JP’s Journal: Eschewing the facial serum

I have missed out on the male grooming boom. For me, a quick trip to my local barber, now and again, suffices. It would appear, however, that men are becoming more conscious of their appearance, with spending on male beauty products up over 70% in a year. Nail care is through the roof with expenditure more than doubling; facial serum (no idea) is up 50%, fake tan by 40% and skincare by 20%.

This helps explain a report out last week that looked at the UK high street. Over the last 12 months there have been more than 2,300 barber shop openings. I would point out that there were 1,500 closures over the same period, but that still meant a net addition of more than 800. To put this into context, the UK high street has seen a net loss of 4,000 outlets in the first six months of 2023. Nail bars and beauty salons also need referencing, showing a net addition of around 1,000 in a year.

It is good news that an enterprising spirit is alive and kicking in the world of male grooming – and beauty therapies more generally; without these openings, high streets would be even more challenged. Unfortunately, economic pressures are telling more widely in the area of self-employment. An article caught my eye last week about the recent decline in self-employment. I am a great believer in the contribution the self-employed make to the economy. Indeed, the good growth seen in the aftermath of the Global Financial Crisis was supported, according to the Office for National Statistics, by a rapid increase in self-employment.

Looking at the details, it is clear that Covid has been a big factor; 5m self-employed just before the pandemic, now down to 4.2m. Some of this is cosmetic (no pun intended) – furlough encouraging people to reclassify as ‘employed’; anti-tax avoidance legislation (IR35) has also played a part. But it is hard work being self-employed. Limited holiday potential, no sick pay and heightened mental pressures. And that is before the bureaucracy. People are voting with their feet. This is a pity and one with implications for growth.

On the data front, October Purchasing Managers' Indexes (PMI) were downbeat with readings consistent with recessions in both the euro area and UK. The US PMI improved to 51 whilst, further afield, Australia saw a fall to 47.3 and Japan slipped below 50. From my perspective the US remains the conundrum. Last week’s GDP data showed annualised growth around 5%, with consumer spending strong at 4% – especially on services. Government spending was robust and there was a build-up in inventories – a positive for now but perhaps an indication of problems ahead. Despite the positive growth news US 10-year yields dipped, ending just above 4.8%, 8 basis points (bps) lower on the week and investors are still looking for a Federal Funds rate of around 4.64% in 12 months’ time.

In the UK 10-year rates moved towards 4.5%, a 10bps decline. Yields in the 30-year area retreated from their recent high of 5.1%, but still finished above 5%. The direction was mirrored by euro area bonds, seeing German 10-year rates at 2.8% and Italian 10-year yields at 4.8% – representing a reversal of the widening in the German / Italian spread seen recently.

Investment grade credit spreads remained stable. In the sterling market poor results from Standard Chartered and NatWest put the focus back on financials and, more generally, there appears to be a growing number of profits ‘misses’ in a wide variety of global sectors. However, high yield markets, perceived as more sensitive to economic fluctuations, were broadly unchanged.

The ongoing conflict in Israel and Gaza continues to dominate news headlines but is not driving up oil prices. Either there is complacency or a sense that the conflict won’t draw in other participants. From a geopolitical perspective, the Hamas strikes dealt a blow to the thawing relations between Gulf States / Saudi Arabia and Israel. It will take time and diplomacy to repair and will meet with resistance from Iran. If there is something positive to take from these terrible events it is that China and the US have a common objective – stability in the region – and seem to have moved a tad closer in recent weeks.

Congratulations to South Africa on a tremendous Rugby World Cup win. New Zealand were brave and who knows what would have happened with a full complement. Not sure how many of the forwards on display use moisturiser? I may well be surprised. At 61 is it too late for me to start?

This is a financial promotion and is not investment advice. Past performance is not a guide to future performance. The value of investments and any income from them may go down as well as up and is not guaranteed. Investors may not get back the amount invested. Portfolio characteristics and holdings are subject to change without notice. The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.