Aurelia Butler

The Bank of Japan has renewed its pledge to keep bond yields at zero, sending the yen lower and widening the policy gap with other central banks that have raised interest rates to tame inflation.The BoJ’s decision to stick to its ultra-loose monetary policy exacerbates a global divergence in yields after the US Federal Reserve raised its main interest rate by 0.75 percentage points this week, prompting Switzerland and the UK to also increase rates.The BoJ on Friday kept overnight interest rates at minus 0.1 per cent. It said it would conduct daily purchases of 10-year bonds at a yield of 0.25 per cent, showing no willingness to let bonds trade in a wider band.The decision triggered a sharp dip in the yen to ¥134.63 against the dollar, extending what has been a phase of exceptionally volatile trading. The yen’s recent plunge to historic lows against the dollar has placed the central bank in an awkward position ahead of elections for Japan’s upper house of parliament in July. The BoJ believes that underlying demand in the economy remains too weak to tighten monetary policy. But the soaring price of imported goods has upset the public and is likely to feature prominently during the campaign.Core consumer prices, which exclude volatile food prices, have risen at their fastest pace in seven years, hitting the BoJ’s target with growth of 2.1 per cent in April. But there has almost been no follow-on from rising prices to higher wages. That has made the BoJ more confident than its counterparts in Europe and the US that the current bout of inflation will be transitory and that it needs to continue supporting the economy with monetary easing measures.The BoJ made an unusual and carefully worded reference to the currency. “It is necessary to pay due attention to developments in financial and foreign exchange markets and their impact on Japan’s economic activity and prices,” it said.At a news conference, BoJ governor Haruhiko Kuroda did not repeat previous remarks that the weaker yen was broadly positive for the economy. “It is desirable for foreign exchange rates to reflect economic fundamentals and to move in a stable manner. The recent sharp depreciation of the yen is negative for the economy,” he said.Some analysts had forecast that Kuroda might seek to address the recent plunge in the yen by tweaking policy. When that did not happen, traders in Tokyo said the yen may have further to fall. Benjamin Shatil, a foreign exchange strategist at JPMorgan, said the decision showed the BoJ was “digging its heels in once again” but the central bank appeared to harden its tone slightly by saying it would pay attention to developments in financial and foreign exchange markets. The implication for the yen, he said, is that a move into the high ¥130s against the dollar is now in plain sight and could even hit ¥140.“With the BoJ apparently impervious to the wave of hawkish global central bank capitulation, unconcerned about broadening imported price pressures in Japan, and apparently willing to purchase the entire stock of [10-year Japanese government bonds] if necessary to preserve yield curve control, pain for the yen looks set to go from acute to chronic,” he said.

Tetsufumi Yamakawa, head of Japan economic research at Barclays, said he expected the BoJ to revise its YCC framework as early as July if the yen weakened more dramatically. “It would have raised questions about the BoJ’s credibility if it immediately reversed its policy. That would have risked giving the image that it had caved in to market pressure,” he said.The BoJ’s decision comes as trading in Japanese government bonds continued to mount a direct challenge to the central bank’s resolve, particularly its commitment to maintain yield curve control by keeping yields on the benchmark 10-year note within 0.25 per cent either side of zero. After that line was repeatedly breached this week, the BoJ stepped in with massive purchases of JGBs on top of the standard offer of unlimited daily buying that it uses to reassure the market of its commitment to the policy. The 10-year JGB yield touched 0.265 per cent on Friday, marking its highest level since January 2016. More

Good morning. Ethan and I are still reeling from one of the most consequential Federal Reserve meetings we can remember. Today we try to widen the lens and look at the economic context. Are we missing anything? Let us know: [email protected] and [email protected] the Fed kicking an economy that’s already down?Yesterday markets sent an unambiguous signal. Stocks fell hard across the board, with the exception of a handful of consumer staples and healthcare companies. Bond prices rose (and yields fell). Translation: “There is going to be a recession! The Fed just told us that it is going to cause one to get inflation under control!”But take a step back. What is the state of the US economy? Is the Fed going to tighten financial conditions in an economy that is already weakening — threatening not just a recession, but a deep one? What is the range of possible outcomes? We know a few important, if somewhat stale, facts. The labour market is very strong; there are twice as many job openings as job seekers. As of March or April, personal consumption, industrial production and business investment were growing in real, inflation-adjusted terms. At the same time, however, there are lots of