Category: Markets

Cryptocurrencies
ArticlesCommoditiesMarkets

Cryptocurrency the Asset Class of the Future

Cryptocurrencies


By William Je, CEO Hamilton Investment Management Ltd

It is a safe statement to make that many financial institutions have in recent years, been torn as to whether cryptocurrencies are an asset class. Analysts are polarised. This is unsurprising as, over time, cryptocurrency went from being widely seen as a conduit for money laundering into a serious proposition for investors. And it’s not just the novices that’ve hopped on board with the cryptocurrency hype, even large, established companies, including the likes of PayPal, which have in turn dabbled with the digital currency as a genuine form of payment.

Major banks have also been rushing to set up crypto-related operations recently, with Morgan Stanley and Bank of America establishing a crypto-focused research division. State Street announced the launch of a dedicated digital finance division. JP Morgan and Goldman Sachs are also rolling out crypto trading services.

An asset is anything of value or a resource of value that can be converted into cash. Traditionally, an asset can often generate cashflows: stocks provide dividends, bonds provide coupons, loans provide interests. However, there are assets that do not really produce cashflows but still being considered as an important asset class.

Gold has long been considered to be an important asset class. It has very limited industrial usage and does not really generate cashflows. It is only collective thinking that gold is valuable that makes it so. In fact, this also applies to any fiat currency. After all, money is only a credit that a currency’s user gives to the issuer. For a currency to thrive, trust is the most important factor. The issuer of fiat currencies are sovereign entities which are deemed to be the most trustworthy. If there is a currency or economic crisis that the people do not trust the government, the value of the fiat currency will drop significantly. 

So, an asset’s value will depend on the collective believe and trust of the people dealing with it. It is still at an early stage to conclude that investors believe and trust in the value of cryptocurrency, but the trend is definitively positive.

Throughout the course of history, we have become accustomed to recognising ‘traditional’ asset classes. Many investors regard cash and equivalents, bonds, and stocks as conventional financial investing’s big three. However, ever since the rise to prominence of cryptocurrency – a decentralised means of digital currency – many have started to question, should cryptocurrency be regarded as an asset class? This debate is as important as ever, considering that legislators and policymakers ponder upon taxing crypto in line with other assets in the midst of a tax war we’re witnessing. Currently in the US Congress, rules on tax on constructive and wash sales are being debated. Presently, only traditional asset classes such as bonds are stocks are subject to these rules, but there has been controversy about whether commodities, and digital assets should be considered.

In recent times, society has done a tremendous job of selling us on the idea that replacing our hard-earned cash with virtual currency is a good idea, and for good reason too. It does not take too much research to see that SMEs, family run businesses, corporates, asset managers and more are all investing in the crypto market. There is, however, a hurdle of learning new terminologies and understanding a new process.

As a result, many people shy away from dealing with it. This can seem daunting and is certainly a barrier to entry for some. However, it isn’t a reason to ignore what could potentially be an immensely fruitful asset pot. Professionals must now start to change their perspective on cryptocurrency, particularly in relation to what institutional investors consider to be an asset class and adapt processes to enable us to deal with cryptocurrency more effectively. Gone are the days of solely dealing with traditional assets. We all know that there are an enormous number of crypto assets now available and certainly the pandemic appears to have played a key role in driving increasing demand from both retail and institutional investors.

It’s not a secret that Bitcoin is the most valued – and thereby attractive – cryptocurrency on the market. Experts have largely accredited this by way of its scarcity, drastically leveraging its general understanding as an asset class. Bitcoin in particular benefits from investor confidence because of its snowballing popularity. Just as people in society believe in the value of diamonds because others believe in it, cryptocurrency shares this artificial value.

This further accentuates the power of supply and demand to dictate price. As hype is artificially created as a societal construct, it causes people to blindly jump on the bandwagon. When combining this with our excessive need to want what we can’t have; the forbidden fruit principle, it’s only to be expected that the price of Bitcoin is so high.

Bitcoin was the first scarce digital asset ever created. Imagine that – a digital product with a fixed total supply of 21 million coins. For new coins to come into circulation its new supply is cut in half every four years through a “halving” mechanism, until all 21 million coins are mined. As a result, it is estimated that only 18 million coins have been mined to date. Of those some believe that 5 million are technically lost, 10 million stored in long-term cold storage, and close to 3 million on exchanges. Mankind has always based the value of a currency on this concept of scarcity – that is why precious metals have been the backbone of many economies for centuries.

The growth in the number of cryptocurrencies is changing all of this and the faith put in them by investors is driving confidence in them as an asset class. If investors continue to believe in the value of gold because others believe in it, it will remain an asset.  The difference with cryptocurrencies today, and gold of the past is therefore minimal.

But what is driving that faith, and what is underpinning the huge increases in the value of cryptocurrencies? Well maybe it has less to do with the currency itself and more to do with its ability to store value in relation to other asset classes. Widespread social adoption together with its privacy, security and transferability make cryptocurrencies an important asset class to store values. Maybe it’s time for a bit of a backward glance and look to recent history to explain this. Since 2008 and the unleashing of quantitative easing, there has been an undoubted period of price inflation. And yet if you look to the balance sheets of many central banks one thing stands out – global currencies have depreciated.

Cryptocurrencies don’t follow the same rules as fiat currencies, or even secured assets, instead things tend to get complicated.  Given a cryptocurrency does not generate or support cashflow, it needs to be valued against potential – and critically – future prices. That then opens the door to several different valuation methods and guess what – our old friend gold is back. Amongst the differing valuation models now available – the stock-to-flow method, institutional participation method, and high-net worth participation method – we find the gold valuation method. But let’s not forget this is a new asset class so we would expect investors will consider a range of valuation methodologies to estimate future value. This is, however, not risk free. It is a new asset class, and one that does not exist physically. It is not gold as we are repeatedly saying. Risks do exist and they are well known, and some would argue substantial. We are firm believers that the industry needs to face into – and support – government initiatives around regulation.

But this is not the only risk associated with cryptocurrencies. Swings in the wider macroeconomic environment, risk associated with the technology backbone – everything from electricity supply to bad faith actors, and even an ever-more vocal and powerful economic, social, and corporate governance framework – ESG as it is known. All of which add to the potential risk for crypto as an asset class in its own right.

El Salvador became the first country in the world to adopt bitcoin as its national currency, allowing people to use a digital wallet to pay for everyday goods. Many countries are considering to issue their own central bank digital currencies. All these have been telling of cryptocurrencies’ future potential in line with an asset class.

The key question remains; should institutional investors dive in and is it in fact a dedicated new asset class?

The primary reason why some don’t regard cryptocurrency as an asset class is because it’s unclear regulatory environment and high volatility. However, more and more institutional investors use cryptocurrencies to hedge against inflation and currency debasement, and to diversify their portfolios in the pursuit of higher risk-adjusted returns. Over time, institutional investors have been more inclined to consider cryptocurrency as new asset class

Bitcoin is the most famous, most written about and most volatile of the many cryptocurrencies now on the market. Given the number of methodologies available to value not only it, but all digital assets, if anything, institutional interest is only just beginning.

This is without doubt, a new asset class and one that will increasingly gain acceptance and participation of institutional investors as time goes on.

It may not be physical gold, but it could very well be digital gold.

NFT
ArticlesMarkets

What Do Payments Market Players Have to Gain by Acquiring NFTs?

NFT


A ploy to stay in the loop or a strategic decision? Simas Simanauskas, Head of Payments at ConnectPay, has explored further what’s in it for the payments processing giants diving into the NFT trend.

A growing number of businesses are joining in on the Non-Fungible Token (NFT) craze. Not long ago, Visa, the payments processing behemoth, bought a “CryptoPunk” – one of the thousands of NFT-based digital avatars, for nearly $150,000 in the cryptocurrency Ethereum. Following the example, Mastercard has recently entered the market as well by announcing a sweepstake to win an NFT. According to Simas Simanauskas, Head of Payments at ConnectPay, the NFT appeal can be attributed to both staying on-trend, liquidity, and its massive future potential.

The NFT market sales volume grew approximately 182 times in the first half of 2021, compared with the same period in 2020, reaching a whopping $2.5 billion. Seemingly everyone–from sports fan platforms to art houses jumped on the bandwagon. According to Simanauskas, while the actual value of NFTs is subject to much debate, it is widely seen as an appealing market for investment.

“VISA’s move to acquire one of the iconic “Cryptopunks” is nothing less than a message that traditional market players are closely following the crypto-space and looking for ways to capture part of that market,” he stated. “When and how they will do it will very much depend on the overall crypto regulation, as well as how fast the biggest crypto wallets and exchanges will adopt rigorous Know-Your-Customer (KYC) regimes.”

 

Others joining in on the trend

There is little evidence to suggest the NFT boom will dial down anytime soon, which seems to have attracted more payments market players to get on board. For instance, Goldman Sachs has been offering bitcoin futures trading for some time now, while Mastercard has partnered up with Circle to create a solution bridging cryptocurrencies and traditional fiat money for people wanting to spend their digital assets anywhere Mastercard is accepted.

“Since NFT is another use case of blockchain technology that has attracted massive liquidity, there can be no doubt traditional players will seek to stay relevant in the market and will look for ways to cater for NFT traders,” Simanauskas added.

 

Potential threats for the finance sector

However, where large sums trade hands – fraud is rampant. For instance, earlier this year, a hacker exploited security loopholes on a famous artist’s website and sold a fake Banksy NFT for $336,000. Hence, when it comes to potential threats to the finance sector, for instance, money laundering, Simanauskas notes authentication and systems will need to be made more robust.

“One could argue that a person seeking to launder funds would either buy or create multiple NFTs—which can take only minutes to create—list them on various platforms, buy them using illicit funds from multiple anonymous wallets and legitimize one’s funds as a proud digital artist. That’s not an issue of NFT, but rather one of KYC,” Simanauskas explained. “As long as crypto exchanges will do sloppy KYC and platforms will accept payments from anonymous wallets, the blockchain industry will retain its messy image.”

“On the other hand, many big players in the industry are trying to clear that reputation by bringing more transparency and internal regulation into the way they oversee client transactions. While financial watchdogs are trying to make sense of all this and prepare to regulate the crypto-space, it will largely depend on the blockchain community itself how well they can address AML/CTF and security questions that would make people trust and utilize the technology to the fullest.”

Stock Market
ArticlesCapital Markets (stocks and bonds)Markets

What to Look For in a Stock Market API

Stock Market

The financial market is one of the industries that has relied heavily on technological innovations for its operations. In the last few years, there have been new solutions developed to streamline the industry and make its operations seamless. One of the major driving forces for these solutions has been APIs (Applications Programming Interfaces). They have opened a channel through which companies come up with innovations to handle all their transactions and to meet the demands of the modern investor.

APIs are computing interfaces through which applications can communicate and share information with each other. This means that when building an application, developers do not have to work day and night getting the data needed for their application to meet its obligations. They can simply implement an API and obtain the data from other applications. This has made software development easier and faster. 

 

What are Stock Market APIs?

As discussed above, APIs allow applications to exchange data and communicate with each other. Similarly, stock market APIs provide stock applications with financial market data for their operations. Traders and investors use APIs for stock to obtain structured data from complex market data while developers use them when implementing the functionality of their applications.

A few years ago, before developers and traders started using APIs, they had no option but to collect and analyze the financial data on their own. This was raw data from different sources such as newswires, indices, and stock exchanges. Such data was difficult to analyze and compare and often led to many investment mistakes. APIs solved this problem and made things easier.

When choosing a stock market API, there are a number of things one should look for. They include;

 

Latency

Latency refers to the time a stock market API takes to send data from the source to the application that made the request for data. APIs with low latency are accurate with their data and sent it faster than those that have high latency. You should make sure that you choose a stock market API with low latency for the successful transmission of data.

 

The Scope and Source of Data

It is important to choose APIs for stock that offer a wide scope of financial data. For instance, you need an API that guarantees you data such as stock data, exchanges, forex, news, commodities, options, and economic data among others. You should test the API to make sure that all this data is available. In addition, you do not need an API that gets its data from a public source. Such data might not only be illegal but also unreliable.

 

Data Being Transmitted

There are free and premium stock market APIs, with each offering different types of data. Before getting one of them, you should analyze the style you use when trading and choose the one that fits you better. The free APIs will get data sometime after its publication, usually about thirty minutes later. On the other hand, premium APIs will get data in real-time. There are also other APIs (or both the free and premium APIs) that offer historical financial data. The right API depends on the style of trading one employs.

 

Currency

There are traders interested in trading in a specific country while others trade in international markets. Trading in a specific country requires one to use that country’s currency since exchange rates might affect the value of money. International traders need to understand different currencies and choose an API that matches their requirements. 

 

Scalability

The stock market is one of the most unpredictable industries we have today. There are times when everything will remain normal while other times things are below normal. However, there are times when things could spike, and the API you choose needs to be scalable enough to handle such spikes.

 

Security

Trading in the stock market is a confidential affair. Traders spent a lot of money buying and selling stocks. It, therefore, means that they need to work with a secure trading API. When choosing a stock market API, make sure that you get the one using secure servers and systems.

Finally, developers should choose an API with the functionality that meets their requirements. They need an API that is flexible and can integrate easily with the programming languages and the development environments that they use. With such considerations, both developers and traders will get the APIs that meet all their requirements.

Whisky
ArticlesCommoditiesMarkets

Success Never Tasted So Sweet – Expand Your MIND and Your ASSETS

Whisky

Scotch whisky is a symbol of British craftsmanship and tradition, of durability and reliability. And though it hasn’t been around for ever, it has been recognised throughout history. Its documented story begins in 1494, and tax records of the day show that a friar acquired eight bolls – about 2,500lbs – of malted barley, “wherewith to make aqua vitae”.

Although distillation processes may have changed over time, the value of this commodity has been driven by demand and maturation. As global appreciation of whisky has flourished, people are gradually discovering that limited edition and maturing casks from the most globally renowned distilleries could bring in top returns for those willing to hold their investment.

 

Why Whisky and Why Now?

The global landscape of investments has changed dramatically in recent years, with the general public now having a greater ability to take trading in to their own hands and invest and trade in a range of commodities through online platforms and investment advisors. Technology has led the way in a virtual environment to allow people to discover new and interesting markets which have previously not been explored. This being said, 2020 has also demonstrated the global volatility of stock markets and poor returns on extremely low interest rates, driving them to discover ways to diversify their asset portfolios.

A way of mitigating the risk of investments is to purchase luxury commodities which appreciate in price over the years. It has become increasingly common for people to invest in classic cars, coins, watches and artwork whilst other commodities have not been considered as viable investment opportunities. However, it is now becoming more apparent than ever that assets which have previously been considered as merely a consumer goods, have great potential for long term investors. One such luxury commodity is whisky, which has previously been washed away for our own satisfaction, is now showing great potential as an investment asset. Additionally, whisky is a tax-free asset which other traditional financial assets fail to offer investors.

Firstly, like fine wine, demand outstrips supply. Whisky that is collectible is also in demand for consumers, so a substantial proportion of any limited edition bottling will swiftly become much more limited as much of it is consumed by dedicated whisky lovers. Whisky is bottled after a period of maturation in oak barrels. Legally, this is a minimum of 3 years, but in practice, most whiskies are matured for a minimum of 8 years in order for them to develop their character.

Distilleries will usually have a ‘house style’ represented by a mass-produced bottling of a relatively young malt (such as Glenmorangie’s popular 10 year old). But they will also have older whiskies maturing at the distillery, and they can also bottle older whiskies such as a 15 or 21 year old. They might also bottle the product of a particular cask of vintage whisky, or they might offer different expressions of the whisky such as a ‘port wood finish’ or ‘sherry wood finish’ which means that in addition to being aged in traditional Bourbon barrels, the whisky has been ‘finished’ with a period of additional ageing in a port or sherry barrel which can impart different flavours. These different expressions of the whisky and older malts are the ones that are of interest to investors – production is limited, they are highly prized by collectors and consumers alike. Whiskies from some distilleries are much more collectible than others, so it is important to do due diligence on what will be desirable in the marketplace in a few years’ time when you seek to sell your whiskies on.

