The run up to Christmas has not been quite as festive as we had hoped, so far, though it has not been too difficult for investors. Activity is muted, as you might expect, but there has been little taking place to encourage a seasonal rally. Indeed, many market watchers remain cautious over what might be in store for investors as we approach the New Year, with many parallels being drawn with the winter of discontent that eventually unseated the Labour government in the late 1970s.
Certainly, the extent of the industrial action being taken at present is worryingly high. Moreover, while the population at large is being adversely affected by these strikes, there is some sympathy for some sectors, most notably health workers. This places the current administration in a difficult position. Wage settlements that match inflation are likely to lead to even more demands for higher pay and will ultimately pave the way for even greater upward pressure on the rise in the cost of living. Not a pretty prospect.
All in all, 2022 has not been the most comfortable of years. True, we stand a reasonable chance of ending December with the Footsie standing at a higher level than when the year started, but it has proved a tricky time for investors. There remain a number of known unknowns. Have we seen the back of Covid? The evidence from China suggests not. Will Putin up the stakes in his special military operation? We must hope he doesn’t. Will there be a global economic downturn? Only time will tell.
But here we are in the season of goodwill, so taking a more positive approach to the future should be my mission. Might 2023 prove to be better? Of course, the future is hidden from us and predicting what might happen is, frankly, a mug’s game. Who would have thought this time last year that Russia would invade Ukraine and propel inflation to double digits? So the best we can do is look at the positives and try to identify – and avoid - the risks.
What we do know is that there is now a tighter rein being exercised in Downing Street. The date for the spring budget has now been announced as March 15th, but we can expect a tough approach from our new Chancellor. Give-aways look unlikely next year, but barring accidents, the recession into which we are inevitably falling should be relatively shallow. Let us all enjoy Christmas as best we can and hope that the financial Santa has something up his sleeve for the New Year.