anecdotal, company- or industry-specific examples of slowing growth, giving the impression that cracks are forming in the economic facade. We also know that sentiment is terrible. Surveys of consumers and businesses are showing ugly results, because rapid price increases scare everyone to death, as they well should. But thus far, this has not been having a noticeable effect on real activity. So let’s exclude survey data and look exclusively at activity. What is actually happening?First, the housing market is clearly slowing. With mortgage rates near 6 per cent and climbing, demand is getting smooshed. The Mortgage Bankers Association index of purchase mortgage applications is down a third from its peak in January. Sales of existing homes are declining, but not as fast as those of new homes, which have fallen off a cliff along with housing starts, as this chart from Pantheon Macroeconomics shows:

Outside of housing, activity measures are sending much more ambiguous messages. The May retail sales report, which showed a 0.3 per cent fall from April, caused a certain amount of hand-wringing about the impact of inflation on consumption. One competitor’s story was headlined “US retail sales declined in May as inflation stings consumers”. Excluding autos, though, sales were up 0.5 per cent in nominal month-over-month terms. And it is not clear if softening retail sales do not reflect the long-awaited rotation back towards services after a period of forced spending on goods. Consider this chart:The dip in month-to-month sales growth (pink line) looks less ominous in the context of the extraordinary bolus of growth — more easily visible in the year-over-year data (blue line) — that we just passed through. Spending on durable goods surged during the coronavirus pandemic, and remains far below its March 2021 peak. Meanwhile, services spending has been rising gradually, and will probably jump even more this summer as everyone goes on holiday, believes Evan Brown of UBS Asset Management. The rotation is clear in the real PCE quantity index, which measures how many goods and services consumers bought in a month:In other words, we may not be looking at falling demand, but a shift on where demand is going. So what about cars? Vehicle sales fell 12 per cent in May, but look how volatile the data are. The industry’s supply chain problems make underlying demand hard to decipher: Finally, jobless claims are sending faint signs that the labour market, while still red-hot, is cooling slightly:To judge by activity measures, the US economy is slowing, but the slowdown to date is slight and is concentrated in a few significant areas, primarily housing. The Fed’s sledgehammer — as we have described it — will land on a relatively strong economy, not one balanced on the edge of recession. The much hoped-for “soft landing”, in which inflation abates without significantly higher unemployment, is all but ruled out. We think the likelihood of a recession, defined crudely as a few quarters of negative growth, is very high, given the Fed’s posture. The central bank is all but determined to make a recession happen, but its depth remains an open question. At the same time, the range of possible economic outcomes remains wide. This is partly because, as we have seen above, demand appears so resilient. Supply will matter too. The Fed cannot count on supply relief, but it may come, and if it does, the possibility of a shallow downturn is much higher. The market is badly spooked, but the economic story is not yet written. (Armstrong & Wu)One good readA tiny climate silver lining: the polar bears of southeastern Greenland have learned to hunt on glacier ice, as sea ice melts. Maybe they will be OK? More

The World Trade Organization has struck deals on a partial patent waiver for Covid-19 vaccines, and made agreements in several other fields of global contention, after a tense six-day ministerial meeting that has renewed some faith in the battered multilateral trading system. Trade ministers temporarily extended duty-free trade in digital products such as films, computer software and data, and agreed to curb some fishing subsidies and to limit food export restrictions. The WTO’s 164 members also agreed to update the organisation’s working practices and try to reinvigorate its dispute-settlement system, which has been hamstrung for years by US non-cooperation.Piyush Goyal, India’s commerce minister, whom many countries privately accused of holding the talks hostage with demands for exceptions, told reporters it was “one of the most successful ministerials the world has seen in a long time”. The decisions made were “a signal that the multilateral order is not broken”, he said. Valdis Dombrovskis, European trade commissioner, said the WTO was on a “positive path”, adding: “The WTO can provide a response to the acute issues and challenges we are facing and is willing to reform itself to bring its rule book into the 21st century.” But the meeting in Geneva postponed several contentious decisions for the next gathering in December 2023. The meeting was scheduled to finish on Wednesday but continued into Friday morning after two all-night sessions. Talks to reduce agricultural subsidies were put aside but countries agreed to prohibit restrictions on the sale of their food to the World Food Programme as the organisation grapples with food shortages caused by