Financial goals 2022: how to prepare your money for the year ahead
2022 is here, so it’s time to sit down, put the kettle on, and think about the year ahead for your money.
While it might seem a bit hackneyed setting New Year’s resolutions and such, thinking about how you want your financial situation to develop will give you a good head start in achieving both short-term and long-term goals.
But what should that thought process look like?
It can be easy to get bogged down in the minutiae of financial decisions, but this should be primarily a big picture process.
Is this the year you buy a house or move up the ladder? Is it time for retirement? Or are you just looking to continue growing your wealth as much as possible?
There’s no doubt you’ll have an idea already, and life can also get in the way, but a solid direction of travel is key.
Once you’ve got that ‘big picture’ in mind, then you can set yourself targets, goals and outcomes you’d like.
Reaffirm your goals
When it comes to financial planning, wealth growth and management, it all ultimately comes down to what your goals are.
Without goals, you can have no direction in your planning. It is likely you have a goal, or at least an idea in mind to begin with.
Think about what it is going to take to achieve that goal. If it’s a long-term aspiration, one year ahead might just be a minor part of that bigger picture.
But ultimately even the small choices we make have profound effects. Whether it’s putting money down on a new car, or socking it away in an ISA instead, that will change your outlook and strategy.
Be it a new car, retirement or a house, or any other financial goal, being clear what it is, is massively important.
Having this in mind will help define important aspects of wealth building such as timeline, risk appetite, and structure of your wealth.
Review your costs
Once you’ve got a clear idea of what you want from your personal finances and wealth in the next year, it’s time to look at how you can eke more out of what you’ve already got in front of you.
It is true that every year prices go up – but in 2022 we’re under particularly significant price pressures from inflation, and now the added issue of rising interest rates too.
Reviewing your spending in light of these problems is a tried and tested method for inoculating your money against shocks.
Reviewing bills, bargaining new deals, cancelling unused subscriptions, finding ways to be more frugal with everyday and non-essential spending – these are just some of the things you can do.
Think of it as a Spring cleaning for your finances – you make decisions every day of the year that accumulate and end up changing the face of your budget over a year.
Taking time to review and reset that is essential.
Reallocate resources
Once you’ve thought carefully about your costs, where cuts can be made or money spent more efficiently, you’re ready to look at how to reallocate what you have left each month.
This also counts for what you’re already saving. Is it going into the right place?
Cash is a viable place to keep wealth, but only if you plan on using it on a short time horizon. Everything else should be invested in one way or another.
But investing is an ever-changing beast to tackle. You should have long time horizons in mind when investing, but making adjustments and reassessing investment cases regularly is important, even if you don’t make any changes.
And where it goes matters too. Pensions may be a good long-term vehicle but having an ISA, or even a LISA can be really effective for wealth growth too. Thinking about the best way to allocate to those different accounts can make a big long-term difference to your wealth growth.
Get a check up
Once you’ve got a clearer idea of your costs, and your resources that you’re ready to deploy through savings or investments, consider getting a financial health check with an adviser.
Independent financial advisers have the benefit of being able to take an overarching view of where your wealth is, and what needs to be done to maximise its potential.
Get in touch with your financial adviser and talk about the above discussed topics, and you’ll be well-set for the year ahead.
Interest rates are going up – how it can affect your finances
The Bank of England surprised everyone in December by raising interest rates.
It did so from the all-time low of 0.1% to 0.25% – still a relatively low level by historic standards. For example, look back to 1990 and the bank’s interest rate was 15%.
More recently though – pre-2008 financial crisis – rates hovered above 5% for nearly a decade. So we’re starting from a low base with rate rises now.
But this will still affect your finances. And the Bank of England could keep hiking this year, with rises up to 1% possible.
Why raise interest rates?
The Bank of England’s primary objective for its ‘monetary policy’ is to keep inflation at bay. Unlike the US, it has no particular mandate regarding employment.
