Investing for Dummies, 4th UK Edition

Part II

Shares, Bonds and Other Investibles

Shares that don’t behave as they should

When markets move up or down, it’s usual for most shares to follow the trend. Those who watch stock-market screens talk of a ‘sea of red’ when prices are falling or an ‘ocean of blue’ when they’re on the way up. But a few always defy the trend.

• Interest rates go up? This means inflation and higher prices. And, believe it or not, supermarkets actually welcome that (although they won’t admit it). If prices start to rise, they can adjust the stickers on the shelves even faster and further in the knowledge that not too many people will notice. That way, they increase profits and benefit shareholders.
• Higher VAT? Again, no problem for supermarkets because so much of what they sell – more than half – is VAT free.
• A really bad winter that hits everything that moves (or rather, doesn’t move!)? Bad for all sorts of shares including transport, high- street stores and insurance companies, but great for drug companies, which will sell a lot more cold cures.
• Market hit by a fall in the value of sterling? Don’t worry. Companies that do loads of business abroad using other currencies will shine out from the gloom.
• Share prices pushed up by really good news? Well, don’t expect that to extend to water and power companies, where prices are subject to regulation. In any case, although you may celebrate good economic data with a bottle of champagne, you never toast happy statistics by leaving more lights on!