It’s November and the spending season is on our doorstep. Hear from Brian, our Head of Personal Finance, as he breaks down what’s been happening in the financial world in October, what it all means for you, and how you can continue to work towards your financial goals this festive season.

 

October was another busy month for our personal finances. Investing wise, it’s been a tough year with the FTSE 100 down 5.47% year to date and the S&P 500 down 19.28%.* Throughout October, markets dealt with the fallout of former-chancellor Kwasi Kwarteng’s mini-budget – which caused widespread uncertainty.

The impact was primarily felt in bond markets. The interest rate the UK government pays to borrow money shot up after Kwarteng’s planned tax cuts. And, international markets did not like that the tax cuts were announced without a plan to pay for them, and with no independent analysis from the Office of Budget Responsibility – which would be the norm.

Kwarteng was replaced as chancellor by Jeremy Hunt in the middle of October. This calmed markets somewhat – and the move was a broad positive for investments, mortgage rates and the value of the pound. Kwarteng’s departure wasn’t enough to save Liz Truss though, and she soon left 10 Downing Street. Rishi Sunak took over, becoming the fourth Prime Minister in three years.

Sunak kept Hunt on as chancellor, opting to not risk rocking the markets any further. Despite all of this turmoil at the top of British politics, stocks and shares actually performed relatively well in October. The FTSE 100 and S&P 500 were both slightly up for the month on 2.96% and 5.26% respectively.**

 

But what does all of this mean for you?

From an investing perspective, it was a continuation of the volatility we have seen throughout 2022, and this will likely be around for months to come. As the UK battles political instability, high inflation and rising interest rates, it’s likely that the financial world will continue to make headlines for months to come.

With all of this going on, it can be hard to focus on the areas you can control. While politics and economics will have an impact on our personal finances, ultimately it will be our activities and habits that determine our financial success.

So, what can you do this month to help your finances? Well, given the turmoil and negative headlines, it’s not a bad time to focus on the foundations of good personal finance.

One of the most important building blocks is a readily accessible emergency fund – especially as we head into the festive period. This is a pot of money that is set aside with the hope that you never have to touch it. It should contain between three to six months worth of expenses (or income if you aren’t sure how much you spend).

It should also be in an instantly accessible savings account, not invested. Once you have this, you can move on to other goals like investing, saving for a house or getting your pension in order.

 

Good news story

We always like to finish on a positive note and, for October, the main good news story is that the cost of wholesale energy nearly halved.

An exceptionally mild month coupled with countries strengthening their energy supply chains over the summer has resulted in prices dropping due to oversupply; a far cry from where we were over the summer when demand was far outstripping capacity to supply.

Wholesale energy prices directly impact all of our energy bills so hopefully the price falls will start to feed through soon.

 

 

*Google Finance, year to date 31 October 2022
**Google Finance, Monday 3 October to Monday 31 October