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26 February 2010.
Market Commentary
Much of February has seen strong gains in world markets with continuous days of gains experienced on the FTSE 100 in particular. These have been pegged back slightly with fears over the strength of the UK economy as it emerged that the Government borrowed more money in January.
Increasing levels of borrowing, rising inflation, as well as some other poor economic data has lead to a fall in the pound and the overall level of confidence in the UK economy from world investors.
What's interesting is that there appears to be a narrowing in the lead that Conservatives have over Labour in the general election polls. This too has contributed to the lack of confidence in the UK economy.
Investors and 'markets' in general would prefer a strong win by either party. This is because the possibility of a hung parliament means neither party would be able to implement strong economic policies to tackle the issues and get the UK moving in the right direction.
So the closer the race for parliament the more nervous the markets are likely to be.
The Things They Say
Considering the fear that markets have over the general election result this year it might be a good time for this...
I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful. Warren Buffett
Click here for more inspiring quotes like this...
Our Top 5
Tips for choosing a Cash ISA
1) Check the interest rate - and for how long it will stay at that level
2) Check the terms - are transfers allowed?
3) Check the access - is it instant access, by branch, phone or online?
4) Check the competition - is it the best rate in town?
5) Check the bank - try not to save any more than £50,000 with any one group e.g. Abbey and Alliance & Leicester are in the same group.
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Jargon Buster
Share Price
This is the value placed on a share of a public company. It is determined by the supply of and demand for a company’s shares. Once a company has floated (sold shares in the company to members of the public) its shares are traded on a stock exchange e.g. London Stock Exchange. The price movements are generally influenced by the success of the company itself although during certain periods other factors can also affect the price e.g. increase experienced during the tech boom or decreases experienced during the credit crunch.
Random Walk
This is a hypothesis that states all share prices are completely random and therefore cannot be predicted. It is based on the notion that history does not repeat itself and whether the price of a share has risen or fallen on any particular day cannot possibly determine what will happen to it the next day.
Efficient Markets Hypothesis
This is based on several studies that suggest it is impossible to ‘beat the market’ consistently because share prices already take into account all known information. The implication that all share prices reflect everything that is known about their respective company is that no investor or fund manager can beat the market over the long term other than through luck, where the random movement of share prices (see Random Walk) moves in their favour.
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