Here in Nantwich, it can be easy to get caught up in our own world.
We might work for some of the nearby big businesses like AO or Bentley, do our shopping in the Town Square and the Crown Mews — or venture a bit further out to Crewe’s Victoria Centre, Chester city centre, or even Ellesmere Port’s Cheshire Oaks.
For entertainment, you might visit Chester Zoo, the (not so) Secret Nuclear Bunker, Dorfold Hall, or the Bridgemere Show Gardens.
Alternatively, you can stop for a spot of food and drink in one of the many pubs, bars, and restaurants in and around the town.
With so much going on, it can often be easy to forget that there’s a world outside Nantwich and Cheshire and that that world can impact life here.
It may not seem possible, but events on an entirely different continent can change and affect our finances and even our day-to-day experience.
In some instances, financial markets can create these changes directly.
For example, the 2008-09 housing crash in the USA had a knock-on effect on jobs in the UK.
However, at other times, the financial markets are a barometer that alerts us to events taking place elsewhere, such as changing currency markets based on political decisions.
If you’ve ever wondered what underpins these changes, how they can affect your life, and what you might want to do about it, read on below.
Uncertainty Can Be a Threat and an Opportunity
If there is one certainty in the world of financial markets, it’s that investors, businesses, and many consumers like certainty.
Even if it might mean paying a little extra for a product or service, the ability to plan months or even years in advance is preferable.
In our everyday lives, this is why people might choose to fix their energy tariff for a year or lock in a mortgage rate for five years, even if there’s a chance that prices or interest rates may go down.
However, people who trade on financial markets may see opportunity in this uncertainty.
For example, DAX news from March showed that there was a lot of doom and gloom in the German stock market following the demise of a few small US banks and Credit Suisse.
However, some traders will have spotted an opportunity among this uncertainty and panic and bought the dip. As of mid-April, the DAX has already recovered those losses.
Uncertainty can come from all sorts of sources, including short-term weather that may reduce, or increase, crop yields.
Likewise geopolitical moves restricting trade, and increases in production in one country driving up demand for a natural resource all feed into domestic prices. The list is endless so it’s a good idea to follow the news.
Rising Prices Are a Fact of Life
The pound, dollar, euro, and other major currencies are classed as “fiat”, meaning that there is no physical object like gold backing their value.
Instead, we all just simply agree that we trust that a pound is worth a pound. It sounds complicated, but it works.
However, it’s important to understand that this system means inflation is baked in.
Central banks try to keep it at 2%, which is deemed to be the ideal balance between growing our economies and not driving prices up too high.
Sometimes it goes above this and we will notice it on everything from the fuel we put in our cars to the food we put in our mouths. There is little you can do to combat it, but you can try to offset it.
For example, buying products you’ll need in the future early can beat price rises.
Similarly, finding ways to increase the value of your cash by putting it into a savings account or investing can also help to beat inflation.
However, when you do this, it’s important to ensure your rate of return is above the rate of inflation, otherwise, you’re simply reducing the rate at which your purchasing power reduces rather than increasing it.
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