"The Parties were bigger. The pace was faster. The shows were broader. The buildings were higher, the morals were looser, and the liquor was cheaper." (The Great Gatsby).

Had we been alive at the turn of the last century, this must have been how it felt to transition from the Victorian era into the Modern one, and at no time was the contrast more apparent than in the 1920’s.

Our world is changing rapidly, and it's hard to keep up. There are so many parallels with the 1920’s that it would be foolish to ignore them; global conflicts, rolling pandemic, shifts in the world balance of power, political turmoil, the inklings of a coming economic boom, to name a few. Mostly though, it's the feeling of standing next to a launchpad - to either witness the spectacular start of an exciting journey to a new world or an almighty implosion.

Why the trepidation? It all boils down to 'Money Printing' - aka 'Quantitative Easing' (Yes, that phrase from Robert Peston). We've created a debt mountain of astronomical proportions!

Before the global financial crisis in 2008, the US held around $900 billion worth of financial assets on its books. It is now on course to reach at least $10 trillion by the end of this year. The same story is replicated here in the UK, across Europe and the rest of the world, with global debt nearing $300 trillion. Our slice of that pie is greater than at the end of WW2, and the only time it was higher was during the Napoleonic war.

Among the many variables, there are two major implications of all this ‘loose’ money (one good and one bad).

The Bad - Economic theory dictates that printing money can lead to inflation. Inflation is extremely cruel to the elderly and retired folk (particularly those on fixed incomes) because very little can be done to fight it.

Many of you will be aware that we've been talking about inflation 'a lot' lately (particularly the potential damage it can inflict on certain investments such as Corporate and Government Bonds) and the various strategies we've adopted to mitigate this issue. To that extent, we believe that we've done all that is possible, and now we just have to hope that any inflation, if it comes, is not too high nor lasts for too long.

The Good - Money flows like water, and this flood of ultra-cheap money into the global financial system has promoted a wave of speculation - none more so than cryptocurrencies (written about previously), but also other areas ranging from commodities to housing and shares of stock, to name some examples. In the short term, this drives up prices but also produces instability, and it is in this creative economic 'vortex' that we are most optimistic.

Think of the global stock markets as a giant incubator. Right now, hundreds of new companies are being created, some of which will grow into the next Apple, Amazon, Microsoft or Toyota, for example. They will have names we won't recognise and do things we won't understand but, have no fear, neither the Wright brothers nor the five people who witnessed the first flight at Kitty Hawk will have been able to imagine the implications of that day. Neither will we!

The final piece of good news comes from historical research. There is very little correlation between inflation and stock market returns (* The annualised inflation-adjusted return on US stocks is 7.3% when going all the way back to 1926). The lesson - hold a vast array of stocks for the long term.

We hope you enjoy the Autumn edition of our newsletter, ‘Moneywise’. As usual, please do not hesitate to contact us if you have any questions.