Traders are taking each day as it comes as the Bank of England tries to steady the financial tiller after the Chancellor’s mini-Budget (Picture: Bloomberg)
A financial trader has described the ‘emotional rollercoaster’ he has experienced amid the turmoil which has followed Liz Truss and Kwasi Kwarteng’s mini-Budget.
James Bentley, who also coaches others to make investments, told of the ‘wild’ conditions in the wake of the Chancellor and Prime Minister’s controversial attempt to create growth.
The 29-year-old is among the financial movers and shakers who failed to be swayed by the newcomers’ cost-cutting plans which Mr Kwarteng announced on September 23.
Mr Bentley told Metro.co.uk that he and his colleagues are currently navigating the ‘bonkers’ London and world markets on a day-by-day basis due to the volatility.
‘The fact of the matter is that there’s a real tug of war out there at the moment and the key attribute you need to have is the ability to adapt,’ he said. ‘The market is very volatile and sensitive to data releases.
‘For example, you have the UK unemployment rate dropping to 3.5%, which is the lowest figure since 1974.
‘To the naked eye, that sounds like great news until you start to factor in the way inflation has torn into wage growth, so it’s very difficult to come away from conflicting signals like that with a confident assessment of the future path of the economy.
An employee views a FTSE share index board in the atrium of the London Stock Exchange (Picture: Bloomberg via Getty Images/File image)
‘As a result, there’s a real battle deciding what is “priced in” and which factor is the strongest on the day, rather than over the week or month.
‘We are telling our traders to be assertive in their decisions, to be alert to current sentiment and forget about holding trades for weeks and months.
‘Trading at the moment is more of a smash-and-grab style where you’ve got to treat every day as a new day.’
Underscoring the chaotic nature of the markets, sterling hit a record low against the dollar late last month, falling close to $1.03.
Although the pound has ticked back up, the mini-Budget has also been met with rises in mortgage rates and government borrowing costs, with critics saying the Chancellor has not explained how taxes will be slashed without a corresponding rise in government borrowing.
James Bentley keeps a close eye on the markets as the financial world reacts to the mini-Budget (Picture: Financial Markets Online/Michael Bentley)
The Bank of England has stepped in to calm the markets by buying UK government bonds – or gilts – which it said are taking place at an ‘urgent pace’ to help restore ‘orderly market conditions’. Threadneedle Street has confirmed the programme will end tomorrow, although there are indications that it may intervene again if further extreme volatility arises.
Mr Bentley, director of Financial Markets Online, still works on the floor of the company’s offices in Chelsea Harbour, south west London, and in Dubai.
He described the frantic reaction to the mini-Budget, after which the pound fell to its lowest point against the dollar since decimalisation in 1971.
Speaking to Metro.co.uk from Dubai, the trader said: ‘It’s a mess out there and it’s wild. Trading has been an emotional rollercoaster.
‘There’s no assertiveness in the market at all and the announcements by the Bank of England have only added fuel to the fire.’
Kwasi Kwarteng set out a plan for financial growth which was followed by a series of shocks including a record fall in the pound (Picture: Reuters)
Liz Truss is under pressure to reverse her cost-cutting plans after they were met with financial turmoil (Picture: Wiktor Szymanowicz/Anadolu Agency via Getty)
Traders routinely rely on official information to make decisions but this has been replaced by the ‘word on the street’ since Mr Kwarteng set out his agenda in the House of Commons, according to Mr Bentley.
‘Rumours were circulating about what was going to happen and then, immediately afterwards, the word on the street was that there would be a U-turn,’ he said. ‘There are two types of traders; retail traders do not have the power to move the markets, they simply jump on the coat tails of the big boys who move the markets.
‘On the other hand the professional side, such as big banks and finance firms, trade for business purposes, not speculation, they hedge their positions and risk by trading multiple financial products.
‘They have got back-up plans, including their own bond-buying programmes, so they’re a lot less affected.
James Bentley is navigating the market turmoil that has followed the mini-Budget (Picture: Financial Markets Online/Michael Bentley)
‘The people who have to watch out are inexperienced and uneducated retail traders who see big swings in the market and try to jump on them out of greed and excitement.
‘Some will be completely new to the industry and still trying to short the pound against the dollar. Like any market the pound doesn’t move in a vertical line, it moves in cycles.
‘You have to take into account other factors, such as the bailouts, and the number of people out of work and not looking for work, which has increased to a record level and is all adding to the government’s bill.’
The analyst, from Surrey, followed family members into the financial markets after leaving school, starting his career with a leading trading institution.
He developed his own system and co-founded his current business, where he heads the coaching team for VIP and advanced members.
Mr Bentley begins most days at 6.15am before the US and European markets open and still works on the trading floors, where he coaches people from beginner to advanced level.
The Bank of England stepped in to purchase UK government bonds to prevent ‘a material risk to UK financial stability’ (Picture: Tolga Akmen/EPA)
Specialising in derivatives, which include stocks and bonds, he trades up to 9.30am or 10am using a system that revolves around making immediate decisions while controlling risk and setting clear rules.
‘The market 10 years ago was slow and steady, whereas now it’s absolutely bonkers,’ he said.
‘It probably started when Donald Trump downloaded Twitter. He would say something and we would all have to play catch-up.
‘What we do isn’t easy. We tell complete beginners that they’re in for quite a ride, they’re going to get some grey hairs and this will not be a get-rich-quick thing.
‘But if you put the work in, the opportunities are endless and it can take as little time as an hour a day.’
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Explaining the turbulence after the mini-Budget, the mentor described the government and Bank of England’s position as one of damage limitation.
‘There are too many factors and opinions in play,’ he said.
‘They will need to pull out all the stops to cover the damage, with inflation running riot and the cost of living biting.
‘It’s all about how they clean up the mess.’
Ms Truss is reported to be facing a growing rebellion from within Tory ranks about her refusal to row back on her cost-cutting agenda, which opponents say will lead to spiralling levels of government debt.
However there were signs this afternoon that she is about to perform a U-turn on the policies, which led to a surge in the pound against the dollar.
Business Secretary Jacob Rees-Mogg has defended her position by saying the turmoil in the bond markets is not linked to the mini-Budget.
The Chancellor is due to give further detail about the plans in his Autumn Statement on October 31.
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‘It’s a mess out there and it’s wild’: Trader’s frank assessment after Liz Truss and Kwasi Kwarteng’s tax-cutting move.