Russia’s invasion of Ukraine.The waiver of the WTO’s “Trips” agreement that governs intellectual property was opposed until Thursday by the UK, which said it would undermine pharmaceutical research. But the deal will let governments compel companies to share their vaccine recipes for the next five years.The agreement fell short of a demand by India and South Africa to exempt all Covid-related vaccines, treatments and diagnostics, though there will be a review in six months. Instead, governments can issue compulsory licences to domestic manufacturers but must compensate the patent holders. Campaigners were disappointed at the result. “It is hard to imagine anything with fewer benefits than this, as a response to a massive global health emergency,” said James Love, director of non-governmental organisation Knowledge Ecology International. India, South Africa, Sri Lanka, Pakistan and Indonesia had resisted extending the digital customs moratorium, saying it cheated developing countries out of billions of dollars in revenues. But small businesses in many poor countries said they relied on foreign software products to remain competitive, according to trade officials. The extension of the moratorium until the next ministerial meeting followed heavy lobbying by business groups. “Business and consumers everywhere already face a food insecurity crisis and an energy crisis. Thanks to this WTO outcome, we have narrowly prevented a data crisis,” said Jane Drake-Brockman of the Australian Services Roundtable.But business reaction overall was muted. “It is clear that there’s a tremendous need for a vibrant WTO that is able to tackle shared global priorities, but this ministerial laid bare the increasingly severe limits to meaningful outcomes that require unanimous agreement,” said Jake Colvin, president of the Washington-based National Foreign Trade Council.

The curb on fishing subsidies is the first time the WTO has regulated trade on sustainability grounds alone after talks to do so had dragged on for 21 years. Countries will have to limit subsidies for illegal, unreported and unregulated fishing; overfishing; and financial aid to vessels fishing in unregulated international waters. Fishing subsidies total about $35bn worldwide, of which $22bn directly contributes to overfishing, according to the Pew Charitable Trusts. The UN says the number of stocks fished at biologically unsustainable levels increased from 10 per cent in 1974 to 34.2 per cent in 2017.The agreements were a triumph for WTO director-general Ngozi Okonjo-Iweala. “The package of agreements you have reached will make a difference to the lives of people around the world,” she told delegates at the closing ceremony. “The outcomes demonstrate that the WTO is, in fact, capable of responding to emergencies of our time.” More

It has been a torrid year on financial markets. Stagnant economic growth and soaring inflation have sent global stocks and bonds falling in tandem, leaving investors “nowhere to hide” according to the head of AllianceBernstein, the giant US asset manager.So this may not seem an ideal time to take a bet on emerging markets, traditionally a very volatile asset class — particularly not for retail investors, who mostly lack the time and the knowhow to gather information on the vast and varied world of developing economies.Yet this is what some asset managers suggest. Pictet, the Swiss bank, for example, says emerging market equities could deliver double-digit annual returns over the next five years. It recommends them not as a speculative punt but as part of a balanced portfolio.FT Money takes a look at the arguments of the bulls and the bears at this difficult time in financial markets — and considers what might be right for retail savers.Emerging markets as an asset class have been around since the late 1980s, often delivering returns that investors in comparatively staid markets in the rich world could only dream of. In the six and a half years from when China joined the World Trade Organization in late 2001 — turbocharging emerging economies with its apparently insatiable demand for the raw materials many of them produce — to the eve of the global financial crisis of 2008, emerging market equities delivered returns of 300 per cent in US dollar terms. American stocks managed a fifth as much in the same period.Since then, however, US stocks have staged a steady march upwards while EM stocks have gyrated.This year, investors have taken flight. Mutual funds and exchange traded funds, the main vehicles for retail investors and for many institutional investors, have dumped more than $40bn of emerging market bonds this year according to EPFR Global, a Boston-based research company that tracks fund flows. Flows into EM equity funds, which held up well last year on the promise of a post-pandemic recovery, have also turned negative since the start of May. The benchmark stock index, the MSCI-EM, is down almost 20 per cent this year.Investors have plenty of reasons to worry. This year’s surge in inflation worldwide, rising interest rates and a widespread slowdown in economic growth are all bad for EM assets, as investors worry that these often vulnerable economies will be hurt the hardest. China’s aggressive zero-Covid policy, with its paralysing lockdowns, and Russia’s war in Ukraine make the outlook bleaker.The question is, how long will the bear market last? The forces arrayed against emerging markets are powerful and show little sign of fading any time soon. Nevertheless, a handful of asset managers are saying now could be the time to get involved. While the outlook for the rest of this year remains deeply uncertain, they say, this could still be a good entry point for those with a five to 10-year horizon.