Forward guidance #investments
Last August Mark Carney governor of the Bank of England issued his ‘forward guidance’ on interest rates. He told the market that he intended to keep the Bank rate at its current historically low 0.5%, at least until the unemployment rate fell to 7% or below. Can we rely on that?
It seems that anything might happen now. Interest rates might rise or as in other European countries could go negative and quantitative easing is still an option. So basically anything might happen. Is forward guidance useful?
The political pressures over the next few months will probably influence decisions by the Bank of England, despite their ‘independence’. This will affect the stock market. If QE is reintroduced, I think we can expect that money to be invested on the stock market rather than being loaned out to businesses.
Challenger banks seemed like a good idea, but the boss of TSB says it’s not big enough to seriously challenge the big banks. It doesn’t seem to have a clear identity either or it’s own system for on-line banking. Shares in TSB are now below the IPO price of 260p. The banking system still seems to be a mess, but at least the profits of the energy companies are falling. A mild winter and a falling gas and oil price are to blame. They will probably use falling profits as an excuse to put up prices. The consumer can’t win, hence the need for regulation.
I’ve been doing quite well on the stock market. The main disappointment this week has been TSB. Solo Oil is in the process of becoming a gas and oil producer rather than just an explorer. The gas should start flowing soon. I think they are a company with a lot of potential. Graphene Nanochem is attracting some interest, they are another AIM company with potential. The share price has jumped by over 8% a couple of times recently, so someone is buying into their technology.
Royal Sun Alliance and Taylor Wimpey ticked up a bit this week. The former was stagnant for a while, maybe it will take off at last. Tesco lost a few pence, but I did well to buy those at 172.7p.
I need Premier Foods to tick up a few pence to get me past my break even price. I think this is another company with a lot of potential. Political considerations and the management of the economy will affect PFD more than most companies.
It’s hard to calculate my annual return on these investments, because I have bought and sold over the past few years. The overall return is over 25% now and annualised that has to be over 20%. My latest investment was Balfour Beatty and that’s more than 10% up since I bought those a month ago. That share price was depressed mostly on rumour and sentiment. I just see that as an opportunity to buy.
Finding another opportunity is difficult. I want to be as diverse as I can and so I’m looking at pharmaceuticals and technology. I can wait…
Many people are wondering what the political upheaval of the general election in May will do to the stock market. I think it could present some opportunities to buy, but we can be sure of one thing; whoever wins the election the economy will be run with the usual ineptitude! Now that is forward guidance…
What do you think? Please share your views in the comments box. You can also follow me on Twitter. Nothing in today’s post should be regarded as financial advice (obviously). I’m not too good at forward guidance either…