive. While headline job creation in May was disappointing, jobless claims and other indicators of labor market stress have been subdued. There are certainly areas of the US economy that are less encouraging. Inflation and lackluster wage growth remain conundrums of sorts given the extremely low unemployment rate. Most economic models would have wages and inflation accelerating at these levels.
Taken together, the current state of the US economy is much the same as it has been for the past several years: not too hot, not too cold. Slow and steady growth around the post-recession trend growth of around 2 to 2.5%. Nothing to become too excited about, but also fast enough to generate sustainable growth. There are reasons to suspect the US economy will significantly accelerate its pace of growth in the second half.
While little has changed for the US economy so far in 2017, numerous events and policies could alter the trajectory over the next year or so. The most important are the Trump Administration’s promised tax breaks and fiscal policies, closely followed by the Federal Reserve’s policy decisions. And, in many ways, the two are related.
Following the election of President Trump, the markets cheered these pro-growth policies as yields on US government debt rose and equity markets made all-time highs. But some of this initial optimism—euphoria even—has dissipated. At least partially, this is due to the declining potential for timely fiscal policy changes. It has taken GOP members of Congress and the Senate far longer to come to agreement on what their version of the healthcare bill should be than markets anticipated.
The importance of the healthcare bill, and, the drawn out debate surrounding it, are difficult to overstate. To do meaningful tax reform, the healthcare reform must be completed first as there are taxes and costs embedded in the ACA law that the GOP deal with before it can fully rework the tax code. And reducing the costs within the ACA is critical to freeing up fiscal room to maneuver greater tax breaks than would otherwise be achievable. Until healthcare is completed, tax reform is on the backburner.
Further reducing prospects of growth boosting initiatives are the significant headwinds Trump Administration faces to implementing its agenda. Many of the headwinds are likely to pass over time, but that is precisely the problem—time. Unless there is a significant acceleration in the pace of legislation, tax reform now appears to be a late 2017 or early 2018 catalyst.
Because of this extended timeline, markets may be forced to refocus on the Fed’s policy trajectory. The Trump Administration’s fiscal policies are incorporated into economic projections used to recommend monetary policy changes. Simply, policy timing matters—not only for markets and the economy—but also for the evolution of the Fed’s monetary policy.
For markets, tax and infrastructure are imperative: the lower the taxes, the greater the after tax profits, and the higher the valuations. That dynamic is undeniably a positive for markets. Infrastructure spending would boost revenues for companies associated with building the nation’s infrastructure. Not only in the common sense of infrastructure, but communications, electrical grid, and other areas in need of national investment—again, a positive for markets. The only outstanding issue is when the positives might arrive.
One of the odd dynamics for US growth is that “good enough" growth is likely to prove "good enough" for a couple more Fed rate hikes this year. In the absence of fiscal policy, this could cause some issues for markets with growth and Fed tightening awkwardly out of sync. The evolution of politics in Washington will have a direct, and uncomfortable, influence on both. The US economy will be heavily, if not solely, reliant on Washington for its direction for the next couple of years.
With news that average UK house prices surged by almost £4,000 in December, specialists from a leading Midlands law firm are questioning whether the so called ‘bank of Mum and Dad’ has started to have an effect on the property market.
“According to the Halifax, house prices rose by 1.7% in December, with the average cost of a property reaching a new high of just over £222,000,” says Neil Stockall, a Partner at Higgs & Sons and head of the Residential Property team.
“This represents the fastest acceleration in property values since the Brexit vote. According to the Office for National Statistics the number of 18-24 year olds living at home is around 3.3m.”
Neil added: “Perhaps the combination of being able to save more, plus some much needed input from parents, has helped some of these young people to take their first step on to the property ladder, thus resulting in this surge.”
Many parents want to help their grown up children in whatever way they can and it is increasingly common for first time buyers to turn to the 'Bank of Mum and Dad' for help in raising the required mortgage deposit. Often parents use their nest eggs to provide that support – particularly with interest rates on savings being so low at the moment. However, there are several things that parents and their children should bear in mind if they want to avoid future problems.
“A common way for parents to help is to ‘advance their inheritance’ to children. This comes with dangers as, should a parent die within seven years of making such a gift, inheritance tax will be payable if the total gifts within those seven years exceed the parents’ inheritance tax allowance.
“Further, if the child is in a relationship or marriage that later breaks down, then the ‘gift’ from the parents may become part of any financial settlement, with half required to be paid to the child's ex-partner.”
Financial gifts of this nature can, however, be protected.
“It is important that when the new home is bought, the professional advisers involved in the process are made aware that the deposit has been given by a family member. The property title will be noted to reflect this, and an appropriate Declaration of Trust can be prepared.
“An alternative approach is to make any such payment by way of a loan rather than a gift and to have a suitable loan agreement drawn up which can be secured against the property. This approach would need sanctioning by any lender, so full disclosure should be made when applying for a mortgage.
“Any such loan could be interest free and the parent may not even really expect that it would actually be repaid, but in the event of a breakdown in their child’s relationship, they will at least know that that payment will fall outside any dispute.
“When it comes to the possibility of a breakdown in a child’s relationship, nuptial agreements may be extremely helpful. These are being given ever greater weight by the courts, provided they are entered into properly. Such agreements would be subject to various qualifications and it is important that expert advice is sought from a specialist in this area of family law prior to committing.”
(Source: Higgs & Sons)
