the times | Monday January 3 2022 35

CommentBusiness

Before throwing cash into the stock

market casino, listen to Uncle Ed

spanner that may wreck the works

this year. I’m comforted that yields on

US treasuries have already roughly

doubled from their March 2020

trough. But at 1.5 per cent they still

can’t be described as anything other

than very low by historic standards.

Where might they move to and how

disruptive could any shift be for stock

market sentiment?

Towards the back end of 2018,

treasuries yielded over 3 per cent, and

just before the pandemic 2.5 per cent.

It’s hard to imagine that the cost of

long-term money nudging back up to

these levels would be especially

disruptive. Indeed, you wouldn’t really

need rose-tinted spectacles to view

this as a welcome sign of a return to

something resembling normality.

US shares are balanced delicately

on a three-legged stool of high

valuations, rebounding profits and the

expectation of rising interest rates.

Forward-looking price-earnings ratios

of just over 20 times for the S&P 500

and 30 times for the tech-heavy

Nasdaq are expensive by historic

standards, but positive profit news

could yet carry the day in the absence

of any big monetary policy shock.

The British market is dwindling in

global significance for a variety of

reasons, not least the relative paucity

of big listed technology companies.

Nevertheless, it still represents a

significant chunk of investment

portfolios that seek to cover sterling

liabilities. And the valuation of the

FTSE All Share is comfortably inside

its long-term tramlines.

I wouldn’t expect a sixth-former to

For Christmas, I

bought my nephew

an introductory

guide to trading

stocks. Apparently,

it’s all the rage at school right now to

have an account with one of the

commission-free apps. Not sure how a

16-year-old manages to get verified to

open one, but then I’m at the old

fogey end of the technology spectrum

compared with him. Anyway, the

book was well-reviewed online, so,

assuming that its rating wasn’t all the

work of bots, I thought it worth

buying as a form of youth protection.

Global markets are dancing around

all-time highs. Little wonder sixth-

formers are being diverted from

cryptocurrencies to shares right now.

Taking an old investor’s cautious

approach, we’re now a scary 13 years

into a bull market.

Not that I’ve forgotten the early

pandemic rout, but I’m reluctant to

mechanistically label that a bear

market and measure a new bull run

as starting in March 2020. Maybe it is

now time for me to move aside for the

youngsters.

Long-term charts of markets can be

dangerous things. Elongate their

timeframes and movements get

smoothed and condensed. The

pandemic panic can easily be

dismissed as a blip when viewed

through a wide-angle lens. I’m

involved with three listed entities.

Shares in each have multiplied from

their lows as Covid-induced economic

fears proved grossly overblown.

But my memory of the first

lockdown — and the unprecedentedly

(at least in my lifetime) difficult

decisions that we had to make — is

still too vivid to place complete trust

in the present buoyancy of global

markets. A classic case of the fabled

bull market wall of worry.

Governments and central banks

have done their thing, shoring up

economies. Tech businesses have

prospered in the age of online living,

driving up stock markets and sorting

the leaders from laggards according to

their new economy weightings. Of

course you need to fret about an

eventual reckoning, either from the

cost of the bailouts or a reality check

on technology valuations, but there is

still so much investable cash sloshing

about the global financial system. Is

this really going to be this year’s

problem?

Rising interest rates are the obvious

Ed Warner

Late payers

‘threaten

thousands of

small firms’

Simon Duke

More than 400,000 small businesses

could go under because customers are

failing to pay their bills on time, a

survey has warned.

The Federation of Small Businesses

said that late payments, inflationary

pressures and Brexit-related red tape

could reduce the number of companies

operating in the UK.

In a poll of 1,271 small enterprises, it

found that 30 per cent of companies

had experienced a rise in delayed

payment of invoices over the past three

months. Eight per cent of small busi-

ness owners said that late payment was

threatening the success of their firms.

With the UK having about 5.5 million

small businesses, that means 440,000

could be forced to close this year

because of late payment alone, accord-

ing to the FSB. The figure exceeds the

400,000 companies that were forced to

shut over the past year because of Covid

lockdowns, it said.

“The small business community

diminished in size over the past year

and unless action is taken now to tackle

the challenges it faces, history is set to

repeat itself,” Mike Cherry, the federa-

tion’s national chairman, warned.

The FSB said that confidence had

fallen last year, with the mood among

business owners blighted by “another

uncertain festive season”. Seventy-

eight per cent of small companies

reported a rise in overheads, with pay-

ments for bills such as fuel and utilities

at their highest levels since 2014.

With full import checks and rules of

origin requirements now in place for

companies that do business in the

European Union, 74 per cent of small

exporting companies said that inter-

national sales had been flat or falling

over the past three months. Thirty-

eight per cent of these firms reported a

decrease in exports.

“Today, it’s a fresh wave of admin for

importers and exporters,” Cherry said.

“In three months’ time it will be a hike

to the jobs tax that is national insurance

contributions, a rise in dividend

taxation, business rates bills and an in-

crease in the national living wage. On

top of that, operating costs are surging.”

Cherry said that if the government

was “serious about levelling up”, it

would have to help businesses strug-

gling to pay their bills. “Increasing the

small businesses rates relief ceiling to

£25,000 would take 200,000 more

firms out of this regressive tax

altogether, primarily in levelling up

target areas,” he said.

be juiced up by dividends, but without

tech excitement the UK market will

always fall back on yield as a crutch.

A 3.5 per cent forward return is

unspectacular, but dividends are

rising and should provide some

cushioning for a market that has

(modestly) lagged the rest of the

world.

All of this, of course, is far too dry

for those who are attracted by the

prospect of throwing some of their

savings into the stock market casino

for the first time. Billboard ads for

trading apps on the A4 heading out of

London are surely a reminder that

the bull market is very advanced

(whether measured as either 13 years

or 18 months old).

Uncle Ed’s advice contained the

obvious old saws: start modestly, use a

stop loss, don’t just follow your mates

(what do they know?), do some

research (however rudimentary),

focus on companies you recognise

and think you can learn to

understand. Don’t be tempted to

leverage your bets by trading on

margin. And don’t come to me for

individual stock tips as I wouldn’t

want to fall out with you when they

go wrong.

In reality, of course, my nephew

almost certainly will take all of his

advice from vlogs and trader

chatrooms. I went down the rabbit

hole of the internet to view a few.

Scary stuff, but more because of the

blizzard of content than its quality,

which ranged as widely as you might

expect.

Before wrapping his present,

though, I flicked through the

analogue, paperback trading guide.

It’s never too late to learn something

new, or at least to be reminded of

what you know of markets but have

chosen to ignore or forget.

The author had a bias towards

momentum investing in growth

stocks. Nothing wrong with that,

especially as he was big on instilling

trading disciplines, too. And right now

we’re clearly in a momentum market.

Perhaps I’ll make a note to myself to

ride the wave until it’s not taxi drivers

but my nephew that starts pumping

share tips my way.

Unless, of course,

he’s on the trading

desk at Goldman

Sachs by then.

‘‘

’’

Ed Warner sits on a number of boards.

He is writing in a personal capacity

Commission-free trading apps such as Robinhood are all the rage within some

schools and sixth-formers may find shares more tempting than cryptocurrencies