“Valuations today are attractive,” says Arun Sai, senior multi-asset strategist at Pictet Asset Management in London. “We are not saying they are going to shoot the lights out, and investing in EMs tactically is never a valuation call. But where valuations do help is in guiding returns over the medium to long term.” Dzmitry Lipski, head of funds research at Interactive Investor, a UK online investment platform, also sees valuations as attractive, especially for EM stocks, which are trading at a discount to those in developed markets.“Nevertheless, investors should be very cautious and selective, as the asset class consists of a diverse collection of countries and companies,” he says.Forces lined up against EMValuations are low for several reasons, of course. Chief among them, says David Hauner, head of EM strategy and economics at Bank of America Global Research, is tightening global financial conditions, as the US Federal Reserve, the world’s biggest central bank, begins raising interest rates and reversing the flood of stimulus it has poured into markets during the pandemic.“The prospects for EM assets can mostly be summarised by the level of global liquidity, which in this case is clearly getting worse,” Hauner says. The amount of liquidity, or money looking for investments, in global financial markets is a core driver of asset performance. Since the global financial crisis of 2008-09, central banks in advanced economies, led by the Fed in the US, have run aggressive bond-buying programmes to encourage investors to buy risky assets, hoping this will boost economic activity and output.It is debatable whether such purchases, known as quantitative easing or QE, did much to drive economic growth. But they have certainly done a lot to boost asset prices. Now, however, those policies are going into reverse. This year, the Fed has begun to raise interest rate and to swap quantitative easing for quantitative tightening, or QT.Although QT only got under way officially at the start of June, CrossBorder Capital, a London-based analytics firm that monitors global liquidity, says the Fed has been discreetly withdrawing liquidity from US money markets since December. In a report this month, it says such withdrawals already amounted to a net $1tn, more than a tenth of its balance.Drawing a direct correlation between global liquidity and global wealth, CrossBorder Capital says: “A rising tide may well float many boats but a tsunami of monetary tightening unquestionably sinks asset markets. More pain lies ahead.”For emerging market assets, rising interest rates and falling liquidity can be especially bad news. When times are good, EM stocks and bonds attract interest from so-called crossover investors — people who do not typically invest in EMs but will put some of their money in when times are good. They tend to be slow to join but quick to leave when the tide turns.Incentives for such investors have changed dramatically over the past year. A year ago, the 10-year US Treasury bond — the benchmark “risk free” asset — paid a yield of about 0.75 per cent. Today, it pays more than 3 per cent — more than a Chinese 10-year government bond.For EM bond investors overall, the outlook this year is bleak. In any economy, rising interest rates cause bond prices to fall, as investors expect higher rates to slow economic growth. As inflation and rising rates in advanced economies push up the yields on so-called safe assets such as US Treasury bonds, they also stoke anxiety about economic growth worldwide. This in turn raises fears of insolvency among bond issuers in developing economies, so that their bonds fall in price by more than those in the rich world. A related headwind to rising interest rates is the rising US dollar. The Fed’s index of the dollar’s value against a basket of 26 global currencies, which fell for almost a year from its most recent peak at the start of the pandemic, has bounced back and reached a new record high last month. This is a worry for emerging market governments and corporates that borrowed in foreign currencies, as well as those that borrowed at variable rates. As the World Bank has noted, external public debt in developing countries is at record levels. It warns: “Debt distress — previously confined to low-income countries — is spreading to middle-income countries.”Many larger EMs, including Brazil, India and South Africa, have avoided foreign exchange risk by borrowing in their own currencies. But they have also had to raise interest rates early and aggressively to fight inflation. Even for them, rising borrowing costs are a drain on other fiscal resources, putting a brake on investment for growth.Since the one-off boost to commodity exporting EMs from China’s arrival at the WTO, many developing economies have struggled to find a new path to growth.For investors able to do the research, investing in EMs has become increasingly an issue of diversification, with many questioning the validity of lumping so many different countries together in a single asset class. When the MSCI EM index — the benchmark for many equity funds — was launched in 1988, Malaysia was the biggest EM, with more than a third of the index; China only joined in 1996, with a weight of just 0.46 per cent.Today, Chinese equities make up more than 30 per cent of the MSCI EM, followed by Taiwan, India, South Korea and Brazil. Russia has been dropped altogether after its invasion of Ukraine. Raw materials, which used to dominate, now account for just 9 per cent, with less than 8 per cent split between energy and utilities. Financials, information technology, consumer discretionary and communications services make up two-thirds of the index.Today’s composition, EM enthusiasts argue, leaves these economies well positioned to gain from post-pandemic, postwar, post-stagflation world development, when (and if) it comes. Calling the bottomBrett Diment, head of emerging market debt at Abrdn, a London-based asset manager that specialises in emerging markets, argues that recent rises in US interest rates have already started to tilt the balance by slowing the US economy and reducing the appeal of the dollar.Another factor that could soon start to weigh in favour of emerging market assets is the relative pace of US economic growth compared with the rest of the world. While other advanced economies are unlikely to catch up with US growth rates soon, a narrowing in the gap may be enough to encourage US investors to think again about overseas assets. That could also be good for emerging market assets.The problem is that most emerging markets are struggling to deliver very much economic growth at all. The World Bank, in a report this month, warned that per capita output growth in developing economies outside China will be slower this year and next than in advanced economies.This undermines the basic case for investing in EMs at all — that they grow faster than advanced economies. “What debt investors in particular are looking for [in emerging markets] is improvements in balance sheets, better fiscal situations, better current accounts and so on,” says Hauner at Bank of America. “But net-net, EM is likely to deteriorate and when you go down into the countries, it is very hard to find stories where this or that country is on an improving path.”This is especially true of China — for many years the biggest single engine of EM growth — where investors worry the government will struggle to exit from its aggressive zero-Covid policy. This has shut down large sectors of the economy, dragging down growth rates both for China and those developing countries that rely on it as an export market.Positive signsNevertheless, there may be grounds for optimism. This year, for sure, Covid-19 casts a shadow over Chinese growth. So does geopolitics with Russia’s invasion of Ukraine and increased fears that China will attempt to take Taiwan.But Sai at Pictet argues it is a given that the pandemic will pass and sees encouraging signs in a moderation of the amount of new regulation the Chinese government has imposed on various areas of economic activity.“Our view is that [the recent increase in regulation] is the government putting in guardrails for Chinese corporates to operate in,” he says. “Have we been able to time this? No. Have people called for a let-up in the past, which has not materialised? Yes, and we have had false starts.“But this is not the Chinese leadership rewriting its economic model . . . we think this headwind will fall away, and that should lead to some reasonable re-rating.”Until recently, expectations for Chinese equities were often unrealistic. He says: “That has been washed out now, so some of that froth has been skimmed off.”Still hanging over the investment outlook, however, is Russia’s war in Ukraine. António Guterres, the United Nations secretary-general, warned this month that the war was “threatening to unleash an unprecedented wave of hunger and destitution”. The damage will be particularly severe in developing countries, with the worst impact for those countries most affected by the disruption in supplies of food and fuel from Russia and Ukraine. Conversely, for alternative suppliers, such as the commodity exporters of Latin America, there have seen some gains — although these may be overshadowed by a bigger overall hit to EM growth as a result of the war.Time to dial up the risk?While mindful of these risks, some analysts say a good part of the potential downside is already reflected in EM asset prices. Diment at Abrdn says: “We are looking to get a little bit less defensive across our EM strategies, adding a bit of risk.”Pictet’s latest five-year outlook report, published this month, predicts that returns over that period will be driven by commodities, private markets and EM.For the sake of simplicity, Sai says, Pictet takes as its benchmark a 50/50 split between global stocks and bonds, with 5.5 per cent allocated to EM equities. With today’s outlook, this would deliver only about 2 or 2.5 per cent annual returns over five years.But double-digit returns are possible from EM equities and other high-risk assets, including alternatives such as infrastructure, real estate and private equity, he says.To achieve 5 per cent returns with a reasonable level of risk, he says, investors should first adopt a more conventional allocation split of 60/40 in favour of equities, with 14 per