Monthly Newsletter – January 2024

2 January 2024

Happy New Year to all! We take a look back at 2023, as well as some financial new years resolutions you may want to take up…




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What’s next in 2024?

That’s 2023 done….

It felt like a lot happened last year:

  • Bank failures.
  • Submersible implosions.
  • Artificial Intelligence (AI) mania.
  • Middle East conflict.
  • Earthquakes & storms.
  • U.S. debt ceiling.
There is a rough and ready way of working out how much went on in markets, by simply looking at how many days have moves bigger than 1% up and down. Big Market Days (BMDs).
The tally for last year was as follows:

2023 saw 61 BMDs , exactly half the number seen in 2022 and not far away from the average of 53.
There was none of the really big days of 2% or more, which tells you that the market is really struggling to work out what’s going on! With the Standard & Poors (S&P) 500 up around 20% over the course of the year, the calmness makes sense, although it wasn’t predicted at the end of 2022.

What does 2024 have in store?  Answers on a postcard……!

Retirement Planning
Given the choice, it’s safe to assume that most of us would like to be retired by state pension age if possible. New research from Just Group however has identified that only one third of people between the ages of 43 and 58 believe that they will be retired by the time they reach state pension age.
A third (35%) of those surveyed by Just Group said they are confident they will be able to retire by State Pension age but 38% believe they will have to work later and the remaining 27% are unsure. Factors for this include the majority of people no longer being able to rely on defined benefit pensions, helping children or ageing parents and automatic enrolment into workplace pensions starting too late in life to make a significant difference.

Whatever the reasons it’s clear that if no action is taken many people will not be able to enjoy the retirement that they would like and may have to continue working far longer than they would have previously envisaged, especially given that the increases to state pension age have already happened and are likely to continue happening in the future.

It is not too late to make a difference to your retirement planning. Even relatively small regular pension contributions can build up over time to large sums thanks to the effect of compounding. Please see graph below for an illustration of this:

*Based on 5% per annum returns.

The message from this is clear – if you can afford to pay more into your pension each month, you should. Even a small monthly increase can make a big difference over several decades. These actions could ensure that you are not one of the people who will not be able to enjoy the retirement that they want and deserve. Please contact the office if you would like to start/increase your regular pension contribution or make a lump sum contribution.

The Humanity of Financial Markets
Although the finance world seems like it is dominated by technology, with high frequency trading, crypto-currencies and now AI (Artificial Intelligence), it’s helpful to remember that markets will always be weird enough to need people.

Finance is full of weirdness – because humans are full of weirdness, biases, habits, emotions etc.
Trying to plug all this weirdness into an algorithm is almost impossible to do, because it’s psychology at work.

Here’s some of the weirder things a computer might miss:

No onions please.

In the U.S. you can buy and sell a lot of commodities using futures. These are financial contracts which ultimately result in the delivery of a real-world product.

If you buy corn or live cattle you need to have a large barn for when your cows or corn arrive. Or if you sell nickel or wood pulp futures, you are going to need a lot of metal or trees in your back garden to meet your contract.

Now this would be hard for a machine to figure out -you can’t ever buy or sell a future on onions. Because in 1955 a farmer called Vincent W Kosuga used the onion futures market to buy more than 98% of the onions available in Chicago, driving other onion farmers out of business and making millions of dollars. The public backlash was so extreme that President Eisenhower banned any trading in onion futures. This law still stands today.

Touch the seat to trade

Try explaining to a computer why it has to be touching the red sofa in order to make a trade on the London Metal exchange, then try to find an algorithm with a leg!!

Source: London Metal Exchange
Unknown currency conventions
Then, try to explain how the convention of currency quoting works on the global market, e.g. do you say “pounds per US dollar” or US dollars per pound” The market that trades $7.5 trillion a day must all be saying the same thing.
There is a hierarchy of which currency is the “base”, which is good news.

1. EUR
2. GBP
3. AUD
4. NZD
5. USD
6. CAD
7. CHF
8. JPY

You’ll note that even though it is the most important currency globally, the US dollar comes 5th. Is there an explanation for this? Absolutely not – there’s no rules written down; it’s just passed from one currency to another when trading has started!

So, even the smartest computer would have difficulty capturing the human element of markets, or life!!

Popular Financial New Year’s Resolutions.

  1. Create a budget.
  2. Pay off any debt.
  3. Stay on track with your goals.
  4. Prepare for the unexpected.
  5. Plan for retirement.
Happy New Year from all at Clear 





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