Dante's Inferno ISA

Moving house is not much fun. I read one survey which found that over half of respondents ranked moving house as the most stressful life event, more so than having a child, starting a new job, or going through a divorce. I’d like to raise the stakes. Moving into a ‘smart house’ with no internet. Oh yes.

If Dante were writing his Inferno in 2023, his cast would include Putin, Covid, a smart house and Virgin Media. And the opening credits would have Buckinghamshire County Council’s hold music as the theme tune.

What’s in the Inferno ISA?

When Dante got around to money management, his Inferno ISA would definitely not include India. This mesmerising country’s stock market is having a moment in the sun, as continued tensions between China and the US rumble, and global eyes look elsewhere. In September, both Jupiter India and India Capital Growth investment trust made it onto interactive investor’s bestselling lists.

The Indian stock market has been the best-performing heavenly index post-Covid and is up over 145% since April 2020. Next up, the US tech-heavy Nasdaq index, up 97% over the same time period.

However the tech story is a little more diabolical if we look short-term. Tech stocks are continuing their worst month of the year in September, with a bad start to October as the spike in interest rates pushes investors out of risky stuff. The Nasdaq is at its lowest level since May and Airbnb shares have fallen by 12% over the last month on a downgrade and investor wobbles. Market darling Nvidia fell by 12% in September. What’s going on?

Why ‘Treasury yields’ matter

If the Fed drops lots of unsubtle hints that interest rates will stay higher for longer, then markets react. This Tuesday, the 10-year Treasury yield spiked at 4.8%, its highest level in 16 years. Huh? Put at its simplest, if you buy a Treasury, you effectively lend money to the US Government for 10 years, and they will now pay you 4.8% every year in return.

High Treasury yields impact most other investments. Why? Well, everyone wants cash from investors. We need cash to grow and build stuff. But if investors can get an almost risk-free 4.8% on their money from the US Government, more risky investments have to work a hell of a lot harder to entice us to give them our money. September was a ‘risk off’ month, impacting riskier sectors and shares, and investors took the least spooky path as high rates and recession worries overcame the artificial intelligence Kool-Aid we’d been gaily drinking earlier in the year.

In the coming year we will have to work a lot harder to identify opportunities, because the general picture is tricky. We have to dig deeper for the returns truffles. Some like India as mentioned above. And global giant BlackRock released an update this week, reporting they have gone overweight Japan. Generally they’re a bit miz about the US and Europe and neutral on the UK’s very unloved FTSE.

Cash also King closer to home

News out today that the Government-backed NS&I has withdrawn its market-leading one year fixed accounts. The consensus view is that rates are close to their peak so if you have some cash to lock away, consider getting your skates on.

That’s it from me this week. I need to log off and work out how to heat the water without the internet. Oh what fresh hell is this? Seems like not even Strictly is cheering people up this year. The winner of last week’s poll about who might win Strictly was 'Who Gives A Toss?' with 26% of the vote. And Eastenders’ Nigel Harman was second with 23%!

Have a great weekend everyone.

Holly

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