It is tasked by the Government to keep inflation to as near to 2% as possible. At the time of writing, inflation is a wallet-busting 5.1% on the consumer price index (CPI) measure.
By hiking interest rates in response to this, the Bank of England is attempting to quell demand. The ‘real world’ effect of this is that borrowing becomes more expensive, leaving businesses and households with less money to spend – forcing people to tighten their belts and slow down consumption.
At least, that is the economic theory. In practice the economic picture is more complicated. But for the purposes of our personal finances, this is the most important element to have in mind.
Impact of inflation
When thinking about how interest rate rises might affect your money, it’s first essential to consider why those rates are going up.
As mentioned above, rates are hiked because inflation is intolerably high. Inflation is the measure of how fast consumer prices are increasing, based on a balance of supply and demand.
You can have two core feeders into rising prices – either demand goes up, or supply becomes constrained. We have inflation now because of a mixture of both.
Lockdowns in 2020 and 2021 saw household spending plummet, leading to people having bigger than usual savings pots. Plus, the financial assistance from the Government in the form of the furlough scheme and other aid helped keep a lot of workers’ incomes relatively stable. This means when the economy opened up people had more money to spend.
This in turn caused a surge in demand for products and services which complex supply chains around the world struggled to fulfil. In combination then, the two effects have forced inflation much higher, quickly.
The net result of this is a range of goods and services we buy every day have become more expensive, faster than anyone expected. Everything from grocery bills, to clothes, fuel for our cars and energy supply to our houses has shot up in cost.
With this the state of the economy then, hiking interest rates becomes inevitable. But how does that in turn impact your personal finances and wealth?
Essentially, unless your earnings are rising to match the rise in the cost of living, you will find it harder to pay for the things you need each month.
It is likely that inflation will fall back down as a result of the rate hikes, and goods and services will rise in price less quickly. But it takes time for the effects to be felt in this sense.
There is however a more immediate impact of interest rate hikes on our personal finances.
Debt
The first, and usually most immediate impact of a rate rise, is to make the cost of debt rise.
When the Bank of England hiked rates in December, banks almost instantaneously announced they were hiking mortgage rates on new products, and those products which had tracker rates.
The same is true for personal loans without a fixed rate (although these are uncommon), and credit cards too. It is unfortunately quite cynical, but like when petrol and diesel prices rise, the banks pass on rate rises almost immediately to their customers.
It can be tricky to avoid these rises. If you have a mortgage which tracks the base rate, now would be an excellent time to consider remortgaging to a fixed rate. If you’re looking to get a new mortgage, then there really isn’t much you can do other than making sure you try to get the best deal possible, or have the biggest deposit you can to minimise the debt you take on.
If you have unsecured debts such as credit cards, try to pay off as much as you can as soon as possible. This will save you significant future costs to servicing that debt. Typically, providers have to give you 30 days’ notice if they do hike their rate, and you have 60 days to pay off the balance before it kicks in.
Savings rates
When interest rates go up, savings rates should go up too. Indeed, before the bank rate was hiked, savings rates were beginning to rise.
But there is a big caveat in this. The part of the cash savings market that saw rises was only in the top end with niche smaller providers.
Big retail banks such as HSBC, Lloyds and NatWest have continued to keep their average rates on offer extremely low. The current rate of interest offered by NatWest, for example, is 0.01% in its Instant Saver account, an extraordinarily miserly offer.
That compares with the current top rate instant savings account (at the time of writing) which is offered by Harpenden Building Society and comes with a rate of 0.75%.
Essentially the message here is that savings rates will go up now the bank rate is going up too. But if you want your money to work harder, it has to be placed somewhere where it will get the best rate possible.
For comparison of rates, a useful resource is Savers Friend, which is operated by financial data firm Moneyfacts.
But in reality, unless it is short term cash or a rainy-day fund, it’s likely to be better placed in investments to grow over time.
Investments
Finally, although indirectly, rising interest rates affect investments.
This happens through a more surreptitious process though and isn’t as obvious as a bank hiking rates. But some investments will begin to underperform once interest rates rise.
