Time to bank on banking?
This chart has been doing the rounds lately.
It shows European banks beating the big US tech stocks over the past three years! Also, in 2024 Barclays stock beat six of the Magnificent 7, all except Nvidia.
The danger with financial charts is that you can pick a period to suit your story, and when you pan out, and take a twenty-year view, banks are coming from a pretty low base.
Compared to 2004, the broad index of banks is only up 18%, while the global index is up 460%! And despite almost doubling in 2024, Barclays is still down 7% after twenty years. Lloyds is still 50% below its pre-crisis level.
Source: 7IM/FactSet, total returns from 31/12/2004 to 31/12/2024. Past performance is not a guide to the future.
Of course, investing is about the future.
Where are banks going from here? Although the financial crisis cut deep, the scars are now healed… the opportunity for banks is huge:
Since 2004, the global economy has increased in value from $44 trillion to more than $100 trillion.
The number of people in the world has increased by 2 billion, and the percentage of people with bank accounts has gone from below 50% to nearly 80%.
So, that’s a lot more customers leading to a lot more money flowing, and room for growth.
Even just catching up to the wider market would be a massive gain.
So, just maybe, banking is back…
Counting the cost of cash (ISAs)
People have all got opinions about Rachel Reeves possibly changing the rules on Cash ISA limits.
You can probably guess our views… “Investment firm supportive of more investing” isn’t making too many front pages. However, before 2013 Cash ISAs used to have lower limits than Stocks and Shares ISAs, so really Reeves is just rolling back, rather than doing anything radical.
Ignoring the politics, the debate does prompt us to go and dig around in the data – all at the bottom in a table.
We go back to when ISAs launched (April 1999) and looked at the average 1-year fix rate available each year.
If you’d put the maximum, you could into a cash ISA at the start of every tax year since 1999, you would have invested £261,520. If you’d kept rolling up the interest, you’d have turned your original investment into £301,924. £40k of tax-free gains!
But of course, it’s also about what ELSE you could have won…
If you take the FTSE All-Share index and use the rarely seen tax-year return to do a literal like-for-like (i.e., from April 7th to April 6th the following year).
So, putting the same £261,520 into a stocks and shares ISA on the first day of the new tax year, and simply hold a FTSE All-Share tracker, you’d have an investment worth £491,516. That’s £229,995 of tax-free gains.
Source: FactSet/7IM. Past performance is not indicative of future returns.
But, if you’d pushed the boat out, and maximised your Stocks and Shares contributions pre-2013, you’d have put £326,560 in and have £708,837 today.
£65k more invested, and £150k more return!
Not a cash ISA controversy…..
Fastest downturn in construction output since May 2020
- Steep declines in housing and civil engineering activity since February.
- New work and input buying fall at fastest pace for almost five years.
- Input cost inflation accelerates to the highest since in March 2023.
Source: PMI by S&P Global
Follow Ferris, not forecasts.
2024 finished like this:
Source: The Guardian/CNN/Fidelity/The Telegraph
But as Ferris Bueller knows….Life moves pretty fast! – (Ferris Bueller’s Day off)
A selection of headlines recently:
Source: The Guardian/CNN/Fidelity/The Telegraph
On a table of performance, US and Japanese Equity plummets down the table, while Europe shoots to the top. Someone described this as MAGA to MEGA!!
It’s also interesting that Real Estate – unloved for a few years – is starting to make a comeback. Who’d have guessed?
Source: Factset/7IM (YTD data to 09/03/25)
Who would want the job of forecasting 2025?
Thankfully that’s not the job of an investor who wants to invest in assets all the time, rather than using a crystal ball or trusting knee jerk reactions. After all, life moves pretty fast!
Knowledge not profit.
You probably don’t know this man … but technically he’s responsible for destroying a piece of cultural history, and technically we’ve all been helping…
Source: Wikimedia Commons
In the late nineties, Ward Cunningham came up with two simple ideas. Have a webpage which allows links to pages that don’t exist yet. And let people write those pages if they felt like it.
And so, with a few others, Ward created a platform for knowledge that could be built and edited collaboratively, by anyone using it.
This destroyed a business model which had been around for more than two centuries:
Source: New York Public Library
After 244 years of spreading knowledge, in 2012 the Encyclopaedia Britannica stopped printing – Wikipedia had made it redundant.
The final version of the 32 volume set was sold for £1000 and contained 40,000 articles by 4411 contributors. Whereas the English version of Wikipedia has more than 64 million articles, with 14 million people contributing, and is free!
It’s worth thinking about Wikipedia when people (and investors) get excited about the potential for profit from the mass uptake of AI tools.
Wikipedia was a shift in access to knowledge. It used the new technology and destroyed legacy knowledge publishing.
But…. it doesn’t make a profit.
It’s possible that some of the biggest impacts of AI aren’t going to accrue to one or two individuals, but instead to broad society. Everything benefits.
So, as investors, probably best to own a bit of everything!
We leave you with Ward Cunningham’s other great contribution, Cunningham’s Law – which is maybe even more true today than it was in the early internet eighties.
“The best way to get the right answer on the Internet is not to ask a question; it’s to post the wrong answer.”
Brighton Marathon
Only a few days to go before Charlotte & Gary run the Brighton Marathon to fundraise for the charity. We are lucky to have an additional runner, Andrew Strongitharm who is also supporting Clear Minds. Andrew has been running for 6-7 years now and completed the London Marathon in 2023 vowing to never run another marathon….and yet here he is!
Not forgetting Gary running the London Marathon two weeks later!
We wish all the runners the best of luck and thanks for supporting Clear Minds. If you would like to donate, please follow one of the following links:
