This week's blog looks at a mixed bag of market sentiment, with lots of bullish projections on the tape from leading economic commentators. Could the worse be over for the Bank of England? What do the markets believe? Most importantly, how will P2P be impacted? Read on to find out.
F. Scott Fitzgerald wrote, "the sign of first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function." This great quote is particularly apt in an ever-polarised world, especially concerning market sentiment. On the one hand, the FTSE-100 has again hit a record high as inflation and recession fears begin to ease. Subsequently, there have also been notable rallies in metals, digital assets, and even tech stocks; the archetypal speculation assets have reversed their fortunes in Q1. Wall St futurists have asked ChatGPT if A.I is a buy and the A.I has said yes; why not, and the markets are green once again, with NASDAQ up 3% for now.
Another indicator is the bond market; in the aftermath of last week's rates announcement, the 10-year UK gilt yield fell dramatically and suddenly. They are being repriced quickly, and this is an indicator worth watching. This signals that the market sentiment is leaning towards a quicker recovery, and we will see a slowdown in fiscal tightening and constant rate rises choking risk assets. The sentiment from the Bank is that the UK could avoid a technical recession, along with The National Institute of Economic & Social Research, who have stated they believe the UK won't continue with a further quarter of failing growth; they also think that the cycle of increasing the base rate is done, but if core inflation remains high, we may be sat at 4% well into 2024.
So are we addicted to bearish sentiment? Well, these signals are cold comfort to the millions of households struggling; we aren't making light of what's been a brutal winter for everyone; we are acutely aware that the FTSE rally has been spearheaded by oil and gas profiteering that has negatively affected far more people that have benefited, but we are looking at this through the prism of commerce rather than morality. Moreover, NIESR, who we quoted above, had described growth in the UK as 'anaemic' and essentially flat for the foreseeable, so nobody is suggesting this will be all over by Christmas. Still, we are seeing at least evidence of a shallower trough
To drag this meandering blog back on track, the first lot of housing stats for January are out, and Halifax has shown that house prices have managed to turn around the 2022 Q4 trajectory in the sense they are coming in flat rather than the 1.3% drop we saw in December. This is quite a bullish signal and matches our predictions earlier last year regarding the rate of decline. The retracement to a predicted circa -10% will never be a cliff-edge collapse due to real estate's high demand as an asset class. It is important to note, however, that even if there were a once-in-a-hundred-year crash, it would have to happen twice over to put a dint in the headroom protection you get at 65% & 70% LTGDV lending, which is a central metric in p2p development finance lending.
In terms of investment, we are seeing many mainstream banks slowly beginning to reprice their notice and saving products as it becomes more apparent that we are reaching or about to reach a terminal rate in terms of bank rate. This is inevitable because these products are priced on a 12-18 month timeframe, which poses some interesting questions for investors looking at introducing P2P to their portfolio and making comparative judgements on potential future yield. Investors will look elsewhere if the banks act on rates coming down, as they indicate they may, evident in the limited ways they are currently passing rates onto customers. Those investors will want to consider P2P a viable alternative and a crucial part of their balanced portfolio.
Invest & Fund has returned over £140 million of capital and interest to lenders with zero losses, showing the rigour that governs our business.
To take maximum advantage of this robust and exciting asset class, please visit www.investandfund.com or contact Shaheel at firstname.lastname@example.org.
Don't invest unless you're prepared to lose money. This is a high-risk investment. You may not be able to access your money easily and are unlikely to be protected if something goes wrong. Take 2mins to learn more.