As with any investment, it is extremely important to make sure you’re in the best hands and have access to the best platforms in order for your investment to flourish. It is therefore imperative that investors have access to well-known distilleries which already have a reputation for investable whisky. This includes famous Scottish whiskies such as Macallan, Dalmore and Springbank, all of which Elite Wine& Whisky has strong relationships with. The collectability and rarity of whiskies is extremely important when considering investing in whisky and hence choosing the right distillery and age of cask or bottle is important when investing.

 

Whisky Market in 2020

In the last year, there was an extraordinary increase of between 15-20% on rare whisky bottle values, ensuring that it outperformed the established alternative asset investments such as watches, art and cars. In the last couple of years, we have witnessed some incredible whisky sales, including the following: An individual bottle of Macallan 1926 broke records at auction, selling for £1.5 million. In 2018, over £40.7m of rare whisky was sold at auction houses in the UK alone. A cask of Macallan distilled in 1989 sold for $572,000 last year – a record price for a maturing cask of whisky.

The Whisky Cask Index, a study generated by Cask 88, Braeburn Whisky and WhiskyStats.net, has shown steady growth across the previous year, as well as the rate at which casks appreciate annually being on the rise. This appreciating rate can be attributed to the positive impact of both the maturity of the whisky, as well as a response to the increasing demand as whisky supply is sold in to a more diverse range of global markets.

 

Comparison with Other Investments

Comparisons are made between the whisky cask market and other luxury commodities; however there are many features of whisky which make it unique. It is therefore challenging to analyse the market without considering variable factors, such as the characteristics of the cask that make it one of a kind. The complexity is also enhanced by the fact that, unlike a piece of art, or a collectible bottle of already-bottled whisky, the value of casks is not only dependent on demand, but also the maturation of the cask. Therefore a cask purchased this year will effectively become a new product as the years pass.

The Whisky Cask Index demonstrates the projected values of a sample of twenty casks from a variation of distilleries across the globe with varying age profiles. It is worth noting that in spite of the global pandemic which impacted the economy during early 2020, the Whisky Cask Index has remained optimistic, and even shown growth. In this data analysis not a single distillery index showed negative returns over the past 5 years, which is able to confirm that the market is relatively robust to negative impacts on the global economy.

 

Top 10 Distilleries

Overall Annual Capital Growth in this study across all distilleries and regions as of June 2020 demonstrated a 13% increase in value. This has further been broken down by distillery in order to understand the highest achieving distilleries by capital growth. The top 10 distilleries by capital growth are as follows; Laphroaig, Bunnahabhain, Staoisha, Macallan, Highland Park, Caol ILA, Springbank, Benriach, Bowmore and Jura.

It is extremely positive that no single Scottish distillery demonstrated a negative index in capital growth. Projections ranged from a predicted annual capital growth of 5.13% for a small Scottish distillery, Ardmore, to larger scale popular distilleries such as Laphroaig and Macallan, which both show projected returns approaching 20% per annum.

The top distillery by predicted annual growth is Laphroaig, in which demand is continually increasing past supply. The following two distilleries in the league table are both located in Islay, with both Bunnahabhain and Staoisha showcasing the popularity of this region. In terms of distillery territories, it is worth noting that whisky produced on Scottish islands dominate the top ten in the capital growth league table with only Macallan, Springbank and BenRiach representing mainland distilleries in this comparative list.

 

2021 Trends

As the whisky market grows and expands into new and established markets, it has been predicted that demand will therefore align with this growth and therefore will require supply to also increase. With increased worldwide demand of whisky, the value of whisky in casks will only increase, in particular more aged whisky, along with the value of whisky produced in 2020 and 2021 during the global pandemic due to the closures of distilleries which meant that there was reduced supply. It is therefore no surprise that name brand whiskies distilled in 2020 or 2021 will see an acceleration in growth due to the lack of availability over this time frame and increased demand making it highly investible whisky.

Recent data collated this year has been reflective of the trends which have been witnessed in the whisky market over the past few years, with extremely reassuring outcomes. This is particularly noticeable in the fact that the aforementioned whisky index did not record any negative returns throughout the period of the study. The projected annual capital growth across the distilleries is expected to continue in to 2021.

If growth continues at a comparable rate, the data suggests that investments made in to casks from one of the top ten distilleries, which Elite Wine & Whisky has access to, could see their investment double in value over the next 5 years. In times of great uncertainty, these findings provide great prospects for future days ahead.

 

How to invest in whisky

Whether or not you’re a passionate whisky drinker, taking the plunge in to whisky investment is extremely simple with the help of a financial expert who can educate investors in their investment. Once you have all the tools to make a well informed choice, the returns can be just as fruitful as the drinking.

Forex
ArticlesMarkets

Why the Best Lessons in Forex Trading Tend to be Self-taught

Forex

Learning to trade forex can be a daunting prospect for new investors and there is often an inclination to buy into expensive training courses to prepare for the world of finance. While some sort of education will stand you in good stead for your forex journey, there is no substitute for real life, self-taught experiences.

To get started, you need to select a forex broker that offers an MT5 Trading Platform with a range of features that will make trading easier for you. This is crucial if you are planning to rely on self-teaching as you will need high-quality tools, charts, technical indicators and order types to enter and exit the market at the right time.

 

Getting to grips with leverage

Another factor to consider at this point is leverage. You will be able to trade “on margin” in forex, which will make your initial deposit go further. Brokers generally offer higher leverage for forex, enabling you to trade large positions and potentially increase your returns. However, it can also magnify losses, so you should wield this carefully when you start out.

Using leverage effectively is something that you can only learn when you start trading with real money. While training accounts can help you to learn these concepts, it is much more difficult to put them into practice in a “live” environment. Learning the right lessons about leverage as you start out will make you a better investor in the long term.

 

Understanding the psychological pressure

Many lessons that are self-taught are also related to the emotional side of trading forex. Again, in practice, it is easier to swallow losses and not get carried away with a hot streak of gains, but when you start trading properly, working on your “soft” skills will help you buy and sell currencies in the right frame of mind. Correct decision making can be linked to your character and disposition as much as having the best information.

This also extends to the psychological pressure of making trades on a daily basis. This is something that you will only realize when you begin trading. Even the best courses cannot prepare you for what it is really like to make fast, hard decisions that could affect your finances. That’s why it is also important to implement some degree of bankroll management, so your positions don’t consume all of your money. Experienced traders typically follow a 1%-2% rule for investing.

 

Finding the right information

Promises about quick profits from “trading gurus” and experts can be enticing for new traders but rarely is there ever a get rich strategy that works quickly. Rather than spending money on vendors that over-exaggerate quick return on investments, you should instead focus on finding good information that you can make use of to complete judicious trades.

Partnering with the right broker is vital as you will need access to interactive charts, technical indicators and analysis charts to identify currencies for investment. By practicing and putting these features into use, you can learn more from them and prepare to trade forex with steady, long-term returns in mind.

 

Learning for free

It is important to remember that it is relatively easy for investors to trade forex. All you need to do is open an account and make a minimum deposit. The low barrier to entry means anyone with a small investment can learn to trade currencies for “free” without having to spend money on an education. Arguably, this is a great place to start as you will have a blank canvas to work from.

It is crucial that you read free articles, tutorials and guides to educate yourself about key forex concepts to build a specific strategy or style of trading that can eventually deliver consistent profits. Without this hands-on, self-taught process, you will struggle to make sense of the fast-paced forex environment.

 

Closing trades

Finally, traders are focused on making profits, but central to that is knowing when to close a trade and exit the market. This is something that only experience can teach. Even traders who have trained for months or even years can fall into a trap of waiting for the market to turn back in their favor. Financial markets are inherently volatile and irrational, so you need to act decisively when both entering and exiting trades. All of these self-taught lessons are invaluable and will give you a better chance of succeeding when trading forex.

Recession
ArticlesFinanceMarkets

The Next Great Depression — Is Your Business Ready?

Recession

By Wisteria

We are living through extremely uncertain times regarding both public safety and the global economy. Even before the Covid-19 pandemic swept the world, we were teetering on the brink of a recession. Economists such as David Blanchflower compared the pre-Covid financial landscape to that of pre-banking crash 2008. If nothing else, this is a major red flag which should give you the motivation you need to take every possible measure to protect your business.

 

Is an international recession on the horizon?

At the very beginning of the year, the UN warned that we could be facing a global recession in 2021. That was before taking the impact of Covid-19 into account. Factors including trade wars, currency fluctuations, and Brexit were all amounting to an uncertain global economy and the Unctad report, “global growth will fall from 3% in 2018 to 2.3% this year — its weakest since the 1.7% contraction in 2009”.

Add the impact of Covid-19 to the already precarious situation, and we are now expecting to be hit with a recession rivalling even the magnitude of the Great Depression (and far worse than the 2008 financial crash). As of June this year, the global growth projection for 2020 has fallen to -4.9 per cent (1.9 per cent below the forecast made by the World Economic Outlook (WEO) in April). In addition, the road to recovery doesn’t look like it will be as fast as the WEO initially predicted, and they are now only forecasting a 5.4 per cent global growth for 2021, 6.5 per cent lower than the predictions before Covid-19. Low income households are expected to feel a particular acute financial impact, and global poverty, which has been significantly reduced since the 1990s, is likely to reach another crisis point.

Because of strain on the global economy, we are expected to encounter rising levels of debt in both developing and advanced countries, as well as a “global downturn that could increase unemployment and inequality”, as stated by Kristalina Georgieva of the International Monetary Fund. Redundancies and a decline in job vacancies on an international basis are expected to follow such a crash, with unemployment rates increasing at an alarming rate.

 

How hard will the UK be hit?

The OECD’s (Organisation for Economic Co-operation and Development) most recent reports do not look promising. Experts have predicted that the UK will likely be the worst hit country in Europe and the economy is forecasted to contract by 11.5 per cent after the first wave of the pandemic. If we end up seeing a second of Covid-19 later in the year, this contraction is predicted to increase to 14 per cent.

One of the major reasons why the UK is likely to feel such a stark economic impact is our country’s reliance on the service industry for our economic growth, a sector which has been particularly damaged by the repercussions of Covid-19.

In addition to the economic factors surrounding Covid-19, the US trade war with China has caused a larger drag on global growth than anticipated, and the UK will be on the receiving end of the economic repercussions. What’s more, the looming prospect of Brexit poses different threats to the UK’s economy. At best, the uncertainty caused by both Brexit and the Covid-19 pandemic has created a hesitant consumer base in the UK. Customers are spending less and are more cautious of businesses than ever. It is a difficult time to maintain customer loyalty, as would-be consumers are tightening their purses in the fear of a looming financial disaster.

 

Learn how to protect your business

Times may be challenging, but if you think ahead, you’ll be able to safeguard your business against a recession. Businesses that prepare for every eventuality are the ones that not only survive but thrive in the face of adversity. Leaving it too late to implement a recession strategy could be your undoing, so get ahead of the game and prepare for a period of great financial difficulty. Here are some key strategies that will help your business face economic uncertainty:

  • Focus on existing customers — as we have discussed, consumers aren’t spending as much due to lack of trust and growing apprehension. Because of this, it is essential that you focus on your existing customer base during testing financial times. This will increase brand loyalty and grow customer confidence. Offer them benefits and reasons to stay true to your brand.

  • Put some adjacency and extension strategies in motion — a recession is not the time to start looking into completely new avenues of profit. However, you can’t let your services become stagnant. Adjacency strategy is the optimum solution to this — find an area adjacent to your core product or services to expand into. Extension strategy is similar: take your current service a little further and offer new and exciting opportunities or products to existing customers. Ensure that you have a flexed forecast so that the business is fully prepared for all possible outcomes of this new strategy.

  • Forge some powerful alliances — mergers, acquisitions, and alliances are all key strategies during a recession. Alliances offer a great way to expand your business without investing in anything completely new during times of uncertainty.

  • Don’t be afraid to outsource — outsourcing key elements of your business can save you time, money, and financial anxiety during a recession. Outsourcing your accounts department may allow you create scale and flexibility within your organisation.

  • Reduce inventory costs — look to see if your business has the leeway to reduce costs without sacrificing the quality of the services or products it provides. This will help to take the pressure off your finances.

  • Don’t sacrifice your marketing budget — often, brands make cuts to their marketing budgets in response to financial anxiety. However, this will spell disaster for your company. There is no time more crucial to maintain your marketing efforts and show customers that your brand is tackling the recession and winning.

  • Tighten up on your corporate governance — companies that see a downturn in performance are more likely to survive if they have good corporate governance embedded into their culture. Part of this is ensuring that the company has had a financial audit. If in doubt, contact an accountancy from that specialises in audits, tax advice, and small business VAT.

No one knows quite what to expect over the coming months and years, but now is the time to start safeguarding your business against an imminent recession. The road ahead does not look easy, but if you put certain measures in place and react in a timely manner, there’s still time to recession-proof your business and come out on top.

Business man using a laptop to trade stocks
Stocks
ArticlesCapital Markets (stocks and bonds)MarketsStock Markets

Quick Tips to Help You Start Buying and Selling Stocks on a Busy Schedule

Stocks

Very few of us are blessed with a lot of spare time at the moment. The pandemic has hit us all extremely hard, and if we’re not worrying about our health or our jobs, we’re looking for ways that we can shore up our finances with some good investments in case there are more rainy days to come. Now, you might think that the only way to make any real money on the stock market is to treat it essentially as a full-time job. But buying and selling stocks and shares has never been easier, and if you know what you’re doing, it is a great way to improve your investment portfolio.

If you want to get started trading quickly, then there are a few simple steps that you need to take. Some are about making you more confident and capable to make the kinds of moves that you need to be making to actually see a return on your investment. Some are about keeping you safe in both in terms of potential losses and from cybersecurity threats. Let’s break down the most important things that you need to know before you dive in.

 

Research Which Trading Platform You Want to Be Using

The easiest way to get trading quickly and to make sure that you’re comfortable doing so is by finding the right trading platform. There are many different platforms out there and most of them are aimed at different kinds of traders with different kinds of needs. For example, people in high finance who have been trading for years would not be using the kind of platform aimed at a nervous first timer who wants to keep things as low-stakes as possible.

One of the most common things that both veterans and rookies look for is an ETF platform. ETF stands for exchange-traded funds, which means that you can make one investment which translates into investing in hundreds of different funds. You can create a diversified portfolio with a single click. There are several different platforms that provide this, but you will need to be keeping an eye out for fees, the range of assets, markets and economies you can invest in, customer support and the regulation it is subject to. Instead of scrolling results for best ETF trading platform UK, read this guide to the pros and cons of each of the major platforms. BuyShares offers detailed breakdowns to trading and investing for every experience level.

 

Know How Much You Have to Spend

If you want to get started trading as soon as possible, then you need to make sure that you have the funds to do so. Most platforms will offer you a few different payment options, whether that’s through your credit or debit card, PayPal and so on, but the important thing is that you absolutely must know how much you have to work with.

Having a crystal-clear idea will allow you to sell and buy with confidence, and it will also help you to avoid spending more than you can afford. It is important to remember that there are no guarantees on the stock market, and that even a “sure thing” is vulnerable to fluctuations. Do your budgeting before you get started so you don’t make any mistakes you can’t fix.

 

Keep Your Finger on the Pulse

Some investors are what’s known as “passive.” That means that they are perfectly happy to buy their shares and leave them to (hopefully) appreciate in value with as little involvement from them as possible. Everyone else is described as “active”, meaning that they are constantly checking on their stock performance to see if now is the time to check out or double down on their investment.

If you’re going to be the latter and you want to get started right away, then you should make sure that you have the tools and the time. Choosing the right trading platform will give you a great head start, and many will have a mobile app to help you keep tabs on your investments wherever you are. Online trading has seen a real boom during the pandemic so you won’t be short on options.

