TACOs, hippy shoes and 'not boring annuities'

The S&P roared back to life this week, hitting new highs as investors saw yet another TACO trade (Trumps Always Chickens out). Optimism washed through markets which reacted optimistically to hopes of de-escalation. The S&P 500 reached an all-time high number starting with 7, closing at around 7040 yesterday.

There are two schools of thought. One says that – despite global conflict we’re coming into another positive earnings season, with anticipated double-digit growth from some of the Big Dogs. This means the world’s biggest companies could announce profit growth of 10% or more. Nice. So, the bigger picture is OK.

One thing is cautious optimism. Another is ‘irrational exuberance.’ You may have heard of a company called Allbirds. They make shoes out of sustainable materials like eucalyptus, sugarcane and wool. (Pagan readers – don’t run through fire with these on!) They weren’t doing very well, their shares tanked and then they said they were pivoting towards AI (rebranding as NewBird AI and buying high-performance graphics chips) and their shares went up faster than the Nike Swoosh from $3 to over $17.

Next week I’ll be announcing our re-brand to BorAIng Money. Expect to see me in Prada driving a McLaren by Friday.

Not everyone is feeling upbeat. A more bearish bunch think that we have stored-up pain from energy shocks to come and we’re at the threshold of stagflation – an economic balloon whizzing around a room running out of air before falling to the ground, as prices simultaneously go up around us, at the pumps, in the supermarkets, and in our factories.

What to do?

For some first-hand expert views on what the current climate means for our savings, investments and pensions, join me and special guests Marcus Brookes (Chief Investment Officer at Quilter Investors) and Tom Stevenson (Investment Director at Fidelity International) on Tuesday next week for a 45-minute online webinar on current markets. Live or on catch-up. We’ll be taking your pre-submitted and live questions and sharing practical tips and ideas.

I touched base with both this morning and they have some really interesting views on bonds, interest rates and how we think about a diversified portfolio. Are the old school rules changing (the basic vibe has typically been that bonds and shares behave differently, so a mix of both avoids everything being awful at once) and how should we think about looking further afield for returns?

We’ll also cover gold, risk, managing retirement money, underrated sectors, diversification and managing a DIY portfolio at this time. Our Ask pages tackle some of these questions too.

Aside from markets, lots of older readers have questions about the very difficult problem of managing money in retirement in this current turmoil.

One for those planning retirement money

This week, I wrote a full update on thinking about managing a retirement pot of money and ‘drawdown’. I tackle some key questions from the ‘4% rule’ to ‘sequencing risk’, Inheritance Tax and also annuities. If I’ve missed anything, leave a comment under the article and I’ll try to respond.

I’ll leave you with a final thought on annuities. Annuities basically allow you to trade a sum of money today for a guaranteed amount of money in the future. The precise amount depends on your relationship with Benson & Hedges and exercise, as well as medical history and more.

As fears of inflation rise (Iran and oil), so ‘interest’ on Government bonds goes up. The UK government has to offer us a bit more to persuade us to lend them money. As these ‘yields’ go up, so annuities go up. According to Legal & General, a 65-year-old chap (with assumptions) can get £6,300 a year today for trading in a lump sum of £100,000 for an annuity.

In 2021 comparative rates were £3,800 a year. See what I mean?

£6,300 every year come rain or shine to add to any State Pension is better than a slap in the face with a wet kipper. And at these levels, worth at least considering alongside drawdown – it doesn’t have to be either/or. And a final word. For gawd’s sakes, don’t just accept the first annuity rate from your current pension provider. SHOP AROUND.

Have a lovely weekend, everyone. A New Moon today with nice high Spring tides means some wild woman behaviour beckons!

Holly