This happens for a multitude of reasons, but largely comes down to the bulk of investors moving away from fast growth stocks, such as tech, and into companies that benefit from rising rates, including (ironically enough) banks, manufacturers which benefit from lower material prices, home builders, and others.
Ultimately predicting how interest rates will affect particular investments is a difficult process. If unsure, then speak to your financial adviser who can help you figure out the best solution to your investment needs.
Money in 2022: tax allowances and other changes you need to be aware of
With a new year brings changes to the tax system, and other areas affecting our personal finances.
With inflation soaring, interest rates rising and the cost of living reaching extraordinary levels, it pays to keep an eye on all the big changes that might affect your wallet in 2022, but that you can plan and prepare for.
Here are changes you need to know about.
Income tax threshold freeze
The Government is set to freeze the income tax rate bands at their current levels.
As a result of this, more than 1.3 million people could be pulled into a higher tax band according to a study from the Institute of Fiscal Studies (IFS).
At the moment just 8.5% of workers’ pay the higher rate, but this could increase to 11% by tax year 2024-25 according to the IFS.
The personal allowance is currently £12,570, with anything between this and £50,270 taxed at the basic rate of 20%. The higher rate of income tax on anything above this is charged at 40%, up to £150,000. Finally, the additional rate is charged at 45% over £150,000.
So what does freezing these bands mean?
With inflation soaring it is likely you’ll be looking to earn more income to be able to keep up with the cost of living. But any pay rise you get could tip you into a higher band.
Plus, with any hikes to the bands now cancelled, you’ll miss out on the extra tax free cash from the personal allowance.
Other allowances are also frozen – the pensions lifetime allowance will stay at £1,073,100, the ISA allowance will stay at £20,000 and the inheritance tax threshold and nil-rate band will stay at £325,000 and £175,000 respectively.
National Insurance hike
Not content with holding back allowance rises, the Government has also decided to hike National Insurance (NI).
The new so-called Health and Social Care levy will raise an extra 1.25% in NI payments from anyone earning a salary, employers on their NI contributions, and on self-employed NI payments.
This means someone on a wage of £20,000 a year will pay an extra £130 in tax per annum. Someone on £50,000 a year will pay £505 more.
There is more too – the hike also affects dividends, meaning anyone taking an income from dividend payments will also see their tax bill increase by 1.25%.
Above an income of £2,000 the rate will be 8.75% for income within the basic rate band, 33.75% on the higher rate and 39.35% on the additional rate.
Energy prices
Already a big issue for many household budgets, energy prices have skyrocketed in recent months.
This led to a big hike in the price cap for energy bills, and this is likely to increase again, by up to £700 according to some estimates.
The current price cap is currently £1,277. While most analysts expect a rise of around £400, some think it could go as high as £2,000 depending on the state of the market by February.
The soaring prices have led to a swathe of energy firms going bust. If you’ve been affected by this, hold tight and wait for Ofgem to tell you which firm is taking over your supply, before attempting to change provider.
Unfortunately though, higher prices mean there is little price competition at the moment. If you want to save on energy bills, the best thing you can do right now is reduce your consumption, or make your property more energy efficient.
Loyalty penalty
New rules came into force for motor and home insurance customers on 1 January which mean anyone renewing their policy will not have to pay more than would be offered to a new customer.
These rules are designed to prevent the so-called ‘loyalty penalty’ – where a customer stays with the same insurer for years and sees their premium increase every time it comes to renew.
While those with policies to renew won’t see their prices increase, what is now likely is new policy prices will rise, and insurers could then offer higher prices to existing customers.
ISAs and pensions
Fortunately, this is one area where the Government has decided not to tinker with – for the moment at least.
Normal ISAs remained with a £20,000 annual allowance, while tax relief on pensions is still available with basic rate and higher rate relief.
This makes the two products still a great place to work to build wealth, and a great area to focus on for the year ahead.