 

Get Your Security In Place Now

It probably won’t have escaped your notice that online scams and cybercrime rose to deeply worrying levels over the course of the pandemic. These scams aren’t just about people getting text messages about missed deliveries, vaccine appointments or people lying about their COVID status. We’ve seen everyone from major corporations to small businesses face issues with their finances and data. If you’re looking at getting into trading, then security is not a step that you can afford to miss, no matter how much of a hurry you’re in. Check out your platform’s security measures and don’t be afraid to ask questions if you have any particular causes for concern. Set up a different email address for trading, take greater care with your passwords and be as careful as you can.

Trading Chart
ArticlesMarkets

3 Things to Remember Before You Start Trading

Trading Chart


Trading is not something you can engage with on blind optimism alone. To succeed, you require a specific frame of mind.

Professional traders buy and sell financial instruments, such as stocks and bonds, and time their exchanges with precision for optimum returns. They don’t invest long-term either, but rather make a succession of deals so that they can turn themselves a faster profit.

Still, the trading challenges are plentiful, and you can expect to face some degree of hardship on your journey. Instead of learning through trial and error, we’ve compiled some advice to help you get started below.

 

Know Yourself

Traders know who they are at their core and don’t buckle under pressure. They aren’t overly ambitious, nor do they rush their decision-making processes.

You need to be a headstrong individual if you’re to succeed in trading, eager to follow your instincts and chart your own path to success. However, it’s vital to undergo a measured approach and to know your limits from the start.

Small-time investors often use online investment platforms, but the pressures can be insurmountable if they’re inexperienced in the world of trading. Unless you have a sizable amount of trading capital you can freely squander without consequence, this isn’t something you can throw yourself into with vague hopes. Craft is required first.

Traders also bring much of themselves to their pursuit. You’ll need to power through stress, make sacrifices in your timekeeping, and continuously research trading strategies to polish your skills. If you feel you possess that level of commitment, you’re ready to proceed to the next step.

 

Adopt a Learner’s Mentality

Traders’ instincts are sharp, and they refine them over the sum of years. They also pair their intuition with learned knowledge.

If possible, find a mentor figure whose wisdom you can tap into. Regularly consult them for guidance throughout your trading career. Be sure to temper your expectations with the perspective afforded by your experiences.

Traders are smart enough to know that the learning process never stops. They’ll embark on trading courses to embolden their prospects and learn about algorithmic trading. These programmes will help you unearth market efficiencies, recognise profitable market patterns and make trades at higher frequencies. Algorithmic trading courses are aimed at professional traders and newcomers alike, so keep them in mind as you advance your career.

 

Anticipate Changes

Traders are often mischaracterised as deceptive individuals, but they operate firmly within the bounds of many laws.

These laws vary from country to country. For instance, Thailand has their own trading rules and regulations that must be adhered to. Foreigners are banned from operating in specific sectors, while business there is generally conducted in an intensely personal and formal fashion. Certain jokes are unwelcome, and you can expect any associates to want to know you deeply before lifting a finger in trading with you.

It’s essential to be sensitive to any cultural differences when you’re trading internationally. Otherwise, you’ll encounter numerous roadblocks, and time is money for traders. Conduct all your research of what is required in each country and then commence with your plans. 

Trader’s must be confident, intuitive, and educated if they hope to succeed in their endeavours.

Crypto Bitcoin
BankingMarkets

More than Half the Nation View Cryptocurrency Trading as Form of Gambling

Crypto Bitcoin

More than half (56%) of Brits deem cryptocurrency trading as a form of gambling, according to a new study from Gamban, a software company that blocks access to online gambling sites and apps across all of a person’s devices.
After speaking with 1,007 gamblers throughout the country, the research also found that nearly half (48%) would consider stock trading a form of gambling too.
Previous research has identified that excessive trading can be linked to a gambling disorder. Grall-Bronnec et al (2017) found that addictive-like trading behaviour can be a subset of gambling disorders. Similarly, a study by Mills et al (2019) revealed more than 50% of regular gamblers have traded cryptocurrencies in the previous year and that this was associated with an increased risk for problem gambling, depression and anxiety. 
Jack Symons, CEO of Gamban, said: “The aim of this research was to help us understand whether different types of trading are considered gambling. In a world where the lure of immediate gratification through digital platforms is increasingly tempting, it’s important that we take appropriate steps to ensure our users are protected from any activities that closely resemble gambling.
“Understanding whether the content we block should expand beyond the traditional forms of gambling will allow us to better protect our users. As well as this, we can then begin to provide recommendations on reducing gambling harm.”
In the last few years – and especially during the coronavirus pandemic – online trading, including cryptocurrency trading, has grown significantly (Nefedova et al., 2020) The increase in online trading activity has resulted in the birth of new online trading platforms, larger budgets dedicated to advertising on various social media channels and an increased overall awareness of online trading. Additionally, cryptocurrency trading has seen a significant rise over the last year with many day traders “shifting their attention to more speculative assets” (Financial Times, 2021).
Jack Symons added: “The results of our research, paired with current available literature, indicates that trading and gambling share similar characteristics and that some forms of trading may be closely linked with gambling harm. 
“Problem gamblers may be at risk when exposed to different forms of online trading. More volatile forms of trading, like cryptocurrency and stock trading, are more akin to betting than investing. So as of next month we intend to restrict access to platforms that offer these more volatile forms of trading to benefit the recovery journey of Gamban users.”
Gamban works with the the self-exclusion scheme GAMSTOP, and the leading treatment provider GamCare, giving those experiencing harm from gambling access to their software for free through TalkBanStop.com
Gamban also struck a partnership with Norway’s government-owned national lottery and gaming operator, Norsk Tipping, to provide its software for free to those who self-exclude.
Trading
ArticlesMarkets

Answering the Nation’s Top 10 Trading Questions

Trading

By Annie Charalambous, Head of Communications at ETX Capital

The past year has been challenging on all fronts, the least of which being the nation’s finances. With many furloughed or having lost their jobs altogether, financial stresses are mounting, and getting the most out of our money is more important than ever.

As interest rates sit at historic lows, people are starting to rethink just how and where they invest their savings, and trading is one such avenue that’s seen a rise in activity over the pandemic.

Over at ETX Capital, we know that making an educated decision is imperative to success, and so we’ve looked at Google search data to reveal the most common questions budding UK traders are asking, and answered them.

 

What is stock trading? (9,900 monthly searches)

Stocks, or shares, are fractions of ownership in a publicly traded company, that anybody can buy (or sell) depending on the perceived value of that business. Traditionally, you’d want to get in (buy) at a lower price and hold onto that stock until it appreciates in value for you to make a profit.

 

What is options trading? (8,100 monthly searches)

Options are financial contracts that give their holders the ability – but not the obligation (hence option) – to buy or sell a security for an agreed-upon price on a set date, thus hedging against the risk of fluctuating market prices.

 

What is a CFD? (6,600 monthly searches)

A CFD, or Contract for Difference, is another type of trading contract, whereby you are speculating on the direction an instrument may move in, without owning the underlying asset.

You are therefore trading on the price fluctuation – “buying” if you believe its value will increase over time, or “selling” if you anticipate a decline.

 

What is forex trading? (5,400 monthly searches)

Forex, coming from foreign exchange, refers to the buying and selling of different currencies to profit from the difference in their values. The forex market is the largest in the world, seeing over $6 trillion a day in volume – everyone from holidaymakers to big banks partake in the FX market.

 

What is leveraged trading? (5,400 monthly searches)

Leveraged trading works in such a way that a retail trader can open a larger trade with less capital, with the broker putting up the rest of the balance (i.e., the leverage).

Having larger position sizes means your exposure is higher, resulting in bigger returns and conversely, bigger losses.

 

What is futures trading? (2,900 monthly searches)

Futures contracts work in such a way that two parties – a buyer and a seller – agree to exchange an asset on a fixed future date, with the profit (or loss) realized at the time of exchange.

Your profit or loss is realised at the time of the exchange, depending on how the price has fluctuated since the order was placed.

 

What is scalping? (2,900 monthly searches)

Scalping is the act of placing trades you intend to keep open for a very short amount of time, ranging from a few seconds to several minutes, to capitalize on high volatility or sharp spikes in the market.

While there are brokers that may allow scalping in some capacity, it is a form of market abuse if done frequently.

 

How to trade stocks (2,400 monthly searches)

As with any investment, research is the first step.

From choosing the right broker (you’ll want to consider fees, liquidity, selection of stocks, and of course, reputation) to finding the right markets to invest in, you should always know why you’re investing in a particular stock.

Some factors worth looking at may include analysts’ projections for stock performance, the company’s financial results (or earnings), published quarterly, as well as the dividends it pays out.

 

How are commodities traded? (2,400 monthly searches)

Commodities are, typically finite, physical products that have a fluctuating value. There are both hard and soft commodities, ranging from gold, silver, oil, and other natural resources to the likes of coffee, wheat, corn, and even orange juice.

Their value is dependent on supply and demand and can be influenced by anything from weather to politics.

 

How to trade cryptocurrencies (1,900 monthly searches)

Like forex and stocks, cryptocurrencies can be traded as either CFD products or bought and held in a virtual wallet. While more volatile than other traditional assets, cryptocurrencies can be a profitable investment if, like any instrument, you get in at the right time.

When trading crypto CFDs, you can short or sell, meaning you can profit from the drops and not just a rise in value.

Recovery
ArticlesBankingMarkets

New Global Data on Bank Customer Behavior Shows Travel is Poised to Recover Faster than Expected

Recovery
  • Points transfers from banks into frequent flyer schemes are accelerating and trending ahead of airline passenger recovery
  • US points transfer activity already exceeding pre-pandemic level by 30%
Yesterday Ascenda, the technology company that makes banking rewarding, revealed consumer confidence in travel is returning quickly according to leading indicators from its bank solution TransferConnect, the world’s largest global exchange for frequent traveller miles and points.
TransferConnect facilitates the exchange of rewards currencies between financial services brands and a broad set of major airlines, hotel chains, super apps and retailers worldwide. The network enables banks across 40 markets to connect with 50 major merchants and delivers access to real-time points transfers for 1.2 billion consumers worldwide.
The newly published data is the first of its kind ever released in the industry and showcases how rewards currency exchange volume from banks into frequent flyer schemes has compared against airline Revenue Passenger Kilometers (RPKs) over the past 18 months. The analysis provides unique insight into how the multi-billion dollar bank rewards value chain has been impacted by the pandemic and where travel recovery is heading in coming months.
When COVID-19 first brought global travel to a standstill in March 2020, bank consumers naturally ceased to transfer their accumulated points into frequent flyer miles. Both RPKs and rewards transfers plummeted more than 80% during a 60-day period.
However, customers continued to earn bank rewards unabated on their everyday card spend as the pandemic unfolded, with growing points balances waiting to be redeemed. The year 2021 then brought the turning point, as news of global vaccination progress unleashed pent up travel aspirations and prompted a reinvigoration of bank point conversions into frequent flyer schemes. Since March 2021, that transfer activity has accelerated its recovery materially ahead of passengers carried. The effect is consistent across geographies and especially pronounced in the US market, where the volume of bank points exchanged into frequent flyer miles has actually surpassed pre-pandemic levels from April 2021 onward and is still continuing its upward trajectory.
In addition to these strong signals of returning consumer confidence in air travel, the analysis also reveals that hotel chains have capitalized on the pandemic to sustainably grow their share of global rewards currency transfers. Following the onset of the crisis, transfers into hotel points had naturally gained relative share as consumers were forced to opt for local vacations. Hotel points represented less than 10% of currency transfer volume in 2019, increasing three-fold in March 2020 to 30%. What’s most remarkable, however, is that the behavior change has persisted into 2021, even during the recent months of recovery, indicating that the chains have sustainably grown their level of engagement with loyalty program members.
Sebastian Grobys, Chief Commercial Officer at Ascenda, said: “As the pandemic unfolded, the world’s eyes were glued to plummeting operating statistics published by airlines and travel industry bodies across the world. Since then, there have been many attempts to analyse the slope of the recovery curve and make predictions about the future, for example looking at forward booking patterns. Today we’re excited to contribute a new and unique source of data that shows frequent flier mile transfers are rising significantly in a strong signal of accelerating recovery.”
Investment market
ArticlesFinanceMarkets

UK Investors Have Their Say

Investment market

Confidence levels are up, Millennials make their mark and interest in ethical investing hits new highs.

Confidence levels amongst UK investors have risen 20 points (62 – 82) in the last 12 months according to new research amongst 1100 UK investors (£10k+).

The Investor Index, now in its second year, is conducted jointly by London-based communications agency AML Group and research agency The Nursery Research and Planning and was launched in April 2020 to assess the immediate impact of Covid 19 on investors and the UK investment marketplace. The first report of its kind to provide an objective overview of the industry based on hard data – the study was welcomed as a barometer of post-Covid investor behaviours.

One year on, and still in the grip of the pandemic, the 2021 study has revealed some significant changes and ‘recalibrations’ amongst investors.

 

Confidence returns – but not to pre-pandemic levels

Over the past 12 months, confidence levels have risen most amongst older investors (55+) up 30 points (54 – 84), investors that are retired up 27 points (57 – 84), those that use financial advisers up 31 points (65 – 96) and investors with a portfolio of £200k+  – up 38 points (55 – 93).

The study has also revealed a disparity in gender confidence levels – with men indicating a 25 point rise over the last 12 months (61- 86) compared to a rise in confidence levels of just 10 points among female investors (65 – 75).

However whilst the results are cause for some degree of optimism – investor confidence levels are still 18 points down from pre-Covid levels.

 

Gen Z/Millennials Vs Baby Boomers – the emerging generational divide

10% of UK investors have started investing since the pandemic began – and of those new investors three-quarters (74%) are under 35s.

It’s a changing landscape with the younger investor bringing different attitudes and priorities to the investor table.

89% of under 35s have changed their investment strategy over the last year vs. 31% of 55+ investors. Younger investors are also increasingly looking to ESG products – with 27% including responsible investments in their portfolio compared to only 4% of investors aged 55 and older. Younger investors are also more focused on the long game – with 30% looking to longer term investments compared to 8% of investors 55+.

When it comes to investment decisions, younger investors are increasingly turning to family (40%), banks (30%) and friends (27%) for advice.

 

It’s a gift – investors demonstrate a change of attitude

57% of UK investors have changed their investment strategy since the pandemic started – with a focus on products offering ‘long term growth’ (46%) over ‘short term growth’ (30%).

Investors are increasingly concerned about their children’s financial security. 70% of investors are aware of the £3,000 wealth transfer allowance with 38% having given £500 or more over the last 12 months – with children the biggest recipients (72%). Indeed the average amount gifted in 2020 was £8087 compared to £5421 pre pandemic (2019) – a 49% increase and a clear indicator of the want for investors to safeguard futures for loved ones.

 

How invested is the UK investor in Responsible Investing?

Investors feel that ethical/socially responsible financial products are more important now than at the same time last year – up 9 percentage points (23% – 32%) with three in ten of those surveyed stating that they believe that these products will be more important in the future – up six percentage points (24% – 30%).

However despite investors acknowledging the importance of ESG/RI there is a continuing perception, despite contrary evidence, that it carries a performance penalty with investors ‘prioritising financial security over wider ethical considerations’ – up five percentage points (23% – 28%).

 

Younger investors look to DIY platforms

Since the start of the pandemic in March 2020, four in ten investors under 35 (39%) have invested more with DIY platforms – compared to just 14% of 55+. And while the younger investor has indicated a ‘happy to do it myself’ attitude regarding financial planning and investments they are less confident when it comes to their feelings about the industry. Just under one-third of under 35s (29%) are confident markets will bounce back compared to more than half (52%) of investors aged 55+.

Perhaps predictably, younger investors are more tapped into trends and news stories connected to investing.

39% of under 35s cited an awareness of the growth in DIY platforms with 44% familiar with the story around Reddit users driving up the share price of Game Stop and 31% aware of the rise in silver prices. Investors aged 55+ recorded significantly lower awareness across all trends.