cent in EM equities. For those with greater appetite for risk, Pictet suggests putting almost a quarter of a portfolio into alternatives, leaving a bit less than 30 per cent in bonds and about 50 per cent in equities, with 13 per cent in EM stocks.Lipski at Interactive Investor notes that investor behaviour on the platform this year has mirrored that of global markets, with sharp outflows from all three of the main investment vehicles — funds, investment trusts and exchange traded products.Savers who now go back into the markets, including EMs, need to take care. Lipski cautions that it is not a good time to rely on passive funds that mirror the benchmark indices, which were so popular in the bull market.He says: “As there are likely to be clear winners and losers in this market, active managers employing more flexible approach and accurately managing risk, should be a better choice for investors.”In other words, investors who decide that the sell-off is a time to buy, should do their homework. Those who want to spend less time managing their investments might be more comfortable in less tricky waters.Some market data has been updated since publication. More

This article is the latest part of the FT’s Financial Literacy and Inclusion Campaign It is Father’s Day this Sunday and judging by the rather lame selection of cards, dads are mostly good at DIY, football, golf and fishing, not to mention drinking beer. So far, so stereotypical. But what about your dad’s investing skills? Volunteers for Flic, the FT’s Financial Literacy and Inclusion Campaign, often tell us their passion for personal finance stemmed from their dads (the same is true of male and female volunteers). It’s not always the dad — sometimes it’s the mum, a grandparent or a beloved maths teacher — but dads are mentioned so frequently it’s sparked discussion in the FT offices. As many of our volunteers are over 40, we wondered if this simply reflected gender norms at the time we were growing up. Take me, for example. A child of the 1970s, my dad was the sole breadwinner and mum gave up work to raise me and my brother. She taught me all about budgeting and spending wisely, but dad had what I’d call the “product knowledge”. When I left home, I would frequently receive articles in the post that he’d clipped from the weekend personal finance sections nudging me towards saving using premium bonds, Isas and pensions. I did not act on all of his wise and sensible suggestions straightaway, but they lodged in my brain. I did, however, buy my first flat aged 26 after a flurry of clippings about mortgage deals for first-time buyers. My parents have always been careful with money because they are not wealthy. Twenty years ago, you did not need an enormous deposit to buy a property, which was just as well as there was no “Bank of Mum and Dad” for me to draw upon. However, dad bequeathed me two highly valuable financial skills: the desire to make the most of my money and to keep on learning about the best ways of doing this. I’m very lucky, but what about people whose parents (or teachers) have not passed on these lessons? “My parents taught me nothing about money, I just went online and did it myself,” was the snappy response of the first millennial colleague I asked. Social media sites — particularly Instagram, YouTube and TikTok — are places where young eyeballs come to seek financial advice in video form. I ran a poll on Instagram this week, asking: “Who taught you the most about money — your dad, your mum or the internet?”

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The top answer was the internet (71 per cent) with dads second on 20 per cent and mothers trailing on 9 per cent. But is the web the best way of learning about money? Online investing exploded under lockdown, with the combination of spare time and spare money prompting millions of young people around the world to get started, inspired by watching people like them. I am all for the democratisation of finance, and some of the content produced by so-called “finfluencers” is both inspirational and educational. Three of my favourites sharing the highs and lows of people’s money and investment journeys are @GoFundYourself by UK writer Alice Tapper, @BasicFinancialLiteracy by US vlogger Patrick Di Cesare, and @StocksandSavings set up by millennial couple Andreea Ion and Jamie Galvin, who feature on Money Clinic podcast this week. The problem? A great deal of the free “advice” being peddled on social media should make financial regulators weep. Well-intentioned educational content rubs up alongside crypto bros in Lamborghinis, teenage day traders celebrating huge gains and celebrity-endorsed routes to riches that turn out to be anything but. Not being able to tell the difference will cost you dear. There is scant discussion of risk. While tech stocks and crypto have been on a winning streak, this hasn’t mattered. On most days, new investors have been waking up, checking their trading apps and feeling richer. Until now.The onset of “crypto winter” and a tech-driven bear market in the US is terrifying for inexperienced investors, whose dreams of achieving “financial freedom” have been wiped out along with their investment gains.So where does this leave the 71 per cent of people who told me they turned to the internet for financial advice? How many newbies will now abandon investing for good?

