Financial Notes

MITCH’S NOTE 👋

I don’t know about you guys, but from keeping on top of the press, and the movements in the stock market and actions from central banks, it appears that everyone is a little jittery right now, and I guess there are good reasons as to why…

I’d love for this to be a place where I can connect easier with you all, so please feel free to reply to this email with any questions or topics you’d like covered!

MARKETS 📈

5-Day Performance Breakdown:

It’s been the second consecutive negative week for UK and US financial markets with a growing sense of nervousness around the AI trade, and my Trading 212 investment portfolio has taken a little bit of a beating!

This was all after earnings reports came out at the end of last week which caused some tech stocks to sell off, but in addition to that, there is a certain level of irony to why stocks continued to sell off, and it was all about jobs.

There has been the largest number of job layoffs in the US since 2003, and guess what companies are blaming for this?

Yep, you guessed it, artificial intelligence.

One of the benefits of AI is the ability to do tasks that have historically relied on humans for, and it’s the thing that companies are spending hundreds of billions of dollars on to capitalise.

Those benefits? Streamlined costs, operational efficiencies, and ultimately the removal of a companies biggest hinderance to corporate profitability which is its people.

And despite what you would initially think of as a positive thing from a market pricing perspective, in that if companies can lay people off because AI can do their job for them, this should result in increased profitability, and therefore a better return for shareholders, right?

Well, yes and no.

Right now the stock market is reacting negatively to this and I’m not quite sure where the balance here is between realising the benefits of AI versus the drawbacks.

Because right now it seems like a toss up between people and profit, and which one Wall Street ultimately prefers.

After all, weakness in the labour market can’t ALL be because of AI. There are underlying factors here that must be causing companies to lay off record numbers of staff.

Fed policy, lowering consumer demand or perhaps rising costs are equally contributing to this deterioration in the labour market.

All I do know is that for one reason or another, the AI boom whilst it has contributed to a stock market boom, it’s now looking more like we’re running low on fuel in the tank. At least thats what my Trading 212 portfolio has demonstrated in these past couple of weeks.

I guess for now the jitters in the stock market will continue…

PERSONAL FINANCE 💷

It’s under 4 weeks now until the Autumn Budget gets announced, and it’s one I don’t think much of the UK public is looking forward too (myself included!)

Rachel Reeves announced earlier this week that the next budget would focus on improving the NHS, reducing the deficit and improving the cost of living.

All things that we as a nation would welcome.

What’s unfortunate, is that to do all this, we’re all also facing down the barrel of having to pay more tax in some way, shape or form.

The Chancellor allegedly has a black hole in the public finances of anywhere between £20 - £30B depending on the stats you read, so she’s coming for more tax revenue whatever way you look at it.

Imagine if we ran our own finances in the same way, we’d all be in court with CCJ’s every week!

I digress slightly, but it’s not just me thats not feeling particularly optimistic about the UK economy post budget, the Bank of England aren’t feeling great about it either…

Firstly, the BoE decided to hold interest rates at 4% at the latest MPC this week, which is totally understandable given they’re waiting to hear from the Chancellor at the end of the month.

But in the interim they’ve put out some forecasts about growth, unemployment and inflation that don’t make for great reading…

GDP growth forecasts remain weak, not venturing above 2% on an annual basis over the next few years, albeit most of Europe are facing into a similar, if not worse situation, so its not disastrous and isn’t recessionary as far as the forecasts project.

Low growth however would lend its hand to the BoE cutting rates in future, (good for borrowers, bad for savers) but ONLY if inflation is under control…

Right now inflation sits at 3.8%, and whilst the BoE forecasts it could come down slightly to 3.2%, it’s still way above the BoE target inflation rate of 2%.

And whilst there are inflationary pressures which the Chancellor needs to get back under control, it puts the BoE in a difficult position to cut rates to stimulate growth, without letting inflation getting out of control again.

It’s a pretty challenging time for the UK economy and policy makers, and a lot pins on the UK government making the right decisions, and up until this point, it just seems to be more tax revenue for no added benefit, but i’d love nothing more than to be corrected on this, I guess I’ll just have to wait and see.

BONUS STUFF ⭐️

IN CASE YOU MISSED IT 🎬

_{I have hired a video editor after 5 years of editing every single YouTube video myself! Below is the first video we worked on together, i’d love to get your feedback as we look to improve the content for your entertainment.}