Housing market
ArticlesMarkets

How to Ensure Your House Is Ready For the Market

When putting your house on the market, there are numerous factors to consider. For instance, you may ask the question “when is the best time to sell a house?” However, before you consider putting your house on the market, you may want to ensure that it is ready first. In doing so, this could help to speed up the process and minimise the risk of losing money.

 

Finding the Right Agent

Deciding that you want to sell your home is the first step of the moving process, however, finding the right estate agent to help you sell your property is next. When looking to find the right estate agent, you must select the right person, as this can have an impact on the time it takes to sell your home.

As you look at the options available to you, look for the person who you feel follows the best practice, meets all the requirements and effortlessly work to industry standards. Aside from providing you with peace of mind that you have the right person capable of helping to sell your property, it can also help with increasing your chances of selling your home.

 

Check the House For Any Minor Repairs

Showcasing a house that looks as though it has been well-maintained, creates an impression on potential buyers that the property has been cared for over the years. As you begin the process of putting your house on market, it is worth conducting a thorough investigation of your property to see if there are any problem areas you notice that could be worth fixing.

These tasks do not need to be grand such as renovating a kitchen, they could be as small as filling in any holes in the walls or checking for any clogs in your guttering. This could be done before or after your valuation, however, doing it before might help with increasing the value of the property.

 

Have An Accurate Valuation First

Ensuring that you have an accurate valuation of your property is a key factor when selling your home. For instance, if you undervalue your home and it goes onto the property with too low of a value, whilst you may generate a lot of interest, if you were to sell at such a low cost then you will also lose money.

As you look to put your house onto the market, you may want to consider house valuation surveys to determine what price your property should be listed at. If you are wanting to value your house, firms such as GB Home Surveys can provide you with an accurate overall value of your property. Investing in such a service will help give you peace of mind that there are no potential pitfalls that could cause a surprise.

 

Worth Going Neutral

When looking at any property, neutral tones and colours tend to be the most appealing to potential buyers. In addition to brightening up the home and creating the illusion that rooms are a touch bigger than they are, neutral tones will help those viewing the property to envision themselves living there.

 

Ultimately, most of the updates that can be done to prepare your home for the market are unlikely to damage your bank account. Instead, they can help to increase the overall value of your property and potentially selling it far quicker – so it is worth considering implementing one of these strategies before you put your house on the market.

Cryptocurrencies
ArticlesCommoditiesMarkets

Changing the Game: Looking at the Benefits of Alternative Cryptocurrencies

Cryptocurrencies

By Sergei Grigoriev, Executive Director, Eurotrader

With the popularity of cryptocurrency reaching a fever pitch, its development has also attracted new contenders within the trading sphere.

Virtual payments have made numerous impressions on global headlines. News networks were set ablaze following triggers such as Elon Musk’s influence on the market and reports of an investor losing millions in Bitcoin, to name a few. It therefore comes as no surprise that attention is focused heavily on the commodity.

However, despite Bitcoin being the most popular name in the crypto sphere – and having the highest valuation – there is a range of lucrative currencies existing in a growing market, each with its own benefits and downsides.

This article explores some of the benefits of emerging cryptocurrencies and the key considerations for finding the right investment.

 

The attraction of cryptocurrency

Much like its blockchain host, cryptocurrency boasts cybersecurity credentials that make it an attractive investment.

This ‘trustless’ style of investment reduces risk, as no bank, building society or financial adviser holds the stock for you. And despite stories of people throwing away their crypto fortunes, there isn’t any physical currency to be concerned about – significantly reducing the risk of theft or fraud that comes with traditional currencies.

Cryptocurrencies also offer another significant pull for investors: they require no middleman. While trading platforms charge fees to trade, withdraw and settle money, these are minimal compared with the hefty fees charged by other investments, like currency conversion costs.

The speed of cryptocurrency trading is also a selling point. Transactions are seamless, instant and secure, with blockchains also lessening the need for a paper trail and helping to guard you against fraud.

 

Delving deeper into the market

Bitcoin leads the cryptocurrency market in almost every department. Its popularity and value are currently unrivalled, with a market cap hovering around the $1 trillion mark.

With that said, Ethereum’s sudden surge to prominence shouldn’t be taken lightly, showing that even newcomers can quickly make waves in the market. With a market cap of $500 billion, Ethereum isn’t showing signs of slowing down.

Since Bitcoin’s launch in 2009, the creation of competing digital currencies has been steadily increasing, with a sudden boom in recent years. In terms of their functionality and operation, most alternative currencies differ wildly from Bitcoin. However, some have similar qualities to the current main player.

For example, Ethereum uses the same blockchain ledger as Bitcoin, with similar benefits. However, the system itself is geared to prioritise speed of transfer, with a different operating system that sets it apart from Bitcoin.

On the other hand, Litecoin is far more similar to Bitcoin. As its name implies, it’s a ‘lighter’ version of the reigning crypto king, however, it also offers more impressive transfer speeds.

Some cryptocurrencies run on independent, alternative systems. For example, Ripple is a centralised crypto platform, notably used for global monetary exchange, intending to make these transactions cheaper and faster than traditional international bank transfers. 

Cryptocurrencies typically aim to remove themselves from the moderation of centralised governments and geopolitical market fluctuations – however, Ripple is an exception, as its most common use is by banks and other intermediaries.

 

The cons of engaging with smaller currencies

Bitcoin is the most established market player by almost every available metric. This can make it difficult for even innovative new cryptocurrencies, offering unique benefits, to break into the market.

This is helped by the fact that it was the first successful and widespread digital currency. Because of its unprecedented growth – and an established blockchain ledger, accessible to all – Bitcoin boasts the largest user base and offers the highest potential prices and rewards on investment.

It’s because of this dominance in the market that alternative currencies struggle to match Bitcoin in size or surpass it in growth.

 

Importance of diversification

With Bitcoin pricing many budding traders out of the market, there are plenty of attractive alternative investments available. It’s simply about identifying the right investment. However, this is more challenging than ever, for both experienced investors and first-time traders alike.

It’s important to understand the unique benefits offered by each currency. For example, those opting for advanced scalability and an intensively secure network will likely turn their attention to Ethereum.

Ethereum’s decentralised ledger is valued for its impressive security, relying on two separate verification processes, Smart Contracts and ‘dApps’.

Smart Contracts are functions that support safe and secure transactions on the Ethereum blockchain. Their specific code and data functions mean payments can only be processed when certain criteria are met. 

It’s often said that Smart Contracts behave like vending machines. A combination of money and an inputted code allows users to access the digital currency, without the need for third-party intervention or transaction management.

Similarly, decentralised applications, or ‘dApps’, are also at the heart of Ethereum’s operation. These are ordinary applications that operate on a decentralised server, like the blockchain, and are defined by smart contracts. Importantly, they allow users to engage with the front-end interface in a way that is intuitive, secure and user-friendly.

Other Bitcoin alternatives offer further unique benefits. Litecoin, for example, is incredibly scalable and efficient. It boasts impressive speeds, with transactions up to four times faster than Bitcoin.

Litecoin is also growing in popularity, as well as being cheaper than Bitcoin – appealing to particular sectors of the trading market that are geared for small, plentiful and rapid trades.

 

Knowing what is right for you

To find the right investment, it’s advised to produce a checklist of what you want to achieve from your investment, as well as defining how much risk you’re willing to incur.

It’s impossible to simply declare a single cryptocurrency as ‘the best investment’. Defining your ambitions and goals as a trader first helps narrow your potential investments into a viable portfolio of assets. 

Over the last decade, the range of accessible cryptocurrencies has boomed, giving traders more autonomy in their choices. 

That being said, an alternative to directly investing in a single cryptocurrency is to trade CFDs. Instead of owning an asset, you speculate on market movements. If you correctly predict a market rise or fall, you may be able to earn money.

The growing number of crypto contenders, combined with the growing interest in cryptocurrencies, makes crypto CFD trading a suitable alternative to those who are following the market and are interested by different crypto currencies.

This heightened interest has led to more CFD trading platforms and retail brokers offering cryptocurrency trading pairs. Traders can trade crypto-fiat pairings, such as Bitcoin Cash USD (BCHUSD) without the need for a crypto wallet or ownership of cryptos themselves. 

However, no matter your experience level or route you decide to take, research is key. In addition to analysing the fundamental nature of each currency, it’s important to understand how to build and manage a portfolio. Cryptos with different growth triggers can help diversify your portfolio and hedge against crashes, giving you peace of mind over your finances.

If you’re unsure, working with a professional can help you better understand the market, putting your mind at ease over the risks and rewards of your investments.

Gold
ArticlesFinanceMarkets

Why Gift Premium Bonds When You Can Gift Gold?

Gold


Becky Hutchinson, Managing Director at Minted, an investment platform which allows individuals to buy and sell gold bullion.

In light of the ‘new normal’, parents and grandparents are looking for new ways to gift, virtually or otherwise. But in a climate of stock market volatility and low interest rates, are traditional financial investments still a solid choice, and could gold bullion be a safer bet?

There’s no doubt about it, Premium Bonds have earned their reputation as a safe and steadfast savings option. First introduced by the Government in 1956, these tax-free bonds from the National Savings and Investments (NS&I) agency are now UK’s biggest savings product, with about 22 million people having over £86 billion invested in them. Every £1 Bond is given a unique number and all numbers are put into a computer called Ernie (which stands for Electronic Random Number Indicator Equipment), which draws monthly winners. For years, they have been popular to give as presents to children under 16. The parent or guardian named on the application looks after the Bonds until the child’s 16th birthday, when they are entitled to a gift that will hopefully keep on giving.

In December 2020, however, the prize fund was cut considerably and due to the drop in the Bank of England base rate, NS&I also reduced the odds of winning. As a monthly lottery, the closest thing Premium Bonds have to an interest rate is their annual prize rate, which currently stands at one percent. This is based on the average pay out, depending on the number of bonds owned and, while it isn’t completely accurate, it does allow for an estimated calculation to be made about interest gained in a year.

But winning may be harder than it seems. According to Money Saving Expert, only 30% of people with £1,000 in Premium Bonds win £25 or more per year. And, over five years, someone with £1,000 in Premium Bonds and ‘average luck’ is expected to win roughly £50. While that may seem a lot of money to a child who’s been gifted Bonds, any parent knows that £50 doesn’t go far in today’s society.

When it comes to investment options, however, Premium Bonds are as safe as they get. Operated by NS&I, which is backed by the Treasury rather than a bank, funds are easy to access and there is little-to-no risk of losing money – only a small gamble around any potential ‘interest’. However, while this level of financial security was once a significant perk, all UK-regulated savings accounts are now protected by the Financial Services Compensation Scheme (FSCS) under the savings safety rules. This extends up to £85,000 per person, per bank, building society or credit union – £35,000 more than the maximum deposit allowance for Premium Bonds.

So, is there an alternative safe-haven investment option, with a better interest rate and without a savings cap? There is and it’s far older than Premium Bonds. Gold was one of the first precious metals to be used by humans as a trading commodity and, to this day, remains a stable choice. Many children’s books tell stories of gold – from pirates to royalty – and, in sport, a gold medal has always been associated with winning. From a very young age, the intrinsic value of gold has been ingrained in most people’s minds.

Aside from the glitz and glamour, perhaps the biggest difference between gold and Premium Bonds is that gold is a tangible asset. Investors can handle their physical gold and store it as they wish or even liquidate an asset if needed. Gold doesn’t just sit pretty either; while its price may fluctuate, historically and over the long term, it trends higher. Currently, the average growth rate per year is nine percent, considerably greater than bonds or current interest rates. With this in mind, £1,000 invested in gold could be worth around £1,538 after five years.

With the popularity of the finite resource growing, more user-friendly and flexible tech-focused routes into gold investment are appearing, making gifting the precious metal much easier. Features such as reward points for referring friends and family also provide an incentive for parents to start building up points for their children. With investment platforms like Minted, people can either purchase gold with a lump sum or save set amounts every month, starting at £30. Once enough has been saved for a gold bar, the physical gold can either be stored in a secure London vault or withdrawn – something any child would be proud to own. 

Despite its high-class status, gold is much more than just a luxury good and can be a viable option for every investor, at any age. As markets continue to fluctuate and interest rates drop, the price of gold could remain on its upward trajectory for some time. No matter the state of the current economic climate, the metal will always be a must-have addition to anyone’s investment portfolio and, with growing options to transfer gold virtually, the best kind of gift.

CBDC
ArticlesFundsMarkets

CBDCs Impact on Payments Market: A Push for Repositioning Barriers for Market Newcomers

CBDC


For the payments market, government-backed digital currencies could accelerate innovation by setting novel technology benchmarks, as well as rearrange some of the entry barriers for new companies looking to set up shop.

A recent survey of central banks has revealed that 86% are actively doing research into central bank digital currencies (CBDCs), 60% are already in the experimenting phase and almost 15% doing pilot testing. With CBDCs heavily gaining traction across governments worldwide, Marius Galdikas, CEO at ConnectPay, has discussed how this technological solution could impact the payments market players.

The idea of CBDCs has been circling around for a few years now, however, with the growing attention towards cryptocurrencies and money digitalization in general, banks are now focusing on how to put the idea into practise. For instance, the Bank of England together with HM Treasury has created a dedicated task force to explore potential use cases of CBDC in the UK market, as well as monitor international developments regarding the topic. Norway is pushing ahead with CBDC, too, while China is already in the process of testing digital Yuan out in the real world.

“CBDCs could be a game-changer for the payments industry. Aside from the clear benefits, for instance, low-cost cross-border payments or boosting financial inclusivity, it could also enhance domestic payments system resilience, slightly shifting dependence from the international payment processing networks,” Galdikas said.

According to Galdikas, CBDCs could be a major catalyst for the payments market, as government-issued digital currencies would be as easily accessible as current e-money payment methods, yet, in some respects, it could surpass what current market players have to offer.

“Although it has immense potential, the idea still has a long way to go. Essential decisions need to be made concerning how state-backed currencies could inherit the properties of cash, for instance, working offline or addressing the double-spending problem. Also, it’s highly likely that the central banks will not take on the responsibility to develop and implement the technology themselves, yet will want to retain the control of the currency itself,” Galdikas explained. “There is no best way to address these types of questions and that’s why specialized teams and task forces are being assembled — to come up with an approach that would combine different tools into a single solution.”

“Therefore payment service providers will have to step up their game to match the benefits CBDCs would bring to the table, which means moving up into a higher gear when it comes to innovation and delivering unique market solutions. They’ll have to be more strategic in communicating their strengths and value proposition to their target audience, too,” he added.

While outlining the benefits, Galdikas also noted how this would impact market newcomers. “CBDCs would definitely set an even higher standard for greater technological competence, which means setting up shop for new businesses is going to need a lot more investment from the get-go.”

“That said, I believe that some of the barriers would drop, for example, the requirement that only credit institutions have access to payment systems, such as SEPA. All in all, the CBDC, with inherent properties of cash, would allow for a wide variety of innovative financial solutions,” he concluded.

This could be a pivoting moment in the industry, which would greatly contribute to building a more financially inclusive society. However, a lot of questions must be addressed before then, with the main ones being technological implementation, as well as privacy concerns, which might arise due to CBDCs being state-backed.

Bitcoins
ArticlesMarkets

EToro Offers Exposure to Crypto Market With New Stocks Portfolio

Bitcoins


eToro, the world’s leading social investment network, today launches BitcoinWorldWide, a thematic portfolio based on the companies in the value chain behind bitcoin. While it includes some exposure to bitcoin itself, the portfolio’s core focus is the companies operating to support further adoption.

“As it crosses into mainstream awareness, bitcoin is increasingly in the spotlight” says Dani Brinker, eToro’s Head of Portfolio Investments. “New all-time highs might make headlines, but the most significant change surrounding the world’s largest crypto is not its price, but the companies building the value chain around it. From mining operations to chip manufacturers and those delivering services to support usage, payments, exchanges and custody, there’s more to bitcoin than you might think.”