Online influencers renowned for pumping stocks or crypto have been suspiciously silent. Others urge investors to “hold on for dear life” and resist crystallising their losses; the more gung-ho proclaim “just buy the dip”.But it is not all bad. Investing can be a lonely pursuit, so being able to collectively share experiences online via Reddit threads or Facebook groups can be hugely positive for nervous investors of all ages.If you’re feeling in need of some fatherly advice, here are a few lessons I’d like to pass on. Everyone makes mistakes in investing, and indeed, in life. Don’t beat yourself up about this. It’s how we learn from those mistakes that matters. Most investors have lost money over the past few months — yes, even me. But I am not rushing to sell my holdings. I am sticking to my strategy. To find yours, you need to ask the question: “What am I investing for?”Too many new investors have been lured by short-term gains. I am firmly focused on the long term. I make the most of tax breaks (pensions and Isas for readers in the UK; 401(k) plans and Roth IRAs in the US) which make paper losses slightly easier to bear.

My pension is locked up until later life, but I’m not planning on accessing funds inside my stocks and shares Isa until my sixties. In the folder where I keep my account details, I have a chart I made on a compound interest calculator showing the likely effect of regularly investing a set amount every month until the 2040s. This is very calming in times of market turmoil. I automate my regular investments and review my portfolio twice a year. I do not have the app on my smartphone — there’s too much temptation to fiddle! Before I started investing, I built up a cash emergency fund. Interest rates on your savings won’t beat inflation, but they are a darn sight cheaper than interest rates on borrowing money. Common blunders include putting too much of your money into a single stock, fund or asset class. Diversify and learn about asset allocation (a vexed question at the moment). Invest time in doing your own research and finding themes that interest you. As younger investors, we also have time on our side. Volatile markets and soaring inflation are much more worrying for those approaching retirement. But if you’re sending a Father’s day card to your dad, you might want to steer clear of mentioning that. Claer Barrett is the FT’s consumer editor: [email protected]; Twitter @Claerb; Instagram @Claerb More

Cartoon loser Wile E Coyote only started falling after he realised he had run off a precipice. European businesses are already experiencing that cruel awakening. The European Central Bank is expected to raise rates for the first time in more than a decade in July. A Lex data screening shows this trajectory could be awkward for companies such as Ocado and Just Eat Takeaway.Ultra-loose monetary conditions have represented normality for years. During the pandemic they helped anxious companies to raise substantial sums. Much of this has been finding its way into shareholders’ pockets. Rising rates mean a bigger chunk of corporate cash will now go to creditors. That will make highly indebted businesses much less attractive. Investors tend to fret when operating profits (ebit) cover interest charges by less than two times. Stagflation is the worst-case scenario. Even as central bankers jack up interest rates, earnings would fall. Both components of interest cover would be moving in the wrong direction.Companies at the lower end of the credit spectrum already have volatile earnings and high interest costs. Our screening of S&P data on the largest non-financial UK and European equities found 39 out of 660 or 6 per cent currently have interest coverage below two times. Lossmaking meal delivery groups Delivery Hero and Just Eat Takeaway topped the list. Ocado, a UK-listed groceries delivery business, has a similar profile. If interest costs increase by a half, the number of companies with thin cover would rise to 10 per cent. If interest costs double, that would push businesses in the danger zone to 16 per cent. Add in a recession where earnings collapsed by 25 per cent from the current consensus and the proportion would increase to 20 per cent. Big blue-chip names such as BT, Orange and Anheuser Busch would then have less than two times ebit cover.In fairness, the food delivery companies would have no immediate liquidity problem, thanks to decent cash piles. Telecoms groups, meanwhile, boast steady, defensive cash flows. But expect investors to become increasingly picky about credit quality and dividend prospects as rates rise and earnings falter.The Lex team is interested in hearing more from readers. Please tell us what you think of the outlook for interest cover in the comments section below. More

TOKYO (Reuters) -The Bank of Japan is likely to maintain ultra-low interest rates on Friday and stress its resolve to support a fragile economy with massive stimulus, a move that may spark a renewed yen fall by highlighting a policy divergence with the rest of the world.While a modest, technical tweak to its yield cap or guidance on the future policy path cannot be ruled out, the BOJ is seen sustaining its massive monetary support for now to ensure the economy is fully out of the doldrums.Central banks across Europe raised interest rates on Thursday, some by amounts that shocked markets, in the wake of the U.S. Federal Reserve’s 75-basis-point hike.The likelihood that Japan will remain an outlier while global central banks tighten policy to combat inflation has pushed the yen down to 24-year lows, threatening to cool consumption by boosting already rising import costs.But rising concerns over the weak yen have not deterred the BOJ from defending an implicit 0.25% cap for its 10-year bond yield target through ramped-up bond purchases.”We expect the BOJ to continue efforts to achieve its inflation target in a stable and sustainable manner,” Finance Minister Shunichi Suzuki told reporters on Friday, signalling his support for the central bank’s ultra-loose monetary policy.At the two-day policy meeting ending on Friday, the BOJ is widely expected to maintain its -0.1% target for short-term rates and its pledge to guide the 10-year yield around 0%.The central bank may also deepen its resolve to defend the 0.25% upper limit by targetting a wider range of debt maturities for its unlimited fixed-rate bond-buying operation, which currently covers only 10-year bonds, some analysts said.”The BOJ could add a pledge to conduct emergency market operations targetting notes for a wider range of maturities,” said Hiroshi Ugai, chief Japan economist at JPMorgan (NYSE:JPM) Securities.”The central bank has no choice but to do this to control bond market moves, even though it probably doesn’t want to accelerate the dollar’s rises against the yen,” he said.The yen rebounded against the dollar, which took a beating after Thursday’s surprise rate hike by the Swiss central bank. It stood around 132.40 per dollar in Asia on Friday.The BOJ’s yield cap has faced attack by investors betting the central bank could give in to global market forces, as rising U.S. yields push up long-term rates across the globe.The benchmark 10-year Japanese government bond (JGB) yield rose to 0.265% on Friday, above the BOJ’s 0.25% cap and hitting the highest level since January 2016.”The yen is facing short-term upward pressure on expectations, mainly among overseas players, the BOJ could abandon yield curve control and raise rates,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.”But we expect the BOJ to maintain easy policy and even strengthen measures to curb yield rises” with no sign of a broad-based acceleration in wage growth, he said.The BOJ is caught in a dilemma. With Japan’s inflation well below that of Western economies, its focus is to support the stil-weak economy with low rates. But the dovish policy has triggered sharp yen falls, hurting an economy heavily reliant on fuel and raw material imports.BOJ Governor Haruhiko Kuroda has repeatedly stressed the need to keep interest rates ultra-loose, and that the central bank won’t target exchange-rates in guiding policy.Kuroda is likely to warn against a weak yen at his post-meeting briefing, such as by highlighting the damage the currency’s sharp falls could inflict on the economy, analysts said. More

TOKYO (Reuters) -Japan has reappointed Masato Kanda as vice finance minister for international affairs, the country’s top currency diplomat, as part of a mid-year personnel reshuffle, the Ministry of Finance said on Friday.The government wants to stabilise financial markets as the yen hits 24-year lows – beyond 135 to the dollar – this week and rising bond yields heap pressure on the Bank of Japan’s yield curve control.Kanda would oversee currency intervention to prevent excess volatility from hurting economic and financial stability, amid speculation that Tokyo may sell the dollar to buy yen.Under Kanda, Japan would host gatherings of financial leaders from the Group of Seven advanced nations next year in the run-up to the G7 leaders’ summit.Kanda is also tasked with coordinating with the broader G20 finance chiefs to respond to the COVID-19 pandemic, and tackle global tax and emerging-market debt.The appointment will take effect June 24 after approval from Prime Minister Fumio Kishida’s cabinet.Japan has not conducted dollar-selling intervention to back the yen since 1998 and it has stayed out of the market since the aftermath of the 2011 earthquake and nuclear crisis.Kanda is known for his broad international experience and close ties with policymakers, having worked with the BOJ as deputy vice minister for policy planning and coordination.Kanda is close to BOJ Governor Haruhiko Kuroda, who was vice finance minister for international affairs for 3-1/2 years to January 2003. Both Kanda and Kuroda graduated from the prestigious University of Tokyo and studied at the University of Oxford.The government’s annual reshuffle also named Eiji Chatani as administrative vice finance minister – the top bureaucrat at the finance ministry – to replace Koji Yano, the ministry said. More