“Mistakes were made.” This was Sunak’s summary of Truss’s short tenure as Prime Minister after he succeeded her last week.

While he said her aims were noble, he had been elected in part to fix them, as he looks to place economic stability and confidence at the heart of this government’s agenda.

We’ll get more detail of what that means from a policy point of view on 17 November, when Chancellor Jeremy Hunt will give his Autumn Statement – the third Budget-type event in under two months.

However, Sunak did not shy away from the fact that his plans are unlikely to follow Kwarteng’s blueprint of tax cuts and extra borrowing. “Difficult decisions to come,” were Sunak’s words.

It is likely his message had been specifically chosen with an eye on calming markets. The past few weeks have seen UK bonds, currency, and equities all volatile as government policy lurched from one direction to another. Sunak will be looking to reassure markets that his government can be trusted with the financial keys to the kingdom, and that he intends to reduce public borrowing without causing economic havoc.

Summing up expectations for 17 November, Ruth Gregory, Senior UK Economist at Capital Economics noted: “The reports that the Chancellor, Jeremy Hunt, will unveil in his Autumn Statement on 17th November a fiscal tightening of up to £50bn by 2026/27 (1.7% of GDP) suggest that after a period in which fiscal policy has provided the economy with support, it is about to become a major drag.”

Putting these numbers in context, she noted this £50 billion is over a third of the annual budget of the Department of Health and Social Care, and in GDP terms, the cuts would be almost as large as the 2.0% GDP fiscal tightening unveiled by George Osbourne in 2010.

Initial reactions to Sunak’s election suggest a level of confidence in the new government. The value of sterling has been on an upward trajectory and finished last week at around $1.16 (compared to a low of $1.04 a few weeks ago). A stronger pound might see weaker returns for UK investors with US assets, as US shares will be worth less relative to UK currency.

The FTSE 100 rose by +1.1% with last week’s sterling strength somewhat of a headwind, given most earnings generated by its constituents come from overseas.

On the other hand, it also helped several UK companies with domestic customer bases and, as a result, the FTSE 250 surged 4.1%.

Looking ahead to this week, the Bank of England (BoE) is due to have a Monetary Policy Committee meeting on Thursday, where it will decide what to do with interest rates. Even if some of the more inflationary policies of the Truss government are no more, inflation remains at over 10%. Markets are generally expecting interest rates to increase by 0.75-1% at the meeting. This means it will likely end the month at 3% or above.

Other countries are going through similar events. Last week, the European Central Bank pushed up interest rates another 0.75%, effectively doubling them to 1.5%.

The US Federal Reserve is also due to meet in the coming week, where it is also expected to increase interest rates by 0.75%. The US bank will have some wiggle room, after figures released by the Bureau of Economic Analysis showed the US economy grew by 2.6% last quarter.

With positive economic news came positive moves for US stocks. The S&P 500 in the US jumped by +4.0%, with NASDAQ Composite adding +2.2%. Energy and industrials were the two strongest performing sectors during the week.

This growth wasn’t uniform, however. Several tech companies, which have struggled for much of the year, posted disappointing results. This included household names such as Amazon and Microsoft. Meta, the parent company of Facebook, has particularly struggled this year and is down approximately 70% year-to-date.

According to David Bowers, owner of Absolute Strategy Research, these companies aren’t quite at the end of the tunnel yet: “The announcements from Meta and Amazon were genuinely shocking (looking at the ensuing share-price action). The weakness of digital advertising revenues was a key factor – a source of cyclicality that is only going to get worse as next year’s recession takes hold and companies around the world scale back their advertising spend in response to a 20% contraction in profits.”

A lot of the tech companies struggling now performed exceptionally well during the pandemic in 2020 and 2021. Their more recent struggles are a reminder of how quickly public perception and share prices can change. Therefore, it remains as important as ever to view investments with a long-term lens, and to ensure you remain well diversified.

Each of us will have a lifelong relationship with money, so understanding how to manage our personal finances is a key life skill. Financial literacy can mean the difference between success and failure; between achieving your goals or falling short of them.

In the UK today, 5.3 million children go without proper financial education. And as a result, less than half (43%) of young people aged 12 to 17 feel confident that they know what they’re doing when it comes to money.¹

In 2014, we made a commitment to raising the level of financial literacy in the UK by taking action in schools and colleges across the country. Today, our Financial Education for Young People programmes are changing those statistics from the ground up, going into classrooms and student organisations to give young people the facts and confidence they need to succeed.

10 years ago, financial education wasn’t even part of the school curriculum. Yet according to the Money and Pensions Service, our money habits begin to form when we’re just 7 years old. Understanding money and how to use it wisely can start in the earliest school years.

For the 13 or 14-year-olds, and the 16 to 18-year-olds who are about to leave school and possibly live away from home, we offer 14 modules covering seven key topics. Students can ‘pick and mix’ from modules including budgeting, borrowing and day-to-day banking.

“For me, building brighter financial futures starts with getting people to feel confident in talking about their finances, knowing where to find the information and who to talk to or turn to. It’s giving resources to future generations,” says Kate Stickley.

Source

¹ Money and Pensions Service 2020

The research was conducted by Opinium for the Money and Pensions Service. A nationally representative survey of 5,225 UK adults aged 18+ was conducted from 9th-19th October 2020. There are over 52,673,433 million people over 18 in the UK (ONS), of which 55% don’t feel comfortable talking about money when they have worries about their financial situation.

The reason I acquired Twitter is because it is important to the future of civilization to have a common digital town square, where a wide range of beliefs can be debated in a healthy manner.

Elon Musk explains his recently completed acquisition of Twitter.