Released in 2009, bitcoin currently boasts a market capitalisation in excess of $1 trillion. Throughout the last decade, the first and most famous crypto has gone through multiple stages of adoption – from unfamiliar tech to a household name attracting institutional investment and media headlines. Last year marked another milestone, with payments companies including Square and PayPal announcing plans to support bitcoin payments, setting the groundwork for millions around the world to easily transact in bitcoin. Now, only 12 years after its founding, you can pay with bitcoin in HomeDepot, buy a Tesla, grab a Whopper or KFC (in some countries), buy games in the Xbox Store and pay your AT&T phone bill.

The portfolio includes companies such as Paypal, chip manufacturer Nvidia, mining hardware producer Canaan and newly public crypto exchange, Coinbase, as well as a bitcoin allocation. eToro considers bitcoin’s value chain to include companies operating in the mining, semiconductor, payments, exchange, custodianship and insurance spaces, as well as the asset itself. It intentionally excluded organisations that are bullish on bitcoin but lack business units related to its activity. For example, MicroStrategy, will not feature in the portfolio as its treasury holdings are its only connection to bitcoin.

“Our aim is to provide retail investors with an easy way to get exposure to companies that deliver a service or product essential to the further adoption of bitcoin,” explains Dani Brinker. “It is a broader approach to bitcoin investing that offers a diversified investment, uncorrelated with the bitcoin itself, but maintains exposure to the growth potential of the crypto sector.”

Digital crypto market
ArticlesMarkets

DFW Based BluCollar to Launch Bold New ICO and NFT Marketplace For the Manufacturing Industry

Digital crypto market

With the ever-increasing popularity of cryptocurrency and NFT (non-fungible-tokens), BluCollar.io is launching its first ICO to capitalize on an underserved market – the manufacturing industry. With little in the way of investable channels, this 2334.60 billion dollar industry (2018) in the U.S. alone, BluCollar is looking to translate those financial transactions and assets to the digital space utilizing the exploding world of NFT’s via its own marketplace. 
“After years of working in the manufacturing industry, we realized that not only do we have massive amounts of transactions that are happening worldwide with a need to move more freely than through traditional monetary infrastructure to keep up, but we’re also sitting on an insane amount of real-world assets that can be tokenized to raise capital. We figured we couldn’t be the only people in this position, so BluCollar was born” – says Sam Bohon, Founder of BluCollar
With a two-part strategy to launch this brave new marketplace, BluCollar will first launch its token on the cryptocurrency marketplace. Based on the standard of Ethereum, by far the most popular open-sourced cryptocurrency blockchains on the market and championed by VISA, PayPal, and popular celebrity investors such as Mark Cuban, and Richard Sherman – BluCollar Token is poised to have a successful ICO Launch on May 15th – August 15th 2021 at BluCollar.io. 
Of course, this is just the beginning. The BluCollar NFT Marketplace is the real hero of the show, allowing manufacturing companies including metal fabrication, construction, and supply companies to tokenize their assets and sell them as NFT’s. These assets can include digital drawings, marketable blueprints, and schematics, as well as real-world assets such as supplies, equipment, and commercial real estate. This enables the companies themselves to raise much-needed capital as well as provide investable ownership to employees as well as the general public looking for a new investment stream. And of course, the currency that powers the marketplace will be BluCollar Token, in itself an investable crypto asset. 
“At the end of the day, we want to help our industry move into the digital age and empower what has always been a rather traditional environment to maximize their financial might. From the workers on the floor to the top CEO’s we can all benefit together through BluCollar and we can’t wait to kick it off!” Sam says. 
After the launch of both the token and marketplace, BluCollar doesn’t plan to rest on its laurels. With a pipeline of spin-off projects such as token and NFT staking and a massive pr campaign already in the works, the sky is the limit in spreading awareness at what a truly massive industry and investable resource this truly is and we’re just at the beginning. 
BluCollar was created to give the manufacturing industry a cryptocurrency and NFT marketplace that represents and empowers the true workforce and disrupts the financial constraints of the current marketplace.
Fintech purchase
ArticlesFinanceMarkets

Fintech Platform Butter Raises £15m

Fintech purchase


Butter, the London based fintech platform that started life as the UK’s first Buy Now Pay Later (BNPL) travel agency, has just closed a £15.8m funding round to accelerate the rollout of its responsible open-banking based BNPL shopping app.

 

Who has invested?

Butter has raised £15.8m via BCI Finance, the credit arm of London based venture builder Blenheim Chalcot, as well as a number of other private Angel investors in order to expand Butter’s offering.

 

What is Butter?

Irritated by the lack of flexible payment options whilst planning a holiday, co-founder Timothy Davis was inspired to build the UK’s first buy now pay later travel agency, enabling travellers to spread the cost of travel arrangements over time, with full payment not due until after the trip.

Together with co-founders Stefan Hobl and Nik Haukohl, Butter achieved full FCA regulated status in 2017, and 4 years later, Butter has evolved into a British fintech platform with over 100,000 customers, offering instalments across every consumer vertical and flying the flag against other sector giants such as Klarna.

Butter quickly established a firm foothold in the travel and tourism industry as the UK’s first BNPL travel agency, providing a flexible, cost-effective way to book travel, with full payment not due until after the trip. A ‘layaway for getaways’.

When the pandemic brought the travel and tourism industry to a grinding halt two years later, Butter adapted fast, launching the UK’s first BNPL shopping app alongside their travel offering, enabling customers to spread the cost of any purchase from any online store.

 

What makes Butter better?

Unlike other BNPL providers, Butter’s unique “over-the-top” (OTT) solution enables customers to spread the cost of purchases with every store on the internet, without requiring merchants to support Butter via a technical integration. Instead, Butter’s in-app universal checkout takes care of paying retailers, with customers then able to repay the costs over 2, 3, or 4 monthly payments.

Popular stores in the Butter app include Amazon, Argos, BooHoo, ASOS, H&M, Zara, Hugo Boss, Sports Direct, AirBnB, Currys PC World, Ao.com, IKEA and more.

As the UK’s first FCA regulated BNPL provider, Butter has successfully developed a unique credit decisioning process with affordability at its core, utilising open banking and machine learning to ensure that lending is responsible and that customers are only able to borrow amounts based on what they can afford.

Timothy Davis, Co-Founder and CEO of Butter, commented: “Our goal at Butter has always been to provide consumers with a simple and responsible alternative to credit cards and loans, enabling them to instantly spread the cost of anything from a takeaway to a holiday over a simple and transparent instalment plan, all within one easy to use account.

We want to remove the stigma surrounding the buy now pay later offering and empower consumers by allowing them to budget and spend intelligently and in a manner that suits their individual financial needs.

We’ve set out to achieve this by building a platform focussed around transparency, responsible lending and the ability to transact on bigger ticket items compared to other providers, whilst also offering more choice to customers through our unique over-the-top solution, which enables consumers to shop any online store in existence with Butter.

The funding that we have secured via BCI will help facilitate the scale-up of our business as we continue to pioneer innovation in the buy now pay later space.”

 

Paul Maurici, Investment Manager at BCI, commented: “Our mission at BCI is to be the funder of choice for UK Fintech’s looking to scale.

Butter is a young and ambitious company, which combines a tech-enabled approach to lending alongside impressive customer delivery capabilities.

With its FCA authorisation already in place, the business is well placed to continue strong growth while assisting its customers in managing their money better.”

Tech company investment
ArticlesInfrastructure and Project FinanceMarkets

Why Investment in Small UK Technology Companies Could Provide Sustainable Returns

Tech company investment

By Andrew Aldridge, Partner at Deepbridge Capital

The UK is widely regarded as one of the greatest places to start an innovative tech company. This shouldn’t come as any surprise given the world-class academia we have to offer, the legacy of innovation and, importantly, the funding opportunities available to entrepreneurs. Of course, we also have a language advantage for global businesses which shouldn’t be underestimated.

There can be a temptation to look to the USA and the glamour of Silicon Valley, and indeed this may be where some companies ultimately end up in order to achieve their ‘Unicorn goals,’ but that doesn’t tell the whole story.

At Deepbridge Capital, we are fortunate to work internationally and all of the aforementioned points are regularly raised as reasons for growth-focused tech companies wanting to be involved in the UK ecosystem, as well as the other sector-focused appeals of the UK.

For example, for medtech companies, the rubber stamp of having the globally-recognised NHS trialing or adopting a device can be of massive significance. Such a testimony opens doors with healthcare providers elsewhere and the scalability that offers.

To a similar degree, fintech can find a natural home in the UK, as a global financial hub, with initiatives such as the FCA Sandbox providing a test bed which can empower fintech innovators to prove concept and showcase innovation.

I could continue by looking at legal tech, biotech, agritech and many more. Indeed, the UK has developed a number of ‘hubs’ across the country to provide opportunities for collaboration and innovation in specific fields of tech. Often these hubs are associated with academia and other influential partners. Outside of the ‘golden triangle’ of London, Oxford and Cambridge, examples of such hubs, include Liverpool as a gaming and virtual reality hub (indeed our investee company vTime is at the forefront of this); Manchester as a digital hub but also the home of graphene (again, we have helped a great company in this sector, Flex-G, create a Manchester base); Edinburgh and Bristol as digital innovation hubs, and numerous less well known areas such as west Wales (working with the likes of the University of Aberystwyth) focussing on agritech.

Naturally, our excitement in all of this is centred on the investment opportunity. As highlighted earlier, the funding ecosystem in the UK is a big reason for the success of tech companies here. This is particularly true in what is often the most difficult funding stage, being the first commercialisation funding or early Series A funding.

The first funding a company received is usually self-funding, or the attraction of funding from friends, family or a supportive business angel. This is usually based on a ‘good idea’ and goodwill towards the founder. This funding tends to be relatively small ticket and, in reality, is an investment ‘punt.’

When you then get to later funding rounds, later Series A and Series B, tech companies are usually expected to have significant recurring revenues and there is no shortage of funding opportunities both here in the UK and elsewhere.

In both of these examples, the UK has a strong track record of funding, but where the UK really excels is at the stage ranging from ‘seed’ funding to early Series A. At this point, a tech company is likely to be beyond the cheque-size which can be offered purely on goodwill, but is unlikely to have the revenues to support interest from the VC, PE and institutional funds looking for a de-risked opportunity.

Historically, this funding gap has been described as the ‘chasm of death,’ as it is often where a company will choke due to lack of funding. However, this is an area where the UK has a significant competitive advantage on international peers; the Enterprise Investment Scheme.

The Enterprise Investment Scheme (EIS) provides the incentive to investors to support growth-focused companies through unparalleled potential tax reliefs. Over recent years, between £1.5bn and £2bn of funding each year has been availed to growth-focused companies under EIS. Founders and investors globally regularly remind us of their jealousy of the UK in this regard – it is important that UK investors and financial advisers are aware of this global envy and the fortunate position they are in.

The tax reliefs offered under EIS provide a degree of risk mitigation for investors, with early-stage investments naturally being high risk, but it is critical that investing at this stage is undertaken with due care and in conjunction with a sector-experienced investment manager.

This stage of investing has great growth opportunities and taking a company from proof of concept through to a significant annual rate of return, can be a significant value inflection journey. At this point of investing, we are looking for companies which have used their initial funding to prove concept and develop initial market traction, with our funding then empowering the commercial growth to subsequently attract large-scale co-funding for corporate growth and then an exit for investors.

There has never been more technology innovation around us and in a digital world it is natural that this is where investment opportunities will lie. If investors are looking for growth, then UK tech is a great place to be and arguably the growth point is exactly where EIS funding is applicable.

We have already seen the shift of tech companies becoming the world’s largest, so it is not a surprise that tech is at the heart of most investment portfolios. However, the long-term growth opportunities often lie at an earlier stage and the UK is a great place to empower this, thanks in part to EIS. And, why wouldn’t investors want tax reliefs, CGT free growth and potential loss relief?

Cryptocurrency
ArticlesCommoditiesMarketsStock Markets

How To Get Your Hands On Cryptocurrency

Cryptocurrency

All you have to do is check out the news to realise that cryptocurrency is growing in popularity. As it continues its ascent, it’ll only become more and more in demand, meaning that those who want to get their hands on it may face an increasingly uphill battle.

Fortunately, you don’t have to fight anyone off to get yourself involved with the cryptocurrency market. There are tons of ways to jump into the market and make your mark with something like Bitcoin or Ethereum.

For a list of the best avenues to explore, you’ll want to check out the five suggestions outlined below.

 

Buying

The first thing you might think to do when trying to get hold of cryptocurrency is to buy it. However, how good of an idea this is generally depends on what a currency is worth at the time.

It’s not uncommon for them to be incredibly expensive nowadays, especially when talking about Bitcoin. Given the growing presence of cryptocurrency, the prices keep reaching new heights, which isn’t ideal for someone looking to get involved with this for the first time.

If you are going to buy, you’ll probably want to start by getting cheaper currencies through a crypto exchange. Anything that’s not Bitcoin ought to be relatively easy to acquire, although depending on the exchange service you use, it might take a few weeks for the purchase to be verified.

 

Airdrops

As cryptocurrency continues to amass interest, more and more projects are surfacing that expand and enhance the market. Getting involved with these projects in the early days is an excellent way for you to start building up your online wallet, as you earn tokens for doing some of the simplest tasks.

Merely downloading an app or following certain social media accounts can net you this reward because you’re helping the project gain notoriety. You’re ensuring that there’s a community around it before it hits the market, which is essential for its success. So, by doing your part, you can earn tokens that can later be traded or sold.

Microtasks, or bounties, are similar to this, although the tasks required of you are a little more advanced. Here, you might be expected to write a testimonial or film a review before earning a reward.

 

Competitions

For a more interesting way to get your hands on cryptocurrency, you can always give competitions a try. These generally involve you playing games for the chance to win something like Bitcoin while also having fun in the process.

Although this might seem too good to be true, it’s a legit and straightforward way of getting free cryptocurrency. If you play with Traders Of Crypto you don’t have to worry about giving away any personal information that may put you at risk. All you’ve gotta do is provide an email address, and then you can start competing.

The games range from trying to be the best trader each month to identifying bugs in code, and they’re sure to make the hunt for cryptocurrency that extra bit more interesting.

 

Crypto Payments

If you have an e-commerce business, one opportunity that’s open to you is accepting cryptocurrency payments when someone makes a purchase. In addition to options like credit card and Paypal, you can also allow users to buy your stock using a variety of cryptocurrency options.

What currency you can accept will largely depend on the platform your e-commerce business uses. Some sites, like Shopify, are incredibly flexible and allow for payments using several hundred different types of cryptocurrency. So, if you’re not fussy about what you get your hands on, this can be a good place to set yourself up.

 

Mining

To those not in the know about cryptocurrency, mining for an online currency might not make a lot of sense. However, what this actually means is that you use your computer to solve complex equations that validate what you’re mining for.

Again, this is an area where Bitcoin can be problematic for a first-timer, as the equipment required to mine this currency is incredibly expensive. You need a lot of high-end tech to be successful with this endeavour, something that you may not be willing to purchase.

Fortunately, other currencies like Ethereum and Monexo don’t have such demands and can easily be done through a more standard computer. Just be aware that mining can use up a lot of power, so the costs to you will differ depending on the price of electricity in your area, as well as the efficiency of your equipment.

It might not always be stable, but it’s clear that cryptocurrency is definitely going to play a significant role in the future. If you want to have a part in that, getting your hands on some of it now through one of these varied ways could prove advantageous.

Bitcoin
ArticlesMarketsStock Markets

Bitcoin to Hit Fresh Highs – But Standby for Regulator-Triggered Price Swings

Bitcoin

The Bitcoin price nears $50,000 and will continue to reach new highs in this first quarter of 2021 – but investors should also expect volatility due to increasing regulatory scrutiny.

This is the warning from Nigel Green, CEO and founder of deVere Group, one of the world’s largest independent financial advisory and fintech organisations. 

It comes after the cryptocurrency hit more than $49,700 for the first time in history on Sunday the 14th of February.