If you would like to discuss any of the themes mentioned in this article, don’t hesitate to get in touch with your financial adviser.
Life expectancy reversal: State Pension age could be rising too fast
The State Pension age could be rising too quickly as life expectancy rates grind to a halt.
Analysis from pensions consultancy LCP suggests that life expectancy has stopped increasing. The rise in State Pension age, first from 65 to 67 and later to 68, may not be needed as a result.
The increase in State Pension age, cost aside, was predicated on rising life expectancies in the UK. But LCP’s analysis suggests life expectancy is now in fact decreasing, making the rise in age for State Pension unnecessary.
The Government had decided to increase the State Pension age on the basis that no one should spend more than a third of their life earning a retirement income from the State. It decided the State Pension age should rise to 68 by 2039.
The Government based its review of the State Pension age on average UK life expectancy. For example, as part of its analysis the Government predicted a woman aged 66 in 2014 could expect to live to age 89. But estimates from LCP suggest that women can now only expect to live to 87.
As a result, the increase in the State Pension age from 66 to 67, which is currently scheduled between 2026 and 2028 could be pushed back by 23 years – to 2049-51. Those born between 1961 and 1984 would enjoy much earlier receipt of their State Pension.
But the sheer cost of reversing the age rise could be too much for the Government to bear. Before the secondary impacts of taxation, reversing the State Pension age increases could cost the Treasury some £195 billion, with more than 20 million people potentially affected by the changes.
Commenting, Steve Webb, partner at LCP said: “The Government’s plans for rapid increases in state pension age have been blown out of the water by this new analysis.
“Even before the pandemic hit, the improvements in life expectancy which we had seen over the last century had almost ground to a halt.
“But the schedule for state pension age increases has not caught up with this new world. This analysis shows that current plans to increase the state pension age to 67 by 2028 need to be revisited as a matter of urgency.
“Pension ages for men and women reached 66 only last year, and there is now no case for yet another increase so soon.”
If you’d like to know more about what a change to the State Pension age could mean for you, then get in touch with your financial adviser.
The World In A Week - Taper Tantrum Two?
Written by Cormac Nevin.
After an exceptionally strong 2021, markets started the New Year on a weaker footing. Equities as measured by the MSCI All Country World Index were down -1.7% in GBP terms. Fixed Income also provided little solace as rising interest rates left global treasuries down -1.0% for the week and riskier high yield bonds were also down -0.7%. The Equity sell-off was concentrated in the US growth/tech space, as the NASDAQ index of tech superstars fell -4.6% and the broader S&P 500 Index was down by -2.1%. One bright spot for the global equity landscape was our very own UK Equity market, where a high concentration of Financial and Energy stocks allowed the FTSE All Share Index to rally +1.0% as markets around the world fell. This gives some pleasing momentum to what has been one of the most unloved equity markets of the last five years.
The principal cause of this pullback in markets was the release of the minutes from the US Federal Reserve’s December meeting that illustrated the increased concerns of the Board members pertaining to the rate of inflation being experienced by the US economy. The members also concluded that economic growth was likely to be robust in 2022. This was interpreted by markets as a green light for the Fed to end the stimulus programme, which it has had in place since the start of the pandemic, earlier than previously anticipated. This view was further spurred on by the release of jobs data in the US on Wednesday that showed the unemployment rate drop to just 3.9%, despite new job creation coming in at only 50% of what was anticipated. This indicated to markets that we may be even closer to the Fed’s goal of “full employment” which gives them further scope to reduce stimulus. Markets eagerly await the latest US inflation data due on Wednesday of this week.
Other geopolitical events also paint a vista of potentially choppy waters as we enter 2022. Revolution in Kazakhstan, great power games in the Ukraine, and the possibility of the Omicron variant disrupting supply chains in the Far East all pose potential upside risks to inflation. We think our portfolios are well equipped to handle what 2022 might bring, and our focus on great companies trading on sensible valuations combined with unique diversifiers remains unchanged.
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 10th January 2022.
