The World In A Week - US Dependence Day
Last week the US market closed at all-time highs and this could not have come at a better time, heading into the 4th of July weekend marking the 245th Independence Day. Last Friday saw US Payroll data beating analyst expectations significantly, as the US added 850,000 new positions in June, demonstrating a strong bounce back in the world’s largest economy. Compelling economic data resulted in the seventh straight day of trading that saw the S&P 500 close at a record, which is the longest streak since 1997.
The US accounts for 25% of global GDP, and this has risen from 21% over the last 10 years, becoming a more dominant market leader. Developments in technology integration and the semi-permanent shift to a digital age have underpinned this with the emergence of leading cloud-computing, e-commerce, and software companies. The MSCI World Index is also largely tilted towards the US and represents approximately 54% of the index. Easy access to capital has fuelled increased levels of borrowing which has produced numerous new zombie companies which only generate enough income to payback the interest on their borrowings. The number of zombie companies in the US has increased from 6% to 20% over the last 10 years. Ahead, there are numerous headwinds for the US which include the growing levels of debt the Federal Reserve is willing to take up, the emergence of China / emerging nations and, as we have seen of late, that markets are becoming more disciplined towards relative valuations. These all amount to numerous hurdles for the US to overcome.
Elsewhere, the UK reclaimed its status as Europe’s largest share-trading centre, reclaiming the title back from Amsterdam. This change in status is largely derived from the resumption of the UK trading in Swiss stocks which was reintroduced as the UK left the EU. According to CBOE Global Markets, London experienced an average of €8.9bn of share deals in June, compared to €8.8bn on Dutch exchanges, and has emerged as the dominant trading centre in Europe once again.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 5th July 2021.
© 2021 YOU Asset Management. All rights reserved.
The World In A Week - It’s the Hope that Kills You!
Last week was a tough week for equity markets, the S&P 500 Index in the US fell -1.9% while the FTSE 100 in the UK fell -1.6%. All of this stemmed from a change of tone from the Federal Reserve, with Chairman Jerome Powell coming out with a statement which was far more hawkish than the market anticipated. Stating that inflationary fears may require an increase in interest rates far sooner than had previously been indicated sent markets into a downward spiral. In the currency markets this had the unsurprising effect of driving the dollar higher, and sterling retraced over -2%.
However, other reactions in the market might not seem so intuitive. Within the bond market, looking at the yield on the US 10 Year treasuries, they contracted from around the 1.6% to 1.4% level. The bond market telling us that it does not believe that inflation will be a problem, or that what we are experiencing is transitory as we move out of the COVID-19 crisis.
Within equity markets there did not appear to be outright selling taking place, (according to analysis conducted by Morgan Stanley), but rather more sectorial and style rotation. Over the week growth and technology outperformed cyclicals. One explanation for this is that a Fed with a tightening bias – as the rate of change in economic growth decelerates – results in an environment in which the yield curve flattens, the dollar strengthens, and the equity risk outlook is mixed, leading to the market looking for companies with more growth characteristics. It remains to be seen whether this holds true.
On the virus front there was some bad news in the UK. The week saw the most coronavirus cases since February, with over 11,000 new cases reported affecting all age groups. This is the Indian or Delta variant, which appears to be far more infectious and twice as likely to send victims to hospital relative to the Alpha variant. This latest mutation has spread to South America, while COVID-19 continues to kill thousands daily on a global basis. Therefore, the need to vaccinate globally remains a top priority.
Finally, I feel it would be remiss not to mention the England vs Scotland European Championship game. It was the first time in 25 years that the two countries had met in a major competition. England on home turf were the hot favourites, it was going to be a walk in the park accordingly but clearly Scotland had not read the script. The match, if you do not know, ended in a 0-0 draw. No disaster but as usual, against all the hype and expectation, England failed to deliver. As is often said… it’s the hope that kills you!
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 21st June 2021.
© 2021 Beaufort Investment. All rights reserved.
Experienced Paraplanner Required
Due to our continued growth, a rare job opportunity has become available for an experienced Paraplanner to join our team of Chartered Financial Planners.