Mr Green says: “Last week was a massive one for Bitcoin, reaching new all-time highs amid soaring interest from institutional investors.

“Morgan Stanley, the U.S. investment giant is reported to be considering investing in Bitcoin through its $150 billion investment arm; Elon Musk’s Tesla announced it had invested $1.5 billion in the digital currency and was getting ready to accept it as payment; BNY Mellon confirmed that it had created a digital assets unit to build a custody and admin platform for crypto assets; and Mastercard said it would give its merchants the option to accept cryptocurrencies later this year.

“In addition, Miami confirms it is considering paying workers and collecting taxes in cryptocurrency and the mayor of the city wants to hold Bitcoin in the city’s treasury.

“This all follows the likes of PayPal’s decision last year to allow customers to buy, sell and hold Bitcoin and as Wall Street giants like Goldman Sachs and JP Morgan issue RFIs (request for information) to explore Bitcoin and crypto asset custody.”

He continues: “There is a clear direction of travel: institutional investors are taking Bitcoin more and more seriously as a financial asset and a medium of exchange. They are increasing their exposure to it at a faster rate than ever before.

“This is pushing cryptocurrencies ever more into the mainstream financial system and, subsequently, driving the price skywards.”

The deVere chief goes on to say: “With the growing institutional demand combined with ultra-low interest rates, we can expect Bitcoin – which has already given a 55% return so far year to date after the 300% gain in 2020 – to reach new highs in this first quarter of 2021.

“However, with increasing dominance and value, comes increasing regulatory scrutiny. 

“Bitcoin and other cryptocurrencies will come under the spotlight from watchdogs like never before and this can be expected to create volatility in the market.”

His warning comes as central banks and governments around the world ramp up their focus on digital currencies. 

In the U.S. in recent days, Treasury Secretary Janet Yellen raised again the prospect of future cryptocurrency regulation and as the Securities and Exchange Commission (SEC) could reportedly investigate Elon Musk over Tesla’s $1.5 billion Bitcoin purchase.

Nigel Green concludes: “Institutional investors are increasingly appreciating that in this tech-driven, ultra low interest rate, low growth world, and where there is diminishing trust in traditional currencies, digital and borderless cryptocurrencies may be becoming a better fit.

“We can expect the price of Bitcoin to surge to fresh highs as a result.  But investors must be aware that regulatory pressures will cause price turbulence.”

economic recovery 2021 covid pandemic
ArticlesMarkets

Self-employed Workers Estimated to Contribute £125 Billion to Drive the UK’s Economic Recovery

economic recovery 2021 covid pandemic
  • Self-employed and side-hustler movement continues to thrive despite challenges caused by COVID-19

  • Over 55s are leading the way in starting new businesses or side hustles during the pandemic

  • By choosing a challenger banking, newly formed businesses are more likely to grow

Research released on Monday by Mettle, the NatWest-backed business account, using YouGov’s platform, estimates that the UK’s growing self-employed and side hustler movement will contribute an estimated £125 billion in turnover to the UK’s economic recovery in 2021. Furthermore, small and medium-sized businesses (with 1-49 employees) are estimated to contribute approximately £310.46 billion.

Pre-pandemic in 2019, the Office of National Statistics (ONS) found over 1.1 million people were either employed in two jobs or self-employed in addition to having another job. COVID-19 has only accelerated this and the growth of the self-employed and side hustler movement, with changes in employment and lifestyles pushing more people to work for themselves than ever before – either through choice or out of necessity of being furloughed or made redundant. The population of self-employed workers in the UK now sits at over five million, making up 15% of the UK’s workforce.

Around 25% of all UK adults now consider themselves to be a side hustler, according to Henley Business School. Having ‘a side hustle’ in addition to a full-time job (from freelance design work, to a passion such as wedding photography), has for the first time for many, become a necessity to supplement income.

Mettle’s research surveyed 2,194 self-employed workers to uncover the role of this segment in boosting the UK economy, the barriers they faced when starting their venture, and the role of banking organisations in helping them thrive.

According to the research, the most popular motivation for going solo was the flexibility and freedom it provided (57%), followed by their desire for a change in work/life balance (38%), and wanting more meaning and purpose in their life (24%).. Those aged 55 and over are leading the way when it comes to self-employment, with 38% of limited companies and side hustles formed post-March 2020 having been established by that age group.

The rapidly expanding self-employed and liquid workforce movement is being supported by a rise in challenger banking solutions that provide online products and services. The majority (83%) of respondents who use challenger bank services and feel supported by them, felt this was because of the ability to do everything virtually, their bank’s ability to get things done quickly (61%) and the fact that their innovative technology and products are more compatible with their business needs (51%).

Compounding this, the COVID-19 pandemic is making the challenge of running a business or side hustle even more difficult. 57% of those surveyed are not looking to expand their business or side hustle or enter a new sector in 2021, with over a quarter of respondents specifically not looking to expand (29%) citing the UK’s economic uncertainty as the reason why. More than ever solutions like Mettle are of utmost importance to help this audience to manage their finances, and to support their maintenance, growth and contribution toward the UK’s economic recovery.

Marieke Flament, CEO of Mettle, commented: “More people are choosing to start or create something of their own than ever before due to changing lifestyles, personal circumstances, or fulfilling a personal ambition. This research highlights the importance of this growing movement for the UK’s economic recovery in 2021 – particularly amongst the over 55 age group.

“The smallest end of the SME market has historically been underserved in terms of business banking, with the majority of incumbent institutions focusing on large commercial customers and corporates. This made it difficult for small business owners to get set up quickly, get paid and tax ready. We champion self-employed workers and side hustlers and are dedicated to building our product to serve them and their needs.

“As the UK looks to rebound from the economic damage caused by COVID-19, it’s absolutely vital that this segment has access to the support and services it needs to thrive. Mettle’s position within NatWest means we can facilitate this. We leverage the experience and risk knowledge of NatWest, but we also operate like a start-up, so we can move at pace and offer a product that enables self-employed and side hustlers to start, run and grow their businesses successfully.

“Banking doesn’t need to be complex, and we think new small business owners, self-employed workers and side hustlers should be able to rely on their bank to help them easily navigate day-to-day processes as they focus on overcoming the macro-economic hurdles outside of their control.”

Dogecoin, bitcoin crypto currency
ArticlesMarketsStock Markets

Bitcoin, Dogecoin Hit All-time Highs Driven By Elon Musk – But How To Choose An Exchange?

Dogecoin, bitcoin crypto currency

Bitcoin was driven to new record highs on Tuesday morning – trading above $48,000 – as investors continue to pile in on the news that Tesla bought $1.5bn worth of the cryptocurrency.

A filing with the U.S. financial regulator on Monday reveals that the electric car company run by the world’s richest person, Elon Musk, has made the massive purchase of the digital asset which has jumped more than 300% in a year.

The surge in the price of Bitcoin and other cryptocurrencies, including Dogecoin – which was also fuelled by an endorsement by Musk on Twitter over the weekend – comes as digital currencies become mainstream due to soaring interest from both retail and institutional investors, increasing levels of mass adoption, and as global interest rates remain at historic lows.

But how does a new crypto investor choose a platform on which to buy, sell, hold and exchange?

Nigel Green, an influential cryptocurrency expert and CEO of deVere Group, one of the world’s largest independent financial advisory and fintech organisations, says there are five fundamentals.

He says: “More and more people are wanting to invest into cryptocurrencies, knowing that they are the future of money.

“But many, even those who have extensive knowledge of the stock market, have concerns about selecting the right cryptocurrency exchange.

“The total capitalisation of the cryptocurrency market is now an estimated $1.2 trillion, but it is still lightly regulated. This means that it’s vital that investors know what to look for in an exchange.”

He continues: “There are five fundamentals for your checklist.

“First, security. The system of a private exchange for saving consumer documents as well as funds should be as decentralised as possible as if it’s all on a couple of web servers, that makes them easy hacking targets.

“Investors should also look for a system that utilises two-step verification throughout login, such as a password, and also quick-expiring codes received through the app.

“Avoid exchanges which offer cheap trade costs or services but are based in areas around the world where investor security is weak.

“In addition, investors ought to assess exchanges as well as the businesses behind them as they would certainly do with any other organisation that they would depend on to protect their money.”

“Second, costs. Some exchanges are proficient at addressing costs in advance, while others hide them. Go for the exchanges that are upfront and transparent.

“Third, simplicity and ease of use. Take into account that you’re not always going to trade from your desktop. In fact, finding an exchange that focuses on ‘on-the-move’ trading via a secure app is often a better option.

“Fourth, dependability. Does the exchange run efficiently when trading quantity is high, or when the currencies rate is see-sawing? Some exchanges are notorious for their system accidents and trading stops.

Fifth, client service. Make sure an exchange has a chat or fast communication service integrated.”

Mr Green concludes: “Whilst Elon Musk’s Tesla, and other institutional investors, including PayPal amongst others, will have teams of crypto experts behind them, retail investors can also get involved.

“Investing in cryptocurrencies remains highly speculative and it is not for everyone – but one of the keys to success would be selecting the right crypto exchange.”

Covid stock investors
ArticlesBankingMarketsStock MarketsTransactional and Investment Banking

What Has Covid Taught Investors

Covid stock investors
  • 44% of investors are now looking to back UK-based companies rather than global firms –  9,629,000

  • 45% of investors feel their ‘risk-appetite’ has increased due to Covid-19, as traditionally safe investments in big companies are no longer viable – 6,942,000

  • 27% of investors are looking to invest in sectors created by the Covid-19 pandemic, such as PPE, social distancing equipment and virtual solutions – 5,674,000

  • 19% of investors believe the coronavirus pandemic has opened more investment opportunities than it has closed – 6,278,000

Investing was one of the most unpredictable aspects of 2020 for anyone concerned with the market, whether that be a sophisticated portfolio or just a workplace pension. The stock market crash at the start of the lockdown and continued economic disruption has left many wondering what the future will hold, while soaring tech stocks have added further complexity to an ever changing market. But what has the Covid pandemic taught investors? 

The overall effect of this period has led investors to reconsider what they are doing with their investable assets. To understand this shift, SME investment specialist IW Capital has conducted nationally representative research to uncover the sentiments of the UK’s investors.

 

Look beyond the panic

Each period of disruption, like that felt last year, offers opportunity for companies to adapt quickly to the changing times and although there has been a lot of worry and negativity surrounding the new lockdown restrictions, we have to look to the positives with one of them being the roll out of the Covid vaccines. Working with both entrepreneurs and investors, there is a clear desire from the small business community for growth investment and to take a big step growth-wise this year. With a 12% increase in new businesses starting up during 2020 compared to 2019, 2021 is set to create some exciting investment opportunities for investors throughout the country.

 

The unexpected happens 

This year has taught us that the unexpected does happen. Investors need to look to the future and prepare for the unexpected to improve financial resilience. This could be by having liquid assets or a rainy-day fund you can use if investment values fall, which is particularly important if you’re drawing an income from investments. Having options for when the unexpected does occur should be part of any investors financial plan and is something that has been brought to the forefront for many as a result of the pandemic. 

 

Maintain a diverse portfolio

The Covid pandemic has had a far-reaching impact across a variety of sectors, however some industries have been affected far more than others, with travel and hospitality being forced to close for months at a time and unable to trade. In contrast, the pandemic has created opportunities for some sectors too, such as manufacturing and biotech. While a diverse portfolio will still have suffered volatility, it can help lessen the impact. Investing in a range of assets, industries and locations can help spread the risk. When one investment falls, another may perform better helping to create balance.

 

Don’t overreact to market volatility

When the pandemic first hit and the stock market plummeted, many investors began to panic and looked to sell shares in order to avoid potential future losses, but when investing, a long-term time frame and goal is so important. Short-term volatility is often smoothed out once you look at investment performance over a longer time frame. It can be frustrating to see that investment values fell in 2020, but when you look at performance over the last five years, for example, you’ll probably still see an upward trend.

 

Luke Davis, CEO of IW Capital:

“Investing and investing wisely has never been easy by any stretch but this year has been particularly difficult for investors at every level. 2020 demonstrated the value of long term investing and future planning. The stock market crash in March triggered a real halt in investment, and although the market hasn’t fully recovered, there has been strong growth since November and in places in the US share indexes are actually higher than the last year. 

“There have been winners and losers from each stage of the pandemic with sectors like travel feeling the true impact of the pandemic and others like online solutions seeing growth and opportunity in a time of financial turmoil. But, this is true of any world event and has forced investors to look to be more future facing.”

ArticlesMarkets

MarketFinance Lends £342m, End of Term Report Shows Trends and Insights

 

More loans, larger businesses and a regional shift – these are some of the trends and insights that fintech business lender MarketFinance observed during 2020.

 

Key insights
  • MarketFinance lent a total of £342.4m across all solutions, over the first 11 months of 2020. Representing a 3.4% increase in total lending over the same period in 2019 (£331.1m)

  • The profile of companies using invoice financing changed significantly during COVID-19. Those businesses using invoice financing were both larger than usual (an average turnover of £2.1m, compared to £1.3m in 2019, a 60% increase) and received 83% more financing on average than they did in 2019

  • Businesses in London, Hertfordshire, the East of England and the South West experienced the greatest drops in invoice financing year on year, with a 45% decrease in London alone. These geographies are hubs for the Support Services and Information & Communication industries, indicative of how hard these sectors have been hit by COVID-19

  • Demand for business loans soared with a 13-fold increase in loans between Q2 and Q3 2020. The majority of loans (60%) were made to businesses in Support Services, Wholesale & Retail Trade, Manufacturing and Construction.

 
Q1 and Q2 2020

The UK’s economic prospects showed signs of turning early in 2020, as Brexit-related uncertainty began to fade. Despite the promising start to the year at MarketFinance, with larger businesses borrowing, this upward turn halted suddenly when the COVID-19 pandemic arrived. The country and economy, effectively, went into lock down at the end of March. However, during this time when UK GDP crashed by 2.2% across Q1, it was also the first sign of the coming shift for many companies towards new alternative financial mechanisms.

As of Q2, 46% of businesses reported that income was down by 50% and so the number of companies using invoice finance dropped by 35%. However, while smaller companies with a narrow spectrum of business activity looked to other financial solutions, larger businesses with diversified workflows (and therefore revenue streams) were able to continue using invoice-backed facilities to boost their cash flow. The average revenue of these companies was over double what it had been during the same period the previous year, growing to £2.1m, an increase of 127%. In fact, while approved company applications for invoice finance went down, invoice values actually went up. The average size of an invoice being financed increased significantly in Q2 in comparison to the previous four quarters.

 

Q3 2020

MarketFinance became an accredited CBILS lender and so the quantity and concentration of loans advanced increased by a significant 13 times compared with Q2. Interestingly, over a third (36%) of all loans to manufacturing companies went to those based in the Midlands.

Anil Stocker, CEO of MarketFinance commented: “Small businesses will play the pivotal role in the UK’s economic recovery as we emerge from the pandemic, and we are confident that the bounce back will, with the right support, be swift. These linchpins of our economic fabric will require innovative, sustainable and tailored financial solutions that are fit for purpose in a post-pandemic world. It is up to all of us – accountants, brokers, business advisors, banks and lenders – to continue to step up to the plate and help these businesses survive and thrive.”

 

Q4 2020

Invoice finance was showing gradual growth as of mid-November 2020, suggesting some normalisation of business activity, despite the second UK lockdown. Although the number of companies using invoice finance per quarter dropped by 55% from Q1 to Q2, the figures for Q4 appear to be trending up on both Q2 and Q3. There’s some way to go before we see levels return to those of 2019, but there’s every sign of businesses recovering well as we move into 2021.

COVID-19 continues to affect global supply chains. Manufacturing, Wholesale & Retail Trade, and Construction companies have sought further funding to see them through the pandemic and beyond. Manufacturing companies received 19% of all MarketFinance loans across industries. 32% went to companies in the Midlands, 21% to companies in London and another 21% to companies in the South West, also continuing the trend from Q3. Facing significant challenges to both importing and exporting, Wholesale & Retail Trade companies received 15% of loans across industries, with 40% of these to companies in London.