© 2022 YOU Asset Management. All rights reserved.
The World In A Week - Concentrate on the Concentration
Written by Millan Chauhan.
Over the last week, Apple’s market cap has exceeded $3 trillion, the first company to do so in history. In October 2021, Microsoft overtook Apple as the world’s most valuable company before Apple retook the crown following a sharp rally in November 2021. Apple kicked off the first trading day of 2022 with a strong start and briefly eclipsed the elusive $3 trillion market cap threshold. Over the last five years, we have seen the technology manufacturer majorly diversify their product line from the initial personal home computer to the iPod, iPad and iPhone and now, most recently, to the AirPods. Apple’s track record of developing cutting-edge innovative products has underpinned the growth of the Company and they continue to diversify their product range with potential launches of virtual reality devices and an electric car.
However, as such big technology names have grown so rapidly so has their weighting at a benchmark level with Apple being the top weight in the S&P 500 at 6.9% and 11.6% in the technology-heavy NASDAQ. The concentration of the top weights has narrowed tremendously as the mega-cap technology names including Amazon, Alphabet, Microsoft, Meta Platforms, and Apple have outpaced a large proportion of the remaining index and now constitute roughly 22% of the S&P 500 Index. This has become a difficult risk to navigate for active US Growth fund managers as they are almost forced into holding these mega-cap technology stocks since they constitute such a large proportion of their index and not holding the stocks could impact their relative performance.
Elsewhere, cases of the latest strain of the virus Omicron continue to rise with 1.2 million people in the UK testing positive in the last seven days. The number of days needed to isolate was reduced from ten to seven, and now UK businesses have encouraged this to be reduced further as symptoms of the new strain are deemed less severe and would help support the labour shortages the country is facing. The current US health advice is to self-isolate for five days after receiving a positive test which may be several days after the first symptoms.
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 4th January 2022.
© 2022 YOU Asset Management. All rights reserved.
Women must save £185,000 more during their careers to match men’s retirement income
Women have to save up to £185,000 more than men during their careers to match what men will earn in retirement, according to research from Scottish Widows.
The £185,000 figure can be broken down into £100,000 extra to bridge the savings gap, £50,000 to cover women’s’ longer life expectancy and £35,000 to pay for the extra care needs that this entails.
Scottish Widows has published its annual Women and Retirement report since 2006, looking at the differences between the sexes when it comes to retirement outcomes. In its latest report it has found women in their 20s today will save around £250,000 on average by the time they retire, while men will typically save £350,000.
Life expectancy for men and women also differs. A man aged 25 today is expected to live to age 86 on average, while a woman can expect to live to 89. It would take a £400,000 pot for the woman to match retirement incomes thanks to this longer life expectancy.
What is causing the discrepancy?
Looking at why there is a gender gap when it comes to retirement outcomes is not down to one simple thing.
Women can expect to earn around 40% less than men during their working years according to recent research from the Institute for Fiscal Studies (IFS). While this gap has decreased by around 25% in the past 25 years, it is difficult to close as typically, women fall behind in income terms when they take time out of the workforce to have children. The majority of gains according to the IFS are down to improvement in education among women in the past quarter decade.
As a result of these lower income expectations, savings and retirement outcomes are also negatively affected, causing the aforementioned savings gap. This is compounded by the fact that women tend to live longer too.
What can be done about it?
It is a difficult issue to resolve, especially as the only way to really avoid the shortfall is to not take time out from work. And with societal changes that reflect the discrepancy unlikely to be forthcoming any time soon, women need to take matters into their own hands.
In the situation where female workers are taking maternity leave or even breaks from careers, they should consider trying to contribute to a pension while off work or get a partner to contribute on their behalf. Anyone not working can still put in up to £2,880 each year. If someone is on paid maternity leave, ensuring they continue to pay in to a workplace pension is essential too.
Other potential measures to consider include increasing workplace pension contributions, deferring State Pension payments as long as possible and getting started with saving at as early an age as feasible.