The Role
You will be accountable for all technical aspects of providing support to our financial planners. A large amount of your time will be spent writing reports, dealing with client queries and carrying out detailed research to ensure our financial planners are fully prepared for client meetings. You will therefore be heavily involved in the following key areas of the planning process:
- Product research - mainly pensions & investments, including Defined Benefit transfer analysis
- Fund & asset allocation analysis
- Report writing - highly bespoke & technical reports
- Quotes - obtaining & checking product illustrations from product providers
- Client reviews - prepare review packs to enable the financial planner to conduct the meeting
- Technical research - taxation, legislation, compliance, etc
- Preparing & discussing appropriate solutions for clients with the Financial Planner
- Effectively use research tools and cashflow planning systems including FE Analytics, Cashcalc, Selectapension & Defaqto/Centra.
- Maintain up-to-date knowledge of the industry, compliance and regulatory developments with a view to updating the team on a regular basis.
You will also build a strong relationship with our clients, as you will be encouraged to participate in client meetings alongside the financial planner.
Person Specifics
This role is not suitable for a trainee, so to be considered you must already be an experienced Paraplanner ideally with the following attributes:
- CII Diploma qualified as a minimum, but ideally Chartered, or well on the way to Chartered status
- High level of technical knowledge, including Defined Benefit transfers
- Able to prepare complex, detailed financial planning reports to a very high standard
- Ability to manage time and organise effectively
- Ability to work on own initiative, but also as part of a team
- Comprehensive understanding of financial products & key areas of financial planning
- Articulate - able to communicate effectively in verbal & written form
We are looking for a hardworking and committed individual who can contribute to our ongoing success & assist with the continued growth of our company.
In return you will be offered an excellent salary & benefits and the opportunity to work within this highly reputable Chartered Financial Planning firm. You will be in a close-knit team and be fully supported in any further exams you wish to take.
If you have the necessary skills and qualifications, please send your CV to: forthvalley@beaufortfinancial.co.uk
Is it time you ditched your High Street bank and went digital?
With a slew of digital-only options, is it time to ditch your old bank? We look at how Monzo, Starling and Revolut are challenging the old guard.
Digital-only banks have become more established in the past few years, with a multitude of options. But is it time to ditch your High Street bank for one of them? In the past decade since the financial crisis a multitude of digital-only banks have emerged as banking customers look for new and innovative ways to handle their finances.
Digital-only financial options are now really varied, and consumer choice has never been better, with plenty to pick from via your smartphone. The range of services from digital-only providers now matches those provided by the high street. However, for the purposes of this article we’re going to focus on current accounts. Big banks such as HSBC, Lloyds and NatWest have come under increasing pressure in recent times from so-called challenger banks in the current accounts market. But what do these challengers actually offer to customers?
Here are some top picks, their best features and drawbacks.
Monzo
Perhaps the most famous one on this list, Monzo is well-known now for its flashy ‘hot coral’ (read: pink) debit cards.
Monzo offers lots of features including budgeting, spending analytics and ‘pots’ which you can create to help manage and apportion your money. You can even set up bill-specific pots to keep cash aside to pay your monthly bills from. You can set yourself monthly spending limits and make payments really easily within the app. It will also give you summaries of spending areas each month, categorised in sections such as eating out, personal care or groceries. This can be especially helpful if you’re struggling to identify areas where you might be overspending regularly.
Like High Street stalwarts such as Lloyds or NatWest, Monzo is a fully licenced UK bank. As such you get £85,000 deposit protection from the Financial Services Compensation Scheme (FSCS). The account also provides other optional services such as overdrafts and loans. It also has a premium service called Monzo Premium, which costs £15 and will give you phone insurance, worldwide travel insurance, 1.5% interest on balances up to £2,000 and other perks – it even comes with a shiny metal bank card. Check if you’re not already receiving some of these services such as phone protection on your home insurance though, as it may not be worth it.