Anil Stocker added: “Of course, the challenges and uncertainties that 2020 has presented won’t end come January. Businesses will have to navigate the aftermath of COVID-19 for months to come. However, although a lot of businesses have felt a negative impact over the past year, many have executed successful pivots and taken advantage of new opportunities that presented themselves. We’re hopeful that this strong comeback signals we’re already past the worst of the situation. We’ve also been incredibly proud of business support networks up and down the country. They’ve rallied together to support businesses throughout the year and we expect to see this support continue. We’re excited to carry on providing SMEs with the working capital they need to grow, innovate and build towards a successful future.”

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ArticlesMarkets

Online Retail Sales Growth Shows Lockdown 2.0 killed the High Street’s Revival, Says ParcelHero

ParcelHero says today’s ONS retail figures show e-commerce devoured over 31% of early Christmas spending as the High Street shut up shop once again in November.
November’s retail sales estimates, released today by the Office for National Statistics (ONS), reveal the High Street’s loss was online’s gain. Online sales spiked by 74.7% in value as early-bird Christmas shoppers hit the internet in record numbers.
The home delivery specialist ParcelHero says that the closure of non-essential stores across England for the second time this year caused the value of overall retail sales to fall back in November -4.1% compared to the previous month. This had a devastating impact on town centre stores’ sales but created record sales online.
ParcelHero’s Head of Consumer Research, David Jinks MILT, says: ‘England’s High Streets became ghost towns once more, as shoppers hunkered down in the warmth and safety of their own homes to snap up thousands of early Christmas bargains. Black Friday had an epic lead-in this November and Brits made the most of it by snapping up online bargains at Amazon and their favourite stores. The boom in online sales was so strong that it dragged up the volume of all retail sales by 2.4% compared to November 2019.
“This was great news for online retailers but highly challenging for their delivery partners as the value of department stores,” online orders increased by 157.2% and household goods stores and non-food sites saw sales rise by 124.7%. The sheer volume of home deliveries will have had a knock-on effect as Christmas orders really kicked in early this month.
“It’s no coincidence that the second lockdown was topped and tailed by the failure of well-known names such as Edinburgh Woollen Mill at the beginning and Debenhams and Topshop at the end. This was a truly dark month for the High Street with names such as Peacocks, Jaeger and Burton also collapsing into administration. Clothing stores reported the sharpest decline in sales volumes in November with a monthly fall of -19.0%. Retailers said that, despite extensive online Black Friday promotions, the enforced closure of stores had affected sales. Clothing sales were still a whopping -30.5% below pre-pandemic levels seen in February.”
“However, many retailers have woken up and smelled the Christmas gingerbread-flavoured coffee. 86.9% of businesses remained trading during Lockdown 2.0 suggesting that, despite store closures, many were able to continue to trade online.”
“Both consumers and retailers need to proceed cautiously for what remains of this year to avoid the impact of still soaring online sales. The beginning of the week is being dubbed ‘Manic Monday’ as last-minute orders are expected to swamp courier networks. For more information on how retailers can reduce the impact of the second wave by comparing carriers,” prices and services, see ParcelHero’s updated guide at https://www.parcelhero.com/en-gb/uk-courier-services.
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ArticlesMarketsWealth Management

Finance experts say THIS is how to bag the best Black Friday bargains

black friday

Finance experts say THIS is how to bag the best Black Friday bargains

With the second lockdown coinciding with Black Friday, shoppers will be vying to take advantage of bargains online this year more than ever before.  

The sheer volume of discounts and deals can be overwhelming, so experts at Hitachi Personal Finance have provided top tips on how shoppers can navigate the chaos and secure the best deals. 
 

  1. Start early
    A lot of businesses launch deals early in an attempt to spread out demand and avoid their systems becoming overloaded. Take some time to have a look around for the items on your wish list and to find the best deal early to make sure they aren’t already sold out by the time Black Friday hits.  
     
  2. Check product price histories
    Whilst reviewing the quality of the goods you are in the market for is important, doing some digging into a product’s previous price history is invaluable. Black Friday deals get their appeal from being the cheapest offers around, but this may not necessarily be the case. Making use of price comparisons sites, such as Google Shopping, will help you be certain you’re getting the best value for money and that your deal really is a good one.  
     
  3. Have a list of retailers ready
    If you’re after one particular item, such as a new laptop or smartphone, the chances are you’re not alone, and overcrowded retail sites can often run slowly or even crash due to heavy traffic. A key tip to try and negate this is to find several different retailers that all sell the product you want, then set up accounts with each one in advance with your purchase details securely stored so you’re ready to bag the best deal and check out efficiently. 
     
  4. Make the most of loyalty perks
    A lot of retailers often offer their members or those with loyalty cards exclusive offers or early access to deals. Signing up for a loyalty membership is usually free and very simple to do, and it’s this time of year when the persistent newsletters and emails tipping you off about the best bargains will come in handy. 
     
  5. Abandoned basket discounts
    Doing almost a dummy run of buying the products you want can be hugely beneficial, not just in terms of streamlining your shopping, but can lead to retailers offering targeted discounts to items left in your online shopping basket. Try bundling together everything you want but leave at the checkout stage, you may find you receive an email from the retailer offering you specific deals without having to endure any stress. 

 
Vincent Reboul, Managing Director of Hitachi Capital Consumer Finance, commented: “The effects of the pandemic have seen online shopping sales skyrocket this year, which is undoubtedly going to have an impact on what is already a busy day for retailers and shoppers on Black Friday.  

“Those irresistibly low prices often facilitate a mad dash to the checkouts, with everyone racing against each other to make sure they get the items they’re after, which can be a huge cause of stress and frustration. 

“With the vast majority of activity focused online this year in light of current restrictions, we are confident that our guidance will enable this year’s shoppers to relieve some of the pressure, by taking necessary steps to plan their Black Friday shop early and get themselves ahead of the competition.”  

For more expert insight into how you can have a successful Black Friday experience, please visit: https://www.hitachipersonalfinance.co.uk/latest-posts/money/top-tips-for-bagging-a-bargain-this-black-friday-and-cyber-monday/    

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ArticlesMarkets

Black Friday Weekend Spending Set to Hit £3m Every Minute

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Black Friday Weekend Spending Set to Hit £3m Every Minute

Nearly £3m is set to be spent every minute over Black Friday weekend, according to a new report.1

The VoucherCodes.co.uk Shopping for Christmas 2020 report, carried out by the Centre for Retail Research (CRR), shows that despite lockdown 2.0, UK consumers are set to spend a total of £7.504bn over the Black Friday weekend – a 12.4% drop on 2019 due to store closures. 

Despite the decline, online sales are forecast to increase almost £2bn across Black Friday weekend, with total online sales rising 52.9% from £3.771bn (2019) to £5.764bn this year. 

Online spending is predicted to peak on Black Friday itself when £1.34m will be spent every minute. Offline spending will hit its highest amount at £0.96m every minute on Cyber Monday, resulting in a total of 1.740bn.  

 

Online vs offline spending (currency values are in Sterling millions) 

Online/offline 

2019 results 

2020 forecast 

 % Change 

 

Friday 

Sat/ Sun 

Monday 

2019 totals 

Friday 

Sat/ Sun 

Monday 

2020 totals 

2019-20 change 

Online 

£1,141 

£1,105 

£1,525 

£3,771 

£1,925 

£1,928 

£1,911 

£5,764 

52.9% 

Offline 

£1,386 

£1,895 

£1,514 

£4,795 

£458 

£678 

£604 

£1,740 

-63.7% 

Total 

£2,527 

£3,000 

£3,039 

£8,566 

£2,383 

£2,606 

£2,515 

£7,504 

-12.4% 

 

Prior to lockdown 2.0, the report found that over a third (37.3%) of UK respondents said they would not shop in-store during Black Friday promotions. This suggests that physical stores would have still seen a shortfall in sales due to lack of consumer confidence regardless of lockdown measures.  

However, due to the imposed restrictions in the UK, the research anticipates that offline sales over Black Friday weekend will fall by a staggering 63.7% compared to 2019, from £4.795bn to £1.740bn.  

London is expected to lead the charge with online sales and will also have the biggest share of total spend (£1.312bn) within the UK across the weekend. If areas in Scotland remain out of tier four lockdown by the end of November, Scots are set to spend the most offline, totalling to £362.1m. 

 

Regional Black Friday weekend spending in 2020 breakdown (currency values are in Sterling millions) 

Region 

Offline 

Online 

Totals 

London 

£196.50  

£1,115.20  

£1,311.70  

South East 

£191.00  

£946.90  

£1,137.90  

East of England 

£122.70  

£587.10  

£709.80  

North West 

£131.60  

£571.20  

£702.80  

Scotland 

£362.10  

£334.70  

£696.80  

South West 

£106.40  

£499.30  

£605.70  

West Midlands 

£103.70  

£458.60  

£562.30  

Yorkshire & Humberside 

£94.90  

£412.50  

£507.40  

East Midlands 

£86.00  

£374.40  

£460.40  

Wales 

£187.70  

£168.80  

£356.50  

North East 

£45.50  

£192.60  

£238.10  

Northern Ireland 

£111.80  

£102.80  

£214.60  

Totals 

£1,739.9 

£5,764.1 

£7,504.0 

While the weekend itself will be popular among shoppers, most retailers will continue their sales within the ‘Black Friday fortnight’.2 During this time, sales are expected to hit a total of £23.090bn. Online total spend is forecast to more than double offline sales £15.480bn and £7.610bn respectively.  

Anita Naik, Lifestyle Editor at VoucherCodes.co.uk, commented: “The new lockdown measures have certainly shaken the bricks-and-mortar retail sector for a second time this year, and Black Friday will no doubt be a huge missed opportunity for many stores across the UK. 

“However, as we know, over the past few years there has been a rapid shift to online shopping and this Black Friday weekend there will be plenty of deals to be found online despite lockdown 2.0. This year we expect to see sales soar across the online retail sector, and this will continue to grow in the run up to Christmas too.  

“With so many discounts over the Black Friday weekend, it can be hard to know if you’re definitely getting the best deal for your money. There are tools which can help such as setting up alerts for things you want to buy or using DealFinder by VoucherCodes. The clever browser extension does all the hard work for you and ensures you never miss a deal again.” 

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ArticlesMarketsTransactional and Investment Banking

Should Investors Stay Underweight Europe? Three Reasons Why It’s Time to Reconsider That View Now

digital europe

Should Investors Stay Underweight Europe? Three Reasons Why It’s Time to Reconsider That View Now

After a decade encompassing Brexit and the euro crisis, and amid disappointing returns relative to other markets, many investors have written off European equities, but River and Mercantile’s James Sym believes that stance now needs to change.

Investors underweighting European equities now run the risk of missing the recovery in the region, according to Sym, manager of the recently launched ES R&M European Fund, with the continent offering attractive valuations, a leading position in up and coming sectors, and political unity.

Europe’s major equity indices have lagged the US and other regions so far this year, with the double-digit gains seen in some US markets far ahead of country-specific and broad indices on the continent.

However Sym, who joined River and Mercantile this year, says this disparity has created a glaring opportunity for investors.

“European equities have been unloved and under-owned since last year, with August the first month that investors started to return to the asset class[1],” he says. “Turning points are often the best moments for relative returns – but it is critical to position ahead of that.”

Below, Sym outlines three factors as to why investors should be reconsidering their European exposure now.

 

1. A better crisis

The time to own European assets is when the region is making top down political progress towards convergence. That was true with the establishment of the euro in the cycle from 2002, it was true post “do whatever it takes”, and it is true today.

In some ways Europe needs a crisis to spur it into action. For years it has been obvious that for the euro to be sustainable there needs to be balance sheet mutualisation across Europe and fiscal transfers. The coronavirus crisis has finally catalysed this move, which should serve to bring the cost of capital down for unloved companies across the continent.

Under the recovery fund plans, the European Commission is likely to become one of the biggest AAA-rated bond issuers in the world. The initial issue was 14 times oversubscribed[2]. This gives the periphery access to capital markets under the same terms as Germany or the Netherlands. Additionally, the net effect of the grant element of the structure is that German taxpayers are paying for peripheral infrastructure investment. This should bring down the risk premium for the region and be good for growth.

 

2. Leading position in ESG

“In a post-Covid environment, the world is coming Europe’s way. Simply put, European stakeholder capitalism was never the ideal light-touch regulatory environment which big tech needed to thrive. This has been a big drag for equity returns as the FANG phenomenon drove US equity returns. However, pre-eminent themes for the next cycle, such as energy transition, are areas in which Europe excels and it has companies well placed to deliver this. Meanwhile, the regulatory noose is starting to circle some of the large US technology companies. At the very least it should be, or become, a more level playing field.

 

3. Unloved stocks

“With outflows for most of the last year, many investors find themselves underweight the region now, while index levels remain far below their highs – unlike other regions, such as the US.

“Year-to-date, the MSCI Europe index is down 14%, while the MSCI World is up 3%[3]. There is a relative valuation opportunity, and it looks even more attractive if you drill down further.

“The landscape in Europe is one that is full of growth funds which are (clearly) full of growth stocks which have outperformed. But if you look elsewhere, there are some really attractive opportunities that offer investors a great chance to take part in an economic recovery post the Covid disruption.

“While interest rates stay low, government spending stays high. We now see the mechanism for populism to ultimately lead to inflationary outcomes which if it transpires would set up a potentially difficult market for many clients.” 

 

[1] According to Calastone research, as quoted by Investment Week

https://www.investmentweek.co.uk/news/4019853/uk-equity-fund-outflows-hit-record-gbp-2bn-june-august-deal-jitters

[2] https://ec.europa.eu/commission/presscorner/detail/en/IP_20_1954

[3] According to Bloomberg data, to 22nd October

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MarketsStock Markets

7 Things People Get Terribly Wrong About Stocks and the Stock Market

stocks

7 Things People Get Terribly Wrong About Stocks and the Stock Market

To the perfect layman, stocks can seem intimidating. The market is so diverse, and financial news can seem like they’re in a completely different language. This also leads to people making their own misinformed opinions about the market. The sad part is that these beliefs are often fueled by a bias people have about business in general.

Some think it’s a scam. Others think that it’s impossible to make steady earnings, or that only big players do so. On the other end of the spectrum, you have those who look at historic figures for the Dow Jones and think that you can’t lose with the stock market and others that think that they can just listen to the news and make trades based on announcements and events. Both of these are wrong and being overly optimistic is just as bad as being overly skeptical. Let’s take a look at some of the things people get wrong about stocks and the stock market.

 

You can Never Lose with Stocks

This is probably one of the strangest myths about stocks. Some people think that they can just hold some stock and that it’ll always bounce back. These people think that selling is an automatic loss and that stocks are meant to be held forever.

What they don’t realize is that they may be losing money in more than one way when doing this. First, they may end up with stocks that are not bouncing back or becoming almost useless due to disruption in the industry or market conditions. But there’s another area where they may be losing and not realizing it.

Let’s say that you invest $2,000 on stock “A” while failing to invest in stock “B”. If the first stock goes from $20 to $15 you might want to hold on to it until it bounces back. And maybe it does and hovers at around the $22 mark. You’re feeling pretty good about yourself.

But what if I told you that stock “B” went from $15 to $30 during that same period? This is indeed a loss, and it’s referred to as an opportunity cost. This is the amount of money you’re losing for having your money tied up in stagnant or underperforming assets while being unable to capitalize on winners. This is why you need to be somewhat fluid and forget the notion that all stocks always bounce back. We have plenty of historical evidence to back that up also.

 

It’s Easy to Tell Winners and Losers Apart

One of the biggest myths about stock market investing is that you can easily tell a winning and losing company apart. But that’s simply not true. Two companies might look completely the same, even issue the same type of press releases, and have similar market valuations. But you can’t try to just judge market sentiment based on price movements. You have to dig deeper.

