Invest to recover #financefriday

A good indicator of the state of the world economy is the gold price. It is £80 an ounce higher than a few weeks ago but it has dropped since yesterday. The pandemic is far from over and we have virtually no restrictions in the UK. I had my booster jab yesterday. I moved a chair away from the wall so I could put my coat over the back of the chair while I had my jab. My doctor was quick to tell me to put it back and keep my distance. Those of us who appreciate how contagious covid is are still being cautious but the ambulances are queuing outside A&E departments because we have allowed people to spread disinformation on social media and now the government is giving people the impression the dangers are behind us. The virus is still with us and causing economic problems, supply chain problems and finance problems and will do so for some time to come.

invest to recover

Invest to recover

We have to invest to recover from the pandemic and give ourselves a better future. What can we invest in considering the recovery is so fragile and erratic? We need to consider the same questions that COP26 considered and think about investing ethically. That isn’t as easy as it sounds. Should we refuse to invest in oil companies who are using their profits from the high oil price to explore “green” solutions to the climate crisis? They are very aware of the need to increase the supply of natural gas and use less oil. They are probably the most knowledgable about alternative sources of energy and have the expertise to create off-shore wind farms. 

Erratic

The stock market is erratic now and some days the market is up and some days it’s down but we have to look at individual companies rather than just the whole market. Today I see ITV is up a little based on its results that came out on Wednesday. I did plan to sell my ITV shares on Wednesday but those results changed my mind. I was inclined to sell ITV in favour of buying either BT or Stndard Chartered. I have kept ITV for now. I recently bought Marston’s and they are down so far but up a fraction today. Pubs are open again but maybe many people are still cautious about mixing in enclosed spaces so it could take a while for Marston’s share price to recover.

Oil

Oil is down $1 a barrel and so too are oil stocks. I still think my investments in Shell and BP are good and I look forward to next month’s dividends. The GBP has fallen against the dollar over the past two weeks and that benefits companies whose earnings are in USD like oil companies and pharmaceuticals. My eToro investments are in USD too so my return on those investments has increased to 16.5% which is OK but I expect better returns when covid is at last under control.

eToro

I now have 32 CFD’s on the eToro platform and one crypto. I put $25 into XRP, I’m losing money so far on XRP but that could change very quickly. AMD is giving me a good return at 31% but some pundits are saying the US market is in a bubble and could crash. AMD’s P/E ratio is 45.2 which is high but not as high as many US companies. It will be those companies with a very high P/E that will crash if there is a big market correction.

Inflation

Inflation is around 5% in the UK and US and probably across all the developed nations. Inflation affects assets like housing as well as share prices and so as covid becomes less of a problem and inflation more of a problem we will see rising asset prices. Gold might be the exception but that will just be a lag, the gold price will pick up as economies get back to normal and could surge in 2023. We need to invest to recover now and invest cautiously.

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