Other than that, the best solution for women’s wealth is to have it working as hard as possible. This means making sure wealth is kept in a savings vehicle which will enable it to grow over time and ensuring any investment portfolios are structured for the best long-term outcomes.
Retirement planning: the key to being well-prepared for your golden years
Planning for your own retirement is a tricky topic. There are many variables to consider, and each individual has a specific set of circumstances and goals to achieve.
But there are a few key areas of planning for your golden years that can help you to have clear in your mind what needs to be done, and how you can aim to achieve your ambitions.
Here are four key areas to consider.
- Time horizon
Thinking about when you would like to retire is perhaps the most fundamental consideration when planning for retirement. Essentially, every decision you make depends on when you actually plan to stop working.
There are a lot of variables to it as well. Retirement is not the straightforward end day and handshake it once was. Evermore frequently people decide to go on what is called a ‘glide path’ to retirement, reducing hours or days in the office until eventually stopping completely.
You’ll need to consider your age now, and how old you’ll want to be when you retire. The younger you are and the further away your retirement date, the more time you’ll have to save and invest to grow that wealth.
If you’re happy working until an older age other considerations such as State Pension entitlement become relevant, as you’ll likely have access to it from age 67 (or later depending on your current age).
- Risk appetite
Once you have set your goals for retirement age – or glidepath to retirement – you’ll want to consider how you’ll get there. There’s a good chance you’re already building wealth through a variety of resources such as property, pensions and ISAs.
Depending on your time horizon you will need to accept certain levels of risk within your portfolio in order to reach those goals.
While being able to save set amounts is key, the compounding effect of growth and regular contributions will have the biggest impact on how your retirement funds grow. Ultimately it is ok to be more conservative with your tolerance for risk, but that may have an impact on the point at which your wealth reaches a size at which you feel comfortable enough to retire.
- Spending needs
You also need to estimate how much you’re likely to spend in retirement. Again this is very subjective, as each individual has a different idea of what their golden years will look like. For some it looks like world cruises, nice cars or even moving to somewhere sunnier. For others it is staying at home, helping with the grandkids and pottering in the garden.
Either choice – or anything in between – is totally fine. But both carry very different kinds of cost implications.
On top of that, age and longevity is something important to consider. Although not a hard and fast rule, retirement spending is often ‘U’ shaped, if plotted on a graph. At the beginning of retirement people tend to enjoy some of the good things, going on trips or spending some pension cash on home improvements.
Then as time goes on many settle into a rhythm that is generally lower cost (the bottom of the U). Finally, as people enter advanced ages costs such as help around the home (gardeners, cleaners etc) and even care costs, start to mount up.
All this is to say it is hard to establish what an ‘average’ income should look like for any individual. With these different costs in mind it is important then to think realistically about what you’ll need, and how long you’ll be able to sustain it for.
Our financial advisers can help you create a financial life plan ’, which can be a great way to properly visualise how this might work.
- Estate and tax planning
Finally, a really important consideration is how all of this is structured. As mentioned before we’re given access to a variety of wealth building tools such as pensions, ISAs or property.
In the first instance it is essential to plan how much of your money goes where to make it as tax efficient as possible. Then you’ll need to think about the tax implications of this wealth once you’re gone – and how to make that process as tax efficient and simple for your loved ones as possible.
With the inherent complexity of these issues though, it pays to have the help of a qualified financial adviser to plan for the best outcomes possible.
Treasury drops Capital Gains Tax and Inheritance Tax reform plans – here’s what you need to know
The government has ditched plans to reform and possibly hike Capital Gains Tax (CGT) and Inheritance Tax (IHT), in a move that would have likely hit wealthier households.
In its update on the function of the Office of Tax Simplification (OTS), published at the end of November, the Treasury appears to have quietly scrapped mooted changes to both CGT and IHT.
The OTS initially proposed changes to IHT that would have seen the tax radically simplified. Currently, the system for taxing inheritance relies on a series of exceptions, allowances and other rules that make it difficult for families to negotