inflation Archives - Parthian Securities - Your Smart Brokerage Firm

Effect of Rising Inflation on the Equities Market

Mon, 28 Aug 2023 14:21:37 +0000

Inflation rate has continued rise this year – starting off the year at 21.82% in January and increasing all the way to 22.79% in June of 2023. Experts anticipate a continued increase in the rate if appropriate measures are not taken. The effects of rising inflation can be very harmful to any economy, as it impacts many aspects of the economy including the equities market. Inflation affects investors, companies, and market dynamics, and can also lead to negative consequences for the market; the question is in what way.

When there is inflation, the purchasing power of investors and the people decreases. Someone may be forced to sell some of their stocks to afford certain things like food, and rent, among other things. On the other hand, investors, concerned about the purchasing power of their returns, may demand higher returns to compensate for the declining value of money. As a result, stocks that fail to outpace inflation might become less attractive, leading to potential declines in their prices and overall market volatility.

Inflation and interest rates, which play a crucial role in the equities market, also go hand in hand. Central banks often raise interest rates to combat inflation. We saw this happening during the July Monetary Policy Committee Meeting where the committee voted to raise its benchmark rate to 18.75% to tame inflation and stimulate investments. While high-interest rates could curb inflation, it would also increase the cost of borrowing for companies, limiting their growth prospects and leading to lower earnings. As a result, investors might become more risk-averse, causing a shift away from equities and towards fixed-income investments, which offer higher returns due to the rising interest rates.

Also, different sectors within the equities market are affected differently by inflation. Some sectors, such as commodities and real estate, tend to perform well during inflationary periods due to their tangible nature and potential to act as a hedge against rising prices. Conversely, sectors that rely heavily on borrowing or have limited pricing power may suffer, as their profit margins are squeezed by higher costs. For instance, the

Lastly, inflation can impact investor sentiment and behavior. Uncertainty about the future purchasing power of money may lead investors to adopt defensive strategies, such as diversifying their portfolios or investing in inflation-protected assets like Such investor sentiment shifts can lead to equity price fluctuations and affect market liquidity.

Although the Nigerian stock market seems to be unresponsive to the high inflation rates, the effects of the contractionary measures the government employs to combat the issue are felt in the market. It is important that investors stay vigilant and adopt appropriate strategies. Diversifying portfolios across various sectors, regions, and classes while considering the current economic landscape and newly implemented policies are essential in mitigating the risk of inflation.

In conclusion, inflation has a multifaceted impact on the equities market, influencing valuation, interest rates, sector performance, and investor behavior. Understanding the interplay between inflation, the equities market, and the economy as a whole is vital for investors, businesses, and policymakers as they strive to navigate the complexities of a dynamic and ever-changing economic landscape.

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Things You Need to Know About The 19.6% Increase in Inflation in July 2022

Wed, 17 Aug 2022 08:09:19 +0000

The Parthian’s View: Inflation Impacts Wallets Not Plans

1. Inflation rate for the month of July 2022 rose to 19.6% from 18.6% in June 2022. This increase to 19.6% is the highest in the last 17 years. As of July 2021, the inflation rate was at 17.4%.

2. Some of the drivers of this inflation are:

a. Increase in energy prices such as premium motor spirit (petrol), diesel, kerosene, and aviation fuel.
b. Increase in transportation prices
c. Increase in food prices given the global increase in fertilizer prices and persistent insecurity issues.
d. Increased spending related to the 2023 general elections.
e. Increase in FX crises, Naira depreciated to ₦427.45/$ at the Investors and Exporters (I&E) window and to as low as ₦700/$ at the parallel market.

3. The key inflation sub-indices food inflation and core inflation both increased in the month of July 2022. Food inflation increased to 22.0% (from 20.6% in June 2022) while core inflation increased to 16.3% (from 15.6% in June 2022).

4. What this means is that the value of consumers’ income and investment have been impacted negatively by this increase. As such, consumers must either earn more to be able to afford their current needs or get higher returns on their investments, i.e., returns that will yield higher than the current level of inflation.

5. We expect inflation to continue in the upward trajectory due to the persistent energy issues, FX scarcity, and more spending related to the 2023 general elections.

In summary, what we need to understand is that while saving is an important and necessary part of your portfolio and financial plan, it cannot be your only strategy to manage your money.

You must invest!

