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It’s time to get your cars topped up with fuel, they’re paying us to take the stuff now. OK, maybe we are not at that point, but the Oil price turned negative this week, more on that later.

Thank you to those of you who took the trouble to listen to our webinar last week.

I asked for feedback and appreciate the comments we have received. The consensus was positive, all feedback, anonymised, is copied below this message. Some of you requested more shots of our faces for some reason, rather than just the slides (and our voices). I will take all the feedback on board and consider how/if we do more webinars going forward.

We had a specific question from a client on oil prices after the webinar, which I have asked Investment Director Ben Yearsley to consider:

QUESTION: The oil price wasn’t mentioned and if I’d thought about it a bit more, I would have asked about the impact that this has had versus the Coronavirus impact and also the extent to which future oil price increases will have on investment portfolios. If I’m right I remember the price of crude at over $100 pb before the financial crisis in 2008 (it was a measure we monitored closely at work) but then it dropped significantly to c. $50 or less and now stands around the $30 pb level.

ANSWER: Oil in the short term will have a deflationary impact on the economy. However, what is potentially a bit concerning is that most major oil companies are looking to preserve cash. They do this by slashing capital expenditure, and effectively they stop spending looking for new oil. In the short term this doesnt matter but it could lead to a sharp price spike later down the line as normal demand returns.

Oil is a big driver of FTSE 100 returns and a major dividend payer in UK markets. In addition, the oil price in part helps drive or reduce profits in many sectors from transportation to shopping. So, a low oil price is good for the economy but bad for FTSE dividends, and a high oil price is bad for the economy and good for dividends.

The oil price war is driven by the Saudis and the Russians to put the US shale oil industry out of business as it needs oil to be $45+ to be profitable. However, even if US shale does go out of business then as soon as the oil price rises above this, someone will buy the assets and get the oil out of the ground…it hasn’t gone anywhere!

Oil has been in the news a lot this week due to negative prices seen in some oil contracts in the US. Before you get too excited about getting free petrol, remember that over 60% of the UK petrol price is tax. Secondly the oil price that turned negative earlier this week was for delivery the following day, the reason it turned negative was that US oil storage facilities are getting close to full capacity and when certain futures contracts expire, the holder of those contracts is expected to take delivery of the oil. With nowhere to store it, traders were frantically trying to offload it and paying other market participants to take the oil, hence the negative price. If you look at Brent Oil, more commonly traded in Europe the current price is $21 a barrel.

In the meantime, and in other developments,

NS&I SUPPORTS SAVERS IN THIS UNPRECEDENTED TIME

  • Planned interest rate reductions on NS&I variable rate products, including Premium Bonds, will not now be implemented.
  • The cancellation of these interest rate reductions will support savers during the coronavirus pandemic.
  • Customers do not need to take any specific action as a result of this announcement.

Planned interest rate reductions on NS&I variable rate products due to be effective on 1 May 2020 will not now be implemented. The variable interest rate changes announced on 17 February 2020 will be cancelled and rates will remain unchanged to ensure savers are supported during the coronavirus pandemic.

Customers should disregard any letters or notifications that they have received, or will receive, about interest rate cuts to NS&I variable rate savings products.

Fixed term product interest rate reductions, also announced in February, will go ahead as planned and will become effective from 1 May 2020.

National Savings & Investments has made the impressive move to suspend/cancel its planned interest rate reductions. Significantly, these were already planned BEFORE the emergency rate reduction to 0.1%. of course, this now makes NS&I rates market leading, allied with a copper-bottomed guarantee from the government (unlike conventional deposit accounts which are protected by the Financial Services Compensation Scheme or FSCS up to £85,000 per banking licence). Whilst this is laudable in its own right, it is of course also a good way for the government to raise capital at a time when they very much need to, as the tax take falls and welfare payments rise.

The markets seem to have found a plateau of sorts for now. Whilst it is impossible to predict their movements over the short term, we continue to believe that over the medium to long term, positive returns will be enjoyed. Financial planning continues to be critically important in order to achieve your financial objectives.

WEBINAR FEEDBACK:

SB

Thank you for putting the webinar together; it was very useful and informative and good to put voices to names. I hope there’ll be more in future.

AC

I have just listened to the 3 webinars.

Overall my honest opinion is that they were very informative and consistent with the discussions we have had. There are one or two unknowns obviously e.g. how long will the market take to recover – will it be a V or U recovery. The answer U made good sense to me as did many of the other answers to other questions.

All questions seemed relevant with clear easy to understand explanations.

The message seemed very much to be Don’t Panic, Hold Fast and believe in your plan…….but importantly keep close to your adviser and don’t think too short term. All good.

I would listen to future such communications.

IS

Very good – wrapping it up into one download would have been easier though? Also, you need a better mic setup – Ben was really clear but yours wasn’t great.

Format was excellent though and very informative – lockdown or not, this should be a regular thing.

G&L F

Both found it interesting. L found it particularly reassuring. L thought the time was about right, G thought 30 minutes would have been better (relayed by adviser).

BS

Hi Mark, just to say how good I thought the webinar was. Please pass on my congratulations to John, Ali and Ben. Enjoyable and informative.

RC

RC enjoyed the seminar and found it useful. Length OK and would welcome further webinars (relayed by adviser).

LC

LC phoned to say he found it useful, particularly the reasoning behind the views exposed in the Q&A section. Thought the length was about right, but he didn’t bother with the last section….. as he would expect what we are doing as a firm in relation to the CV to be done by all companies.

Overall, would welcome future webinars (relayed by adviser).

S & S E

S and I have just listened to the webinar recordings which we found very helpful and informative. A very good follow up to our Zoom meeting on Tuesday as well.

Please could you pass on our thanks to Jon, Ben and Alison.

I thought the length of time was fine – it’s sort of driven by the number of questions and they’re not really yes/no answers either.

The oil price wasn’t mentioned and if I’d thought about it a bit more I would have asked about the impact that this has had versus the Coronavirus impact and also the extent to which future oil price increases will have on investment portfolios. If I’m right I remember the price of crude at over $100 pb before the financial crisis in 2008 (it was a measure we monitored closely at work) but then it dropped significantly to c. $50 or less and now stands around the $30 pb level.

KAB

Thank to you and all the Team for a most interesting presentation and advice. We couldn’t be in better hands.

MR

Thank you for asking my question although as you stated, I didn’t get a definitive answer but either way, I understood what Ben said.

Interesting webinar and I hope you get great feedback.

I found your webinar most interesting, I will certainly listen to your next session.

KA

Well done Jon. Nicely pitched.

J & KH

Thought the length was the maximum and perhaps should be limited to 30 minutes. Didn’t learn a great deal (didn’t expect to) but fund the rationale exposed by Ben interesting.