2 Oct 2024

It was another steady quarter for stocks. The FTSE 100 rose by 0.8%, the All Share by 1.2% and the more domestically exposed 250 by 3.7%. Once again, excitable global news headlines were not reflected by the financial markets.  Government bond yields are lower as central banks appear to have started to ease rates. The UK ten year gilt fell from 4.2% to 3.8% but is now back up to 4.0%. While inflation headline numbers have been trending down there must be underlying concern about the relentless rise in government debt (pretty much everywhere).  Despite staged warnings from the new Labour government about the legacy of the excessive spending by its predecessors (previously known as “Tory austerity”) there are reports that another £50 billion of borrowing headroom will be discovered by reclassifying some borrowing as “investment spending” and saying that it doesn’t count. This is all good except that it still has to be paid back and it will still compete with less virtuous borrowing for the attention of lenders. Ultimately interest rates are a function of the credibility of the borrower and inflation will trend up as credibility falls. Not the other way around.  But ahead of the budget this good “headroom” news will probably allow the government to reverse its scrapping of the pensioners’ winter fuel allowance. Perhaps that will be good for energy stocks as well as general well-being and fewer deaths from climate change. Flagons of mulled wine all...