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Smart Ways to Manage Your Personal Finance During Tough Times

Mon, 08 Aug 2022 10:27:40 +0000

Times are hard lately as the cost of living keeps rising without a relative increase in income. If you find yourself struggling to survive with the same income you’ve been okay with, you’re not alone. The key to surviving this period is to follow some basic personal finance rules you may have ignored in the past. Here are some basic personal finance principles you can apply to stay financially stable during this period.
1. Keep it simple
The more investment accounts you have, the less attention you can give to each one, and the more likely it is that you’ll miss a big problem.
1. How much is your time worth?
Figure out how much you earned last year after taxes. Subtract from that all of the costs of commuting and other expenses you paid out of pocket. Then, figure out how many hours you worked, plus the hours you commuted and attended other business meetings. Divide your after-expenses income by your total hours of work to get your true income value.
1. Renting vs. home ownership
Rent, unless your total monthly cost of home ownership is lower than renting. It’s easy to get sold on the homeownership dream, but if it’s going to jack up your bills, it’s probably not a wise move.
1. The 10-second rule
Whenever you’re tempted to splurge on something, simply hold it in your hand for 10 seconds and ask yourself honestly whether you need it or not. Try to think of reasons you shouldn’t buy this item. Will you really get enough value out of it? Usually, just 10 seconds will convince you that you don’t really need the item, but if it passes the test, feel free to buy it!
1. Build the right budget
Build a budget based on your actual spending over the previous few months. Get real numbers, not estimates. Dig through your bank statements and credit card statements and figure it out. This will easily show you the areas where you actually overspend.
1. Cancel unused memberships and subscriptions.
Unused subscriptions and memberships do nothing but devour your money month after month. If you’re too busy to watch TV, keeping your Netflix and DSTV subscriptions is a waste. Cancel and renew when you need to use them.
1. Invest in stocks and hold
Money in stocks, over the long term, tend to offer very good returns, but stocks are very volatile, with lots of short-term jumps and falls in value. However, stocks become profitable if left for the long term. So, hold on and be patient.
1. Spend less than you earn.
Spend less than you earn and put away that difference for the future so that you can still survive and thrive when you’re older and don’t have the opportunities and energy of today. Without your earnings being greater than your expenses, you simply cannot achieve big financial goals without some sort of miracle – and you should never bet your future on a miracle.
1. Have an emergency fund
You certainly should have an emergency fund sitting in a savings account always because an emergency can happen anytime. You can start building an emergency fund by setting up an automatic weekly or monthly transfer from your salary account to your savings, then leave the savings alone until an emergency rear its head.
1. Reduce investment losses with fixed income investment
It’s good to have at least some of your money in safer investments like highly rated bonds and FGN Treasury notes. Fixed income investments tend to increase in value steadily over time and are far less volatile than stocks. However, if you have a very high-risk tolerance, or you’re young and your financial goals are still quite distant in the future, this may not be very crucial.

At Parthian Securities, we encourage everyone to take ownership of their financial life by asking questions and getting information that matters.

Our research and insights bring you information that fosters smart decision-making because we believe that the best outcomes in life come from being fully informed.

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Inflation Eating Your Money? Here’s How to Grow Your Money During Inflation

Fri, 18 Mar 2022 12:15:46 +0000

How To Grow Your Money During Inflation.

Some years back, I saw a pair of my favorite sneakers in a store, I went in, saw the price tag, then went home to start saving up for it. When I had saved up the amount needed, I went back to the store and found that the price of the sneakers had doubled – in just six months! I was so pained. This experience taught me a few lessons about saving and inflation.

I learned that inflation would continue to erode my saving if the amount I need to save to attain my goals does not keep up with inflation. Secondly, I realised that my money in a bank account (or under my mattress!) provides zero protection from inflation. Lastly, I learned the hard way that investing is a must if I want to protect my money against inflation and continue to afford the lifestyle of my dreams.

Everything is rising with the heat.

Inflation is on the rise, and every Nigerian is currently feeling the heat, literally – with the worsened power cuts and rise in fuel price. The National Bureau of Statistics recently released the consumer price index report which showed that has inflation increased to 15.7% in February from where it was the same month last year.

ALSO READ: Protect your savings against inflation

Can investing protect your money against Inflation?

When it comes to growing your wealth and keeping up with inflation in Nigeria, investing is a must. Inflation saps the buying power of cash over time. As a result, if you do not invest in a worthy instrument, the value of your monthly savings from salaries will diminish each day.

How to invest to beat inflation

The best strategy to position your portfolio to beat inflation is to invest in businesses that tend to benefit from rising prices, such as commodities, emerging markets, and cyclical stocks. Investing in these kinds of businesses during times of higher inflation has proven to be a lucrative strategy that can earn you good profit and balance out the weight of inflation on your finances.

Invest in Commodity Stock

Investing in commodities can provide you with diversification, a hedge against inflation, and lots of positive returns. You can invest in commodities through stock markets by buying shares of listed companies on Nigerian Exchange Limited (NGX) like Okomu Oil Palm, Nestle, Presco Plc, Total Nigeria Plc, Transcorp, Seplat, etc which produce commodities. Investing in Exchange-traded funds (ETFs) like ABSA New Gold on NGX and various indexes of commodity producers packaged as ETFs are also good commodity investments that you can benefit from during inflation.

Ready to start investing?

Well, I intend to keep up with my baby girl lifestyle -and more importantly, I have resolved not to let inflation stop me. If you’re with me on this, then it’s time for you to start with your research on investing. I will recommend that you subscribe to the Parthian Securities Newsletter to learn more about the Nigerian Stock market and receive vital investing tips right in your inbox.

If you have questions about getting started, you can contact the folks at Parthian Securities via info@parthiansecuritiesng.com..

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