Stockmarkets and Sterling...

Although Wednesday's intervention by Threadneedle Street brought some respite, I can see further pressure from markets and the rally in Sterling will allow speculators to re-short the pound. The only way for this to be resolved is for a U-turn or postponement of the policies introduced in the mini-Budget. With too much self-interest at the top table, that seems unlikely but it would show true leadership and is what markets really need to regain lost faith in the UK. The Government messed up by not having the OBR provide independent costings and rushing through these measures. Hence, we have panic and a Soros-like speculation and frenzy across UK assets. The result is an independent central bank bailing out the fiscal measures of a fragile Government, by resuming QE and stopping QT. The result will likely be rates being raised by a minimum of 1.5% next month, if not sooner. No wonder the world has shunned the Pound and gilts. If the Bank of England and the Government were running a BP or Tesco, they'd be sacked already. The Government have put huge pressure on British businesses like Barratt as well as other house builders and companies like Rightmove, as mortgages become hard to find and affordable. I fixed a client yesterday at 4.95% from a previous rate of 1.99%. She just wanted certainty but the payments mean she has zero disposable income now. The fall-out from this is much more far-reaching that how many dollars we can get for our pound. It's starting to hit everybody.

The Pound is not the issue. We have a free-floating exchange rate, which is moving around as it should. This is not 1992, the currency does not need to be defended against anything. Attempting to do so will only make things worse as it implies panic. The real issue is the U.K government bond market and the solvency of pension funds. This is what prompted the action by the Bank of England on Wednesday. The bond market determines what it costs the U.K government to borrow, and frankly if they can borrow at all. James Carville, a former aide to Bill Clinton, was absolutely correct in 1994 when he said he wished he could be reincarnated as the bond market, because then you can intimidate everybody.

It's extremely worrying to have Liz Truss doing the rounds this morning saying, "I have to do what I believe is right for the country and what is going to help move our country forward", regardless of the chaos on the markets and what the experts are telling her. To quote Albert Einstein, insanity is doing the same thing over and over and expecting different results. Right now, the lunatics are running the asylum.

It is important to note that the Bond Purchase exercise is an asset swap, as opposed to pure fiscal spending. It’s not directly comparable with other forms of stimulus as announced by the chancellor recently. In a fragile market environment, however, it is not taking much thought or analysis to generate high levels of volatility.

The sheer scale of incompetence on display from Truss and Kwarteng is astounding. In under a week, they've managed to prolong the recession, increase inflation prospects and raise everyone's mortgage costs. Andrew Bailey and the Bank of England have hardly fared any better. It was only last month they were telling us the recession wouldn't start until the final quarter of this year. Last week they suddenly announced that, sure enough, we are already in recession, something anyone with half a brain could have told them. How are we supposed to have any confidence in these people?

The big concern for the property market is what happens if the new normal for mortgage rates is a rapid increase of 2%-3% on current levels. This could cause a 'buyers strike' as perspective purchasers are unwilling or unable to take out the mortgage they need at the newly elevated rates.

You could be forgiven for feeling like it is a bloodbath out there at the moment. However, the experienced investor will take a step back, realise that this is just the latest 'crisis' in a long list of them, and remember that a long-term plan will have already accounted for unforeseen events, so stick to that plan.

The sharks will be circling bargain UK businesses. With Sterling so low, expect to see some M&A activity in the not too distant future. Effectively, many companies are over 20% cheaper now than last year and with the increase in borrowing costs they are less well positioned to protect themselves from hostile takeovers by overseas companies - especially those listed in the US or strong in Dollar-denominated income. The other big losers are those approaching retirement using default lifestyling approaches. They will have seen significant losses at the time they can least afford to make them up. Yes, annuity rates are up but as more people are choosing flexible retirement these losses may mean that many will have to work for longer than planned. This will come as a shock as these funds are marketed as lower risk. Yet another mis-selling scandal may be looming.

The pound continues to lose its ground because more investors are taking safer bets by putting their money in the greenback. Investors continue to look for a deeper understanding of the strategy unleashed by Truss and Kwarteng. By early November, we’re expecting another interest rate hike from the BOE, which will feed into mortgage rates and impact the property market yet again. As mentioned previously, Kwarteng’s call for the public to remain calm will only materialise if the general public are properly informed of his plans. Constant communication with them and reassurance as things develop are also advisable (as requested by the City’s top investment bankers) would also not go amiss.

We have just had notification from The Mortgage Works that their 2 year fixed rate will be above 6% when they release them tomorrow. These products are for BTL’s, I suspect at this level, it will make it very challenging for landlords where the yields are lower. They will probably look to increase rents shortly.