Starling
The other major digital-only bank to choose from is Starling, founded by long-time banker Anne Boden. Boden worked for years at major High Street banking institutions before taking what she’d learned from those places and implementing the best bits into Starling.
Starling has lots of spending analytics, makes payments really easy and has a user-friendly interface for customers who might not be the most tech-savvy. It also has segregated spending pots called ‘spaces’ which can help you manage small savings goals.
One of the standout features on Starling though is zero-cost spending abroad. Starling charges nothing for you to spend abroad, and only changes your money into foreign currency at the interbank rate, meaning you’ll always get the best deal when using your Starling card abroad. It also has the option to add joint accounts for you and your partner, plus euro accounts if you need to keep, send or receive money in euros.
As with Monzo, it is also a fully licenced UK bank offering all the same protections as peers.
Best of the rest
While digital banking apps have proliferated in recent times, most are not really worth considering for one specific reason – they aren’t licenced UK banks and don’t have the same level of deposit protection as Monzo, Starling, or big High Street banks.
There are, however, two names of note in this category: Revolut and Monese.
Revolut has become something of an alternative option. It has many of the features of Monzo and Starling but doesn’t currently have FSCS protection. Rather, money is secured in so-called e-money accounts. The feature that sets Revolut apart is the greater variety of currencies you can maintain balances in. It is, however, an inferior choice if you’re looking for UK-specific current accounts.
Monese gets a mention because it is extremely easy to set up and use. However, like Revolut it doesn’t currently carry any deposit protection.
Whether you decide to drop your old bank or not, there is certainly plenty to choose from now in digital banking. Although the aforementioned apps have done a lot to innovate when it comes to mobile-only banking, many of the bigger banks have now largely caught up in terms of features.
It’s best to consider what you need the account for, and whether it’s suited to you, before moving all your bills and salary into it. Remember though that there’s no limit to how many current accounts you have, so keeping more than one is perfectly possible. Just try not to open them all at once as this may leave an impression on your credit report.
Tips for building a nest egg for your children or grandchildren
Starting early can make an extraordinary difference to long-term wealth. Here are some options to help your children or grandchildren.
Building a nest egg for a child or grandchild needn’t be a difficult process. But the earlier you start, the better the outcome will be for them. Not starting saving earlier in life is a common problem, but it can be difficult in your 20s and 30s to get your savings going with so many costs of living. But once you’re older, with kids or even grandkids, you may start to think about whether you can help them get a financial foothold in life to help them when they’re older. Not only does it make sense from an inheritance perspective – the more you give away while you are younger, the less potential there is for tax liabilities – but the earlier you start building them a nest egg then the bigger that egg will be.
If you’re looking to make a start there are some options which can make It simple and tax-efficient.
Junior ISAs
The Junior ISA or ‘JISA’ should be your first port of call when considering saving for a child or grandchild.
JISAs, like normal ISAs, come in a few forms. You can start with a Stocks and Shares JISA or a cash JISA. Cash JISAs, while offering rates that tend to be better than normal savings accounts, still don’t offer much by way of interest at present. At the time of writing the top cash JISA offers 2.5% interest.
A stocks and shares JISA, while not offering a guaranteed rate of return, will have the benefit of access to investment markets. Because the time horizon of a child is so long (if you start saving for your kids when you have them you potentially have an 18-year window to amass a pot for them), it suits investing in equity markets which have shown to deliver superior long-term returns.
The Government has increased the limit on annual JISA contributions to £9,000 a year. This can be split between a cash account and an investment one, if you prefer. The child can then access the money in the JISA and have full control of it at age 18.
Children’s savings accounts
There are a variety of children’s savings accounts on offer, some from big High Street banks and some from new challenger banks. While the top-choice products offer similar rates to cash JISAs, they are mainly inferior to JISAs because of their lack of a tax wrapper. In reality then these kinds of accounts should only be turned to if you’ve maxed out the annual contribution for your child’s JISA, but still have further money you want to give them.
There is one consideration to make for children’s savings accounts however, from the perspective of education. Often a children’s savings account will give more responsibility to them than a JISA which parents manage. Giving a child their own account to manage can provide valuable life lessons to them from an early age.
Pensions
Yes, that’s right, a pension. You can open a pension for your child. While the rules governing pensions prevent them from accessing the money before pension freedom age, it could be a valuable alternative or addition to a JISA.
The annual limit you can contribute to a child’s pension is £2,880 per year. This is given 20% tax relief much the same as regular pensions, meaning you can put away up to £3,600 in total. Like a stocks and shares JISA, a pension has the benefit of access to investment markets, which really could help with long-term wealth creation.
The conundrum of picking between a pension or a JISA is that the former can only be accessed at age 55 (which could increase to 57 in 2028), while the latter gives the child full access to the money at age 18.
Unless you’re confident that the child will have a fully responsible mindset with their money at age 18, it may be worth hedging and having a blend of both accounts.
But likewise helping them to understand the importance of what you’ve given them and learning good financial habits as they grow up may put them in a great position to use that money wisely. And with the long-term landscape so uncertain, it may be better to give them something they can access at 18.
Are you saving enough for retirement? Here’s what to consider when planning
From living longer to cruises of a lifetime - here are a few things you need to consider when saving for your retirement.
There’s no one easy way to calculate how much you’ll need to get by in retirement, as everyone has different goals and aims for how they want to enjoy it. However, there are some general pointers that can help you get a grasp of what you need, and what you need to be saving and investing to achieve it. When planning for your retirement, thinking about how much income you’d like on a monthly basis is a great starting point.
A rough guide to help could be assessing what you spend monthly now, and then taking away bills which will not be there in future (your mortgage, for example, which has a fixed end date). Doing this can help you get a clearer picture of what it costs just to maintain the lifestyle you currently have.
A common ‘rule of thumb’ in this regard is replacing about 70% of your salary on an annual basis. This is predicated on the idea that you will have paid off the mortgage, so won’t have that to pay off each month. Think then in terms of percentage income. A £200,000 pension pot that pays 3% per year will pay out £6,000. You might be able to attain more income for that size of pot, but it will involve more risk.
It’s also important to think about whether you want work to be a hard stop, or you plan on transitioning over time out of full employment. This can be a good option if your pension pot doesn’t extend as far as you may like yet, and the state pension is a way off from kicking in.
Keeping the state pension in mind is also important. While it may not seem like enormous sums of money, it does form a key part of many people’s retirement plans. The age of the state pension is creeping up slowly, which needs to be kept in mind when planning.
Perhaps the best answer to “how much should I save?’ is “as much as you can”, but there are some other factors to consider.
Think of the ‘U’
Saving for retirement is about goals. What do you want, and how long do you expect to want it for? As retirement unfolds everyone has a different idea of what they’ll want to do with that time and money.
On average though people’s expenditure tends to follow a ‘U’ shape. That is – when they first retire spending is high because they reap the benefits with tax-free lump sums and access to cash - taking nice holidays or maybe finally putting that extension they always wanted on the house. As they settle into a more normal routine over time though, costs start to diminish (the bottom of the U).
Finally, as people enter their later years, costs tend to rise again. This can be from more banal things like getting help in the garden or around the house, to more significant events such as health issues or care requirements.
Lamborghini or Laburnum?
Thinking about your needs in retirement can be framed principally through the kind of lifestyle you intend to lead. The income needs of someone who plans to be at home with grandkids tending to a garden will be very different from someone who intends to jump on cruises and see the world, or buy a fast car. Both choices are fine ones to make, but the former will likely be more frugal than the latter. That being said, if you’re planning to spend time at home, you will likely have to think more about the cost of living there, maintenance and even whether you’ve got equity locked up inside the property.
Live long and prosper
The other big thing to think about is longevity. Not only do you need to be able to replicate a portion of your income via a pension and other wealth on day one of retirement – it needs to be able to last for a long time. While predicting your own lifespan is impossible, there is a guide to keep in mind from the Office of National Statistics (ONS). At the moment a man aged 55 has a life expectancy in the UK of 84 years according to the ONS. This rises to 87 for a woman. While these are only averages, this is a significant period of time by any measure. While taking an income from wealth is perfectly possible, the more you save early on, the more time it has to grow and the better your outcomes will be overall.
For those that don’t have as much saved at retirement as they would have liked, it means either adjusting their lifestyle accordingly, or taking more risk with their pensions (something which brings its own challenges). The good news is, a lot of this can be addressed right now. Saving regularly and investing that money to an appropriate level of risk for you, at all stages of your adult life, is crucial. Retirement planning needs to be done as soon as reasonably practicable, because the earlier you start investing in a pension, the more it will be worth.
Your adviser can help you consider these plans more carefully. Don’t hesitate to get in touch.
Savings lotteries – what are they, and are they worth it?
Savings lotteries have become more prevalent in recent times as banks look to incentivise saving without offering better rates. But are they any good?
Nationwide Building Society has launched a new lottery for customers, which automatically enrols them in a monthly prize draw where one lucky winner can scoop £100,000. How does it compare to others?
Nationwide had previously launched different lotteries for different kinds of accounts, including for its Cash Isa and Start to Save products. But this is different in that any Nationwide customer with a mortgage, current account or savings account will be automatically entered. There are 8,008 chances to win each month, with a top prize of £100,000, two £25,000 prizes, five £5,000 prizes and 8,000 £100s up for grabs. The competitions will run monthly for 12 months from September and be selected from a pool of roughly 14 million Nationwide customers.
Alternatives
Nationwide isn’t the only firm to offer savings lotteries to customers. Indeed, with the crashing of savings rates in recent years, it has become a more common incentive to entice new customers without offering better rates.
Perhaps the most ubiquitous of the lot are Premium Bonds. The National Savings & Investments (NS&I) Premium Bonds prize draw is incredibly popular. Some 21 million savers have over £107 billion squirreled away in Premium Bonds according to MoneySavingExpert. Rates were slashed recently though, so the odds of winning anything at all have lengthened considerably. Premium Bonds do still offer good prizes, including two £1 million prizes every month. NS&I says the rate at which you’ll win prizes each year roughly equates to a 1% rate of interest on your savings. This is not however guaranteed, and you could hold the bonds your whole life and win nothing.
The other major savings lottery available at the moment comes from Halifax Bank. It is offering three prizes of £100,000 every month, plus more smaller amounts. To qualify you’ll need to open a savings account with the bank and deposit at least £5,000.
Other banks have recently offered new ‘lottery-style’ accounts, including NatWest, Post Office Money and Family Building Society, but those are currently unavailable to new customers as they have proven so popular.
Overall, the aforementioned lottery accounts can be a good idea if you have smaller sums of cash, as rates on best buy accounts are shockingly low anyway. That being said, the bulk of your savings may be better off elsewhere, such as in investment markets, in order to generate a better rate of return.
If you’d like to discuss options for your cash savings further, don’t hesitate to get in touch with your adviser.
The World In A Week - Inflation Narratives & Deflated Expectations
Last week was broadly positive for markets, as the MSCI All Country World Index (ACWI) of global stocks rallied +1.8% in GBP terms. It was a mixed bag beneath the surface, with European Equities and US tech stocks driving the rally while UK and Emerging Markets were more muted and Chinese markets were down. Both the riskiest and least risky forms of debt posted positive returns as high yield bonds and treasuries were up roughly +0.5%.
These patterns of returns are not typical for markets and may reflect the principal ongoing debate taking place among market participants, that being the topic of inflation. Last week saw another release of Consumer Price Index (CPI) data in the US which showed inflation was running ahead of expectations, albeit by a modest amount. Headline inflation came out at +5% on an annualised basis, while “core” inflation (which excludes volatile food and energy) printed at +3.8%.
The relevant markets were decidedly unperturbed by this news. The yield on the 10 year US Treasury Bond fell (not what we would traditionally expect when inflation is rising), while the 5 Year Breakeven inflation rate also continued on its downward path. We follow inflation “breakeven” rates as they imply what the market thinks inflation will average out at over the next five years. Right now the markets share the Federal Reserve’s view that the current inflationary spell will be temporary.
We think there are very good arguments on both sides for whether inflation will prove as “transitory” as the Fed expects it to be. On the one hand, while the data shows an inflationary trend that is faster than many expected, it has been spurred by increases in prices that are likely to be temporary such as used cars and flights. There are also major deflationary global forces arising from technology and an aging population.
On the other hand, the bond markets (and indeed many multi-asset managers) may well have been conditioned by decades of low/falling inflation to believe it never poses a threat again. Vast amounts of money have been injected into the system to keep economies alive during the pandemic, and the velocity of this money is expected to increase as economies reopen. In addition, we have seen commodity prices rise rapidly and employers struggle to fill jobs which could lead to non-transitory wage inflation.
We have been moderately adding inflation-sensitive assets to the portfolio but appreciate that, unlike the current weather, the picture remains quite unclear.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 14th June 2021.
© 2021 Beaufort Investment. All rights reserved.
The World In A Week - Tax becomes less taxing
The Organisation for Economic Co-operation and Development (OECD) published its latest economic outlook last week. There were no hidden surprises in the 221 pages, whose narrative echoed that the pandemic continues to cast a long shadow over the world’s economies, with the silver lining being an improved prospect for the global economy due to vaccinations and stronger policy support. However, the path to recovery will be an uneven one.
The headlines gave a forecast for global growth of +5.75% in 2021 and +4.4% in 2022, a sharp rise from the decline of -3.5% in 2020. The biggest risks revolve around the deployment of vaccines not being fast enough to stop the transmission of the virus and the emergence of new, more contagious variants. This will hamper the pace at which containment measures can be relaxed and stifle the expected boost to consumer confidence and spending.
A relaxation in lockdown measures did allow for the G7 finance ministers to meet face-to-face in Cornwall over the weekend. Global taxation was highest on the agenda and it was agreed that global corporate taxes should have a minimum level of 15%, and large companies with a profit margin of at least 10% should be taxed where they conduct business. If negotiations go well, the agreement could be extended to the G20, and could see the end of countries competing on lower tax levels and an end to the race to the bottom.
The World In A Week - Building Bridges
Although considerably paired down from President Biden’s initial spending plan of $2.3 trillion, a proposed infrastructure deal of $579 billion was agreed with senators. It will focus on improving and building roads, bridges, railways, public transport, and broadband networks. This is all new spending and, when combined with the renewal of existing annual funding for infrastructure, the total commitment over the next eight years is $1.2 trillion.
This pushed US stocks to another record high by the end of last week with the strongest weekly performance since February. This was despite consumer inflation in the US hitting 3.4% for the past 12 months to the end of May. The rise in inflation was slightly below expectations and does marginally ease the pressure on the Federal Reserve’s outlook for interest rates, having surprised investors with their slightly more aggressive tone two weeks ago.
Unlike their counterparts across the Atlantic, the Bank of England delivered a modestly subdued report for their Monetary Policy Committee meeting last week. Commenting on the recent measures of inflation being stronger than expected, the Committee anticipates this to be transitory in nature and not develop into a factor that will cause a tightening in their monetary policy.
The balancing act for all policymakers around the world is to build a bridge, from the emergency conditions that were put in place last year, to more normalised conditions, without triggering a repeat of 2013’s taper tantrum.
Finally, last week marked the fifth anniversary of the Brexit referendum. Having only just left the trading agreement with the European Union at the end of January this year, and with the muddling effects of the pandemic, it is still too early to judge whether the UK is in a better or worse position. Public opinion has remained constant, with very few Britons having changed their view of Brexit over the past half decade, leaving the pro- and anti- Brexit camps closely matched. What is clearer though is the need for the Government to rebuild relationships with our trading partners around the globe, as well as with the UK electorate.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 28th June 2021.
© 2021 YOU Asset Management. All rights reserved.