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Full podcast episode transcript
[0:09] Susannah Streeter: Hello and welcome to Switch Your Money On from Hargreaves Lansdown. I’m Susannah Streeter – Head of Money and Markets.
[0:14] Sarah Coles: And I’m Sarah Coles – Head of Personal Finance.
[0:16] Susannah Streeter: Great to be with you, Sarah. So, we’re bang-smack in the middle of the summer – and what a summer it’s been. We’ve had multiple heatwaves, we’ve had storms, and it’s been a stormy time for financial markets – a real volatile ride over the last six months, in fact, since Trump became President. We are taking a bit of a look back about what’s happened during this episode, Sarah – a lot to talk about – and, still, we have some unpredictability to come.
[0:43] Sarah Coles: Yes – and there was a huge bolt of lightning that hit the markets – and hit all of us – at that so-called ‘Liberation Day,’ when Trump decided to announce all of his many and various tariffs.
[0:55] Susannah Streeter: Yeah – I mean, there’s a lot of talk of rollercoasters. It was actually more like going on Disneyland’s Hyperspace Mountain!
[1:02] Sarah Coles: [Laughs]
[1:03] Susannah Streeter: It really was – you know, these deep twists and turns and big plunges as the world really headed into darkness – we didn’t know where we were going to end up. The ride has come to a bit of an end, but there are certainly a lot of fears among some investors that it could take off again because of the unpredictable policy that does tend to come up from the White House. We saw that during Trump’s first term, and it seems to have really... he’s raised the game – put it this way – ...
[1:30] Sarah Coles: [Laughs]
[1:30] Susannah Streeter: ...in his second term. And, in a way, we’ve almost come off the rollercoaster and onto the bumper cars when it comes to trade policy. Trump getting into the front seat with, first, Keir Starmer – with the UK, doing a deal with the UK – and also doing a semi-deal with China, but leaving others on the sidelines – and, of course, we’ve seen how it’s all played out recently.
[1:51] Sarah Coles: I am dying to know where gonna go next on the fairground rides – but, in terms of the impact it’s had, it’s not just the shares that it’s hit as well – it’s things like government bonds too – I guess, could be the coconut shy of government bonds.
[2:03] Susannah Streeter: Yes – and, actually, it’s also not so much the tariffs, although they do have an impact because, of course, the expectation of where inflation is going to go in the United States – because, if you’re increasing, effectively, the price that you, as consumer, have to pay for their goods, it’s gonna have this knock-on effect on inflation – and that has an impact on treasury yields. But the other impact that you’re seeing as well on treasuries – on the bond markets – is Trump’s ‘Big Beautiful Bill’ – and concerns that it’s really going to increase the US debt mountain even higher.
And, of course, it’s what’s prompted the big spat – the latest twist in the tale of the big spat between Elon Musk and Trump, because it does seem to be that it’s the ‘Big Beautiful Bill’ that Elon Musk is very concerned about. He says, simply, that the US Government is spending too much and creating far too much debt for the future – and that has also been having an impact on the bond market as well – and I don’t foresee that this is going to calm down any time soon.
[3:11] Sarah Coles: And, I suppose, that spat, itself – so Elon Musk and Donald Trump... that, in itself, had repercussions as well, didn’t it?
[3:17] Susannah Streeter: Yes – it’s been having repercussions for Elon Musk’s businesses because, of course, there are concerns that, actually, if you’re in dispute with the President, it may mean that you might not get such favourable terms for some of your businesses, going forward – and that, of course, has big implications for Elon Musk.
And it seems as though Trump and Musk – in the way that they control two huge social media platforms – are using that as their mouthpieces to attack each other – and it’s gonna be really interesting to see how this relationship develops.
[3:53] Sarah Coles: We talk a lot about geopolitics – and the US has been a major force for uncertainty at this end of the year, but there is a lot of other things going on – a lot of conflict around the world around as well.
So, what impact has all this had on the dollar?
[4:06] Susannah Streeter: Well, yes – the dollar is usually seen as a safe haven in uncertain times – historically – but what you’ve seen is, actually, the dollar lose value against a basket of currencies by around 11% this year. So, it does seem as though this so-called ‘US exceptionalism’ might be fading a little bit because of this unpredictable policy coming from the White House.
I mean, I say, ‘Fading a little bit,’ but US stocks have reached record highs again – but it does seem to be playing out in the value of the dollar and I think that it may still come under some pressure in the months to come because of the unpredictable nature of policy.
[4:46] Sarah Coles: So, obviously, there’s a huge amount going on in the US – and it is tempting just to spend the rest of the podcast talking about the US – but that’s not all that’s going in the world. There’s awful lot of conflict around the globe – and that has a huge impact, doesn’t it?
[4:57] Susannah Streeter: Yes – it’s been described as a really high-risk cycle – and you can see, with this ongoing war in Ukraine, but also continued outbreaks of violence in the Middle East – that there is justification in that – and, of course, there is still concern about what could happen in terms of China and Taiwan. But, certainly, the Middle East is grabbing most of the headlines – not surprisingly, given that a conflict in Gaza has been raging – but also those attacks by Houthi rebels in the Red Sea have been disrupting shipping – and that continues to happen – and it doesn’t seem as though there is gonna be any immediate let-up in this, and so the oil price is likely to stay a bit volatile.
We have got these conflicting ties when it comes to the oil price. On one hand, you’ve got the concerns about the effect on global trade taking a knock because of the tariffs – but, on the other, heightened tensions in the Middle East – which, of course, is such a crucial oil-producing region... that’s also having an effect and countering that effect from other global trade concerns. So, I think this push-pull in terms of the oil price is going to continue – and that, of course, does then have repercussions for a whole host of companies, but also individual consumers as well – because what happens to wholesale energy prices is then reflected in the energy price cap – and it could have an implication for where the price cap will be in the autumn.
[6:28] Sarah Coles: So, with so much going on – and so many different forces at work – how are investors feeling right now?
[6:33] Susannah Streeter: Well, we do a survey at Hargreaves Lansdown – the Investor Confidence Index – and it probably won’t surprise you that, actually, it was a bit of a mixed picture in June. What you actually saw was, after the turbulence of ‘Liberation Day,’ investor confidence had rebounded, but it was pretty mixed in June. It does reflect a bit more of a cautious stance.
Investor confidence in the European sector decreased slightly – down 4% –but it fell most in the Japanese sector – down 11%. And what’s quite interesting is that these two regions, of course, are where there has been uncertainty surrounding tariffs. So, certainly in June, with no trade deals yet signed – and concerns about what the tariffs could end up at – not surprising, really, that investor confidence took a bit of a knock. But confidence in the North American market increased – the magnitude of the rise, though, was much smaller than other markets – and investors’ confidence in the UK sector has decreased this month, but only very slightly. Confidence in UK economic growth has actually increased by 12% in June – and the UK economy may still be stagnating, but you’ve got lots of different other readings coming out – other surveys from around the world, such as Deloitte – that, actually, most recently showed that, among executives – global executives... they see the UK as joint-top in terms of places to invest in the world. And so, even though you’ve got quite a lot of headlines – I, most recently, saw... I can’t remember which newspaper it was, but I passed it on the street – big billboard saying, ‘Britain is Broke’ – and, certainly, we know that Rachel Reeves is facing a challenge with the public finances – but, to some extent, stability has returned to the UK and, certainly, executives are seeing the UK as a more attractive place to invest in.
[8:24] Sarah Coles: I suppose, part of being an investor isn’t necessarily chasing that growth around the globe, but actually taking a more long-term approach?
[8:31] Susannah Streeter: You’ve just got to be patient. Lots of people aren’t known for their patience – they wanna be timing the market and not thinking about time in the market – because, of course, when you invest, you really should have a long timeframe in mind – and, if you need that money within the next five years, investing isn’t necessarily the place that you want to be – because, of course, over the course of weeks/months, markets will go up and down. You’ve got to have that long-term timeframe – and it is really hard when times are volatile to stay the course and not make those kneejerk movements in terms of your portfolio.
Obviously, we say, ‘Diversify frequently,’ but, in many ways, we just can’t say it enough because lots of people are still too overweight in certain parts of their portfolio – and it really is worth looking under the bonnet of the funds that you do have – just to make sure you really have spread your risk across different assets – and not just types of sectors but geographically as well. And, if you are feeling a bit cautious – perhaps you might be heading towards retirement and you think you want to make sure your investments are a bit more stable – you could look at reducing risk that could shelter them a little bit more from the less extreme ups and downs of the global stock market – perhaps looking at lower-risk investments like bonds or total return funds, for example.
[9:50] Sarah Coles: So, I’ve asked you loads of difficult questions in this particular...
[9:52] Susannah Streeter: [Laughs]
[9:53] Sarah Coles: ...conversation. I’m gonna ask the hardest one of all... So, very briefly, what would you say are the big challenges and what the big opportunities are coming up in the next six months?
