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30 May 2023

Last week was the week of buzzwords!

The UK’s buzzword being Greedflation. The concept that greed is now fuelling inflation, from supermarkets profiteering to employees asking for steeper pay rises. The term has been mentioned numerous times in various forums and is some contrast to the initial transitory rhetoric.

As has been mentioned in previous blogs, a combination of issues have led to the current incertitude. Majority of the blame in my opinion should be aimed at the BoE and MPC, whose main role is to keep a lid on inflation. Figures out last Wednesday showed the March inflation figure to be down from 10.1% in March to 8.7% in April. This in theory should have been cause for celebration! Unfortunately core inflation is proving far stickier. Far from falling in April, the overall rate surprisingly rose from 6.2% to 6.8%, the highest level since 1992.

Along with Greedflation and the warm weather, yes, the Governor highlighted extreme weather in Morocco early last week. The concern remains that inflation has become embedded in the economy and the Bank of England must work even harder to eradicate it. The only tool within their arsenal, they believe, is raising rates which now look likely to rise to 4.75% at the meeting in June, and 5.5% by year end. Again, we have said numerous times that increases in interest rates are not instant and it will take time to filter through. Long term, creativity is needed in coaxing people back to work, along with getting those on long term sick back into the workplace. Increasing the size of the labour pool and producing a productive work force will work far better than beating us all with the interest rate rises which will cripple growth and our economy.

Moving across the pond. Their buzzword of choice has been Artificial Intelligence (AI). Anything with AI in the name or nature of business is flying off the shelves it feels. Nvidia reported their first quarter fiscal report last Wednesday evening to much fanfare. The shares are close to approaching Trillion Dollar company status. Shares popped 25% last week, after already rising 113% this year alone. An investment for the brave…

The US was also occupied with raising the debt ceiling. With talks dragging on without resolution, Joe Biden and top congressional Republican Kevin McCarthy have reached an agreement in principle to address the debit limit and spending cap. More information will come later today, ahead of Memorial Day tomorrow.

RHI Magnesita

Mentioned in 24th February blog. Company has announced this morning that they have received an offer for 20% of the company at £28.50. The offer is from Private Equity, Rhone Group which values RHI Magnesita at GBP 1.38 billion according to my figures. The bid is for a non-controlling minority position, which again highlights that UK listed shares remain attractive.

With rates likely to be high for longer the market will continue to be volatile which will provide opportunities. I still believe drip-feeding funds will prove to be fruitful in years to come.


Neil Morss

Chartered FCSI