It is often when an industry is going through a rough period that you will truly be able to separate the two. You can expect to see consolidation, and this is when you might find out that a company is running low on reserves, or that it has really bad debt. This is the type of stuff you’ll need to start worrying about if you’re intending to play the long game. This will also help traders in addition to understanding chart patterns and using technical indicators to understand the truth behind those price fluctuations.

You have to come with the mindset that it’s hard to tell winners from losers. This will push you to do more research and not go based on a false sense of confidence thinking you’ve identified a pattern after seeing a sudden uptick in price.

 

You can Only Make Money when Stocks go Up

This is another myth, and people are often surprised when they learn that you can actually bet against a stock and still make money. This is called selling short, and one of the most important tactics you’ll need to learn when trading.

Selling short is when you agree to borrow stocks from a broker in the expectation that it will be lower at a later time. Let’s say that you decide to sell a few shares of Johnson & Johnson short. You agree to borrow 100 shares at $145. That’s a $14,500 investment. The stock then falls to around $130 3 weeks later. You then can pay back the 100 shares which now cost you $13,000. This means that you made a $1,500 profit minus commission.

While this can be a very powerful strategy, you also have to know that it can go both ways. What this means is that you could end up owing more money if the stock goes in the other direction. What this also means is that the stock market isn’t strictly about “buying low and selling high” as they say. You can make money in any direction the stock market is going.

 

Getting Started is Difficult and Demands a Lot of Money

A lot of people also have the idea that you can only invest in the stock exchange if you have tens of thousands of dollars, but it’s not entirely true. As a matter of fact, it’s possible to start with as little as $500 to $1,000, though some advocate that you start with at least $2,000.

It really depends on what sort of trading you were thinking of doing. If you fell in love with the idea of day trading, then you might be surprised to find out that you need to have at least $25,000 at all times in your account if you intend to do more than 4 trades per day over a 5 day period. However, there’s nothing that stops you from starting with a minimal investment if you intend to buy stocks and hold.

Getting started is also not as difficult as you think. It might seem daunting at first, but once you get a hold of the basics, you realize that the stock market is much simpler than you may think. If you want to get a solid foundation on how to buy stocks, we strongly recommend you check out WealthSimple. They have a piece where they run down how to pick a broker and trading platform and a few strategic tips as well. You’ll learn what you need to look at in a stock when to invest, and a few basic stock market terms.

 

You Gotta Go with Blue Chips

There is also this group that believes that blue chips are the only way to go. We’re not saying you should not invest in them. As a matter, they can be great.

They can be a good source of passive income through dividends, tend to hold their value during tough times, and are great stores of value. However, when market conditions bounce back, these stocks stay right in the middle.

While you want to always have a few blue chips in your portfolio, you also have to invest in stocks that have growth potential. Again, this is where you need to think about opportunity cost. By having all your capital on blue chips, you are missing opportunities on fast-growing stock when you could easily hedge your bets by diversifying.

 

You Should Hold You Money During a Crash

This is somewhat related to the point we made earlier about stocks making money in any direction. The worst times for traders are times of stability, believe or not.

A stock market that has a lot of movement in any direction is what they actually look for. This is where the real opportunities are, whether the market is going up or down. That’s why you have to always pay caution to the wind and not be afraid of major financial downturns. This doesn’t mean that money is lost, it is only changing hands.

This also means that you can also start looking at sectors and stocks that are moving in the other direction. Financial crashes are usually the manifestation of a much deeper problem, and that’s when you need to start looking at who’s providing the solutions.

 

Risky Stocks are Automatically Bad Stocks

It really depends on your strategy again. If your goal is to hold for the long term, then maybe you want to go with safe stocks with moderate potential for growth and loss. This also means that you’ll get moderate returns if any. Some people might prefer to invest based on value, while others prefer to bet on short term movement. Both are very valid strategies and might suit a different type of investor.

With risky stocks, there is so much potential. Yes, you could lose, but there are always ways to mitigate it. The greatest risk comes with greater rewards, so instead of focusing on whether a certain stock is too risky, look at short term price movement armed with the right knowledge and tools to make informed and calculated bets.

These are just some of the things people get wrong about stocks in general. Once you dispel those myths, you can start truly understanding what the stock market is all about and form a realistic idea of it.

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ArticlesMarkets

How Much Is the Online Food Industry Worth?

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How Much Is the Online Food Industry Worth?

If you’ve ordered your groceries or takeout online this year, you’ve contributed to the massive wealth of the online food industry. Currently, the global online market is worth $111.32 billion, and the industry is only growing. Food delivery services are expanding, and more grocery stores offer online ordering now than ever before. From caviar to beer, you can satisfy even the wildest cravings with the touch of a button. 

What exactly led to this surge in net worth, and how will the events of 2020 affect the industry in the coming years?

 

A Brief History

Food delivery is nothing new. The first pizza delivery occurred way back in 1889 in Naples, Italy. Then, in World War II, chefs and volunteers delivered meals to citizens seeking cover from bomb threats. In the 1950s, soldiers returning from war popularized pizza delivery in the States and, 10 years later, food trucks entered the scene. 

However, online ordering didn’t make its debut until the early 2000s when GrubHub and major pizza chains began creating mobile applications. By 2015, online ordering began to overtake mobile ordering and, two years later, DoorDash university startups began implementing robot delivery. Meal kit delivery services like Blue Apron also launched during this time. 

 

A Growing Industry 

Since then, online ordering has become commonplace. Now, amid a global pandemic, food delivery is enjoying a major moment in the spotlight. 

To avoid the grocery store — and the subsequent risk of contracting the coronavirus — millions of people are ordering their groceries online. During March, 31% of U.S. households used online grocery ordering, with 10.3 million of them using this service for the first time. Thus, this relatively new form of online ordering is becoming a major contributor to the wealth of the online food industry. 

Digital foodservice orders are also experiencing a boom as many restaurants had to close their doors to dine-in customers during the pandemic. In May, these online orders increased by 138%, and now, new users represent nearly half of third-party food delivery apps. Of course, the global economic slowdown has slowed the overall growth rate of the online food industry. However, it will likely experience a major rebound next year. 

 

The Future of Online Food

According to surveys, 43% of individuals using online grocery services are very likely to continue doing so. Moreover, 30% of households who didn’t use these services in March would likely try it over the next few months. Likewise, experts expect those who tried online food delivery during the pandemic to continue using mobile applications and online ordering even after restaurants re-open. 

Still, more than 50% of Americans are cooking at home more than they were before the pandemic. Thus, restaurants will have to continue diversifying their services to offer DIY meal kits and experimental food bundles if they want to attract these newfound chefs. If more businesses rise to the challenge, the online food industry will likely expand and exceed even the most optimistic future predictions.

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ArticlesMarkets

Why Gold Prices Have Been Hitting Record Highs

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Why Gold Prices Have Been Hitting Record Highs

Gold prices continue to rally this month as the coronavirus pandemic of 2020 continues. The precious metal closed at a little above $2,000 (£1523.05) on August 5th — a record high in the history of gold. Its earlier record peak was in 2011, a few years into the global financial crisis, when investors pushed the price of gold past the $1,900 (£1446.90) threshold.

Analysts have noted that the price of gold in recent months has been on a steady upward trend. However, during the initial stages of the pandemic, market prices rose and fell erratically. A report on gold prices by FXCM in March of this year stated that the bullion, which includes gold, performed poorly due to mass capitulation. Investors liquidated their assets out of panic as outbreaks occurred left and right. This caused the price of gold to fluctuate.

Almost two quarters into the pandemic, however, and the price of the metal continues to increase. That said, SYZ Private Banking’s Luc Filip recently pointed out that investors need to understand each asset’s characteristics in order to position themselves for recovery. And so with that in mind, here are the main explanations behind the escalation of gold prices:

 

Gold is a safe haven

Compared to other financial markets and instruments, gold is considered a safe haven in times of economic turmoil. This is due to the fundamental value of the metal, independent of other factors like economic stability. Gold is still gold — and valuable — on its own.

When a financial crisis happens, the value of assets such as stock, real estate, and currency drops. Investors tend to flock to gold given that it has historically retained most of its value during economic instability. The recession that today’s pandemic has caused is no different. And as cases continue to rise globally with no available cure or vaccine, the prevailing investment speculation is that gold will be the least risky investment option for the foreseeable future.

 

The dollar is weakening

The price of gold generally has an inverse relationship with the value of the dollar. As of this writing, NBC News reports that there are over 4.8 million COVID-19 cases in the US, and this number continues to rise across the country.

The inefficient containment of the coronavirus is one of the reasons the US has entered a recession. Though it initially rose, the dollar has dipped in value over the last few months. A weaker dollar means more gold can be purchased by investors pushing the demand — and its price — higher.

 

Investor interest is rising

Given those reasons, investor sentiment towards the metal has been positive. It is also receiving wide media coverage due to the record highs the price of gold has been hitting and surpassing. More analyses and reports on gold naturally increase interest among investors.

As the pandemic continues, Goldman Sachs predicts that gold prices will rally and pass the $2,300 (£1751.51) mark per troy ounce. This is due to the ongoing economic and political instability in the US, as well as the global public health crisis that hit the country particularly hard. Though the situation is alarming, these are considered favourable conditions for gold and thus, might make it a worthwhile investment.

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ArticlesMarketsTransactional and Investment Banking

Why Whisky is the Safest Investment to Make Right Now

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Why Whisky is the Safest Investment to Make Right Now

Whisky Investment company Braeburn confirm why investing in whisky during economic uncertainty is a lucrative and sustainable asset for any portfolio.

Throughout history, whisky has proven a reliable investment even in time’s of economic decline. Whisky proved a popular choice during the Great Depression, and recent market behaviour would suggest that ‘liquid gold’ will continue to have significant financial gain despite the current climate.

“Societal turbulence is often a time when investors take stock of their portfolio and examine new ways in which they can protect and profit from their savings, this global pandemic is no different.” states Braeburn’s Sales Director, Samuel Gordon.

Whisky investment has been rising in popularity over the last decade, by 582%, according to The Knight Frank 2020 Wealth Report. This report also shows sales of scotch to India, China and Singapore rising by 44% in the first half of 2018 alone. However, in actuality, it’s whisky casks specifically, that offer the security and consistency that evade traditional asset classes.

With the surge in demand for single malts, distilleries are struggling to keep up. The process for crafting quality spirits that enthusiasts desire, happens over lengthy periods of time. Distilleries ultimately can only make and store so much resulting in a continually increasing value. As a result, independent bottlers, blenders and other investors are known to pay highly and quickly in current secondary markets.

While economic uncertainty can bring new levels of volatility to traditional financial markets like stocks, shares and housing. Samuel explains that whisky doesn’t follow these market trends and isn’t impacted by the reactive and turbulent swings of traditional investments.

“Instead of decreasing during periods of economic downturn, historically, whisky casks have increased in value. When whisky remains in its cask, its continuing is maturation process. Over years, the whisky interacts with the cask, taking on beautiful and unique flavours from the wood. Although in time, there is a golden moment to bottle whisky, in general, the longer it’s left the more distinguished and deep the flavour becomes along with the ability to demand a higher resale value.”

Unlike other industries that are impacted by developing technology and evolving consumer behaviour, the whisky industry is prized on its heritage and historical methods. Whisky has maintained consistency through every type of economy and returns are still on the rise.

Over the last five years, casks have earned an average of 12.4% per annum. The average cask doubles in value every 5 years with casks from popular distilleries earning even higher returns. This again, is due to the maturation process which allows whisky to ride through difficult times whilst still increasing in value. Instead of the cask values rising and falling violently with political and economic changes like the traditional stock market, whisky is left to mature in the cask, only to appreciate in value.

Whisky casks offer diversification into tangible assets allowing investors to enhance their portfolio across different asset classes. Traditional ‘paper’ investments puts future success solely in an endeavour outside the investors control. With whisky casks, no matter what happens in the economy, the whisky can always be bottled and sold, even if the market is down or a distillery closes. With an asset grounded in intrinsic value, an investor can safeguard wealth.

An important factor in whisky cask investment is that is offers further security against forgery or fakes. Unlike art, antiques and even bottled whisky, whisky casks mitigate this risk because the Scottish Government requires that they are stored under strict oversight.

Casks are stored in government bonded warehouses that are required to keep meticulous records. Because of this careful and impartial monitoring, investors can be confident in the provenance and value of their casks.

Samuel concludes,

“Whisky casks are a unique investment. They offer unique characteristics and can complement a portfolio in good times or bad. With a real, intrinsic value whisky casks are unlike any other tangible asset. And with the demand for authentic, mature single-malt casks on the rise, they’re more lucrative than ever.”

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ArticlesCapital Markets (stocks and bonds)MarketsNatural Catastrophe

Markets Have More Upside Potential Despite Second Wave Fears

financial markets

Markets have more upside potential despite second wave fears

By Luc Filip, head of private banking investments at SYZ Private Banking

While fears of a second wave of coronavirus bring renewed volatility to Europe and the US, investors are looking East for reassurance. China, which entered the pandemic three months ahead of the rest of the world – and now boasts positive economic growth – offers a useful template for the trajectory of the rest of the developed world. 

As witnessed in China, we expect a significant pickup in activity from Europe and the US now that social distancing measures are relaxed. The downward trend has finally slowed in these areas and economic indicators have risen above April lows, marking a positive first step in this direction. This was, and will likely continue to be, led by activity in the service and consumption sectors, as social distancing measures are lifted further and people learn to live in the new post-Covid environment. 

We anticipate the recovery will be faster than consensus expects, with the real possibility most economic activity could return close to pre-crisis levels by the beginning of next year. In fact, we believe the unprecedented amount of fiscal and monetary policy stimulus might fuel a temporary overshoot of economic growth in 2021 – before falling back toward more subdued long-term trends. 

Despite the very real risk of a second wave, of which we are already seeing signs, we do not believe this will result in another full- blown lockdown in developed countries. Instead, we would likely see more targeted measures, which would not derail economic recovery. Nevertheless, the recovery will remain concentrated in developed countries following in China’s footsteps, while the rest of the developing world – countries mostly dependent on manufacturing and commodity export – are likely to experience a far less robust recovery. 

 

Positioning for recovery

Before these positive developments are fully priced in by markets, now is still the time to increase risk exposure. But with ultra-low bond yields and sky-high equity valuations, many investors do not know where to turn. The key is to consider every aspect of an asset’s characteristics, including its merits compared to the available alternatives, as there is always relative value to be found.

Equity valuations, which regained pre-crisis highs in some sectors, may appear expensive given the current economic situation. However, it is necessary to go beyond purely intra-equity market metrics and consider equity valuations within the current rate environment. Taking into account the excess return currently offered by stocks over cash and bonds, equities are not expensive at all. In the US, this equity risk premium is close to a historic high. Therefore, combining both internal equity metrics and risk premia, we still see value in equities. 

 

Covering all bases 

Nevertheless, our confidence in the economic recovery does not discount the high probability of volatility in the markets – due to downside risks such as the speed of the recovery, the geopolitical situation, the likelihood of a second wave and a second lockdown. 

Therefore, diversification is crucial – across asset classes, regions and sectors. In the eventuality of a negative surprise, our exposure to gold, long treasuries and hedging equity strategies will protect the portfolio. Meanwhile, we increased our exposure to US and European equities in May through passive instruments to obtain wide-ranging coverage across all sectors. We also took advantage of the recent lower volatility to purchase additional portfolio protections as they became cheaper. 

Another key to managing downside risk is to focus on quality. We prefer holding proven quality assets which are continuing to perform well – even if they are more ‘expensive’. On the equities side, this means stocks with strong balance sheets, cashflow and brand, which are well positioned for the new normal of digitalisation – such as Google, Mastercard and L’Oréal. On the credit side, we reduced our exposure to high yield, as we anticipate a painful recovery for many companies, and reinvested the money into investment grade corporates – which are supported by the Federal Reserve’s purchasing programme. 

Generating performance while managing risk requires a flexible active approach to asset allocation. Through the crisis, our preference for quality, rigorous diversification and tactical protection have enabled our portfolio to participate in the market recovery, while mitigating downside risk.