[10:02] Susannah Streeter: I think one of the challenges that the world – and, certainly, some economies may face – is ‘Stagflation.’ So, this is a situation – a tricky situation to be in when you’ve got stubborn inflation, but really stagnating economic growth. And we know that the US economy looks set to slow down because of this uncertainty that Trump has bought in regarding the tariffs – and there is a bit more cautiousness at the Federal Reserve – the US central bank – about lower interest rates because policymakers are a bit concerned that inflation may stay a bit stubborn. To some extent, that’s been playing out in the UK less so – we’ve had slightly more easing signs in the labour market, which could relieve pressure on inflation. We’ll have to see what evolves in the months to come.
The other aspect as well – what could continue to be a challenge – is fractious geopolitics – I mentioned being in the high-risk cycle... that’s not gonna go away, I don’t think, any time soon.
And then, the third aspect to all of this is, ‘What’s going to happen with the AI juggernaut?’ Companies have been ringfencing budgets and pouring vast sums – particularly the tech giants – into their AI investments, but it’s quite hard to have real long-term clarity about just how consistent this AI investment will be – and when companies will really see returns and get bang for their buck – so you could see volatility ahead because of the huge sums and huge valuations of those textiles on Wall Street.
[11:33] Sarah Coles: Always interesting to take stock and see where we are in the big global picture. But, of course, it’s not just the big picture we need to take stock of – so it pays, round about half-time of the year, to have a little think about our own finances – and particularly things like pensions.
So, I guess, a good time to bring in Helen Morrissey here – our Head of Retirement Analysis.
So, Helen, what sort of jobs should people be doing right now regarding their pension?
[11:54] Helen Morrissey: I think it’s a really good time to take stock of what you’ve got and say, ‘Am I actually on track with my pension investing?’ – because I think, sometimes, we let our pensions run along in the background – we don’t really have much of a sense of how much we’ve got – what that might get us – and so, now that we’ve reached that half-point of the year, maybe take that time. Look at what you’ve got – make sure that you get all your pensions together in one place, just to see what you genuinely have in entirety – and then maybe use things like an online pension calculator, for instance, because that’ll give you a really good idea of what you’re on track to get. And then, once you know that, you know if you are on track for the kind of retirement that you want.
On top of that, that might be that you decide to increase your contributions, for instance – to try and boost that pension value over time – but it might also be an opportunity to look at your investments. ‘Are your investments on track to get you to where you need to be?’ ‘Are they in line with your values?’ ‘Do you need to speak with a financial advisor to fine-tune things – to make sure that you’re happy with it?’ ‘If you’re not on track, what’s your ‘Plan B?’ ‘D’you have a robust ‘Plan B,’ or d’you need to get one in place?’
So, it’s a really good opportunity to have a look at these things and make sure that you can look to the future with confidence. I think it’s also worth saying... I’ve mentioned financial advice – but, if you’re looking for more information, there’s a great government-backed service called Pension Wise. If you’re over the age of 50, you can go and speak to them – they can’t give you financial advice, but they can give you some great information and guidance to help you on that right track.
[13:30] Sarah Coles: And, I suppose, when we talk about pensions, we always have to say that you can’t access the money until the age of 55 – and, of course, that’s rising to the age of 57 in 2028.
[13:37] Helen Morrissey: Absolutely.
[13:38] Susannah Streeter: What about people’s broader finances, though, Sarah? When we get to this half-point through the year... Summer is always expensive – you’ve got your holidays to pay for – if you’ve got children, you’re having to buy all the school uniforms to go back to school – looking ahead, even to Christmas – dare I say it?!
[13:51] Sarah Coles: [Laughs]
[13:52] Susannah Streeter: Thinking about, ‘Who’s going to host?’ – how much it’s going to cost. It’s worth, actually, having a bit of a check on your broader personal finances – to think, ‘Have I got enough to see me through?’
[14:02] Sarah Coles: Yes – I mean, it’s easy to get sidetracked by the exciting things like investment, but it is worth taking quick [inaudible 14:07]. I won’t try and sort everybody’s finances in 10 seconds, but I would say...
[14:10] Susannah Streeter: Particularly for Christmas!
[14:11] Sarah Coles: [Laughs] Particularly for Christmas! But I would say, ‘Look at your emergency savings.’ So, you should have between three and six months’ worth of essential spending in an easy-access savings account while you’re working – and, when you’re retired, that should rise between about one and three years. That’s quite a big, chunky amount of money – have a look, see where you are with that – especially if your costs have increased over a period of time. ‘Has your essential spending increased – and, as a result, should your savings increase as well?’
You also need to really think about things like cover – so insurance cover – you know, ‘Do you have enough life cover in place?’ ‘Do you need to look at any other kind of cover?’ So, for example, looking at your income if you were sick – ‘Do you need to cover that if you’re unable to work for a period?’ ‘What d’you have through work – do you need to get standalone cover for yourself through something like Critical Illness or Income Protection?’
So, the pillars of people’s finances are really worth going back to and having a look at. And, obviously, the job everybody loves to do – but I would say is the most rewarding thing you can do... is have a look at your budget because you know you’re spending too much – everybody knows they’re spending too much. Really drawing up a budget will tell you why and where you could cut back.
[15:07] Susannah Streeter: So, if you’re sheltering from a hot spell or a burst of rain, don’t just switch on the TV and look at your finances instead.
[15:15] Sarah Coles: Yes – and I would say, you don’t have to do it all at once – just one job at a time. Obviously, given more time, I would go into things like wills and power of attorney – and these things are really important. So, if it does rain all summer, that absolutely – I would say – get stuck into your will because you will never regret updating your will.
[15:30] Susannah Streeter: Well, thank you very much – an awful lot of admin to do. Certainly, the case for me – it’s always catch-up time – but imagine the type of admin that you would need if you were gonna set up a political party.
Well, as we’ve heard, that’s what Elon Musk wants to do – partly because of his spat with Donald Trump, he’s vowed to set up ‘The America Party,’ but there are also plans for a new party in the UK as well. High-profile left winger, Zarah Sultana, has quit Labour and she’s vowed to launch a new political party with Jeremy Corbyn.
So, if you’ve been across your political news recently, do you know what this new party might be called?
[16:06] Sarah Coles: I haven’t a clue.
[16:07] Susannah Streeter: Okay, I’ll give you...
[16:08] Sarah Coles: [Laughs]
[16:08] Susannah Streeter: ...three guesses – is it ‘Arise,’ ‘The Collective,’ or ‘Real Change?’
[16:13] Sarah Coles: I have no idea. I’m gonna pluck ‘A Real Change’ out of nowhere because why not?
[16:20] Helen Morrissey: That’s a really good option, but I think ‘Arise’ sounds very grand – so I’m gonna go with ‘Arise.’
[16:27] Susannah Streeter: I’m really sorry – I’ve been very sneaky – and it is, in fact, a trick question – because, although all three have been in the frame, apparently, Corbyn says the democratic foundations of a new kind of political party are taking shape, but discussions are ongoing – so it is a question of ‘Watch this space.’
[16:45] Sarah Coles: I suppose, it’s like when people start a band – the first six months...
[16:48] Susannah Streeter: [Laughs]
[16:49] Sarah Coles: ...aren’t actually spent entirely devoted to working out what it’s gonna be called.
[16:52] Susannah Streeter: I’m surprised, though, that Elon Musk’s not going for ‘The X Party.’
[16:57] Sarah Coles: [Laughs]
[16:59] Susannah Streeter: It’s not really on-brand, is it?
[17:00] Sarah Coles: Yes – I mean, although, I guess it will be all over ‘X’ when, eventually, get the campaign started – whatever this new party looks like.
[17:07] Susannah Streeter: We’ll have to see.
Thank you for being with us – before we go, we should say that this was recorded on 14th July and all information was correct at the time of recording.
[17:16] Sarah Coles: Nothing in this podcast is personal advice – you should seek advice if you’re not sure what’s right for you. Investments and any income they produce can rise and fall in value, so you could get back less than you invest – and past performance is not a guide to the future. Pension rules can change and benefits depend on induvial circumstances.
[17:28] Susannah Streeter: Yes – this is not advice or a recommendation to buy, sell, or hold any investment. No view is given on the present or future value or price of any investment and investors should form their own view on any proposed investment.
[17:38] Sarah Coles: And this hasn’t been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication.
[17:44] Susannah Streeter: Non-independent research is not subject to FCA rules prohibiting dealing ahead of research. However, HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing.
[17:57] Sarah Coles: You can see our full non-independent research disclosure on our website for more information.
So, all that’s left is for us to pop off and form a new political party – and to thank Helen for coming into the podcast, and our Producer, Elizabeth Hotson.
[18:07] Susannah Streeter: Thank you so much for listening – we’ll be back again soon. Enjoy the summer – goodbye!
[18:12] Sarah Coles: Goodbye!
[18:12] Helen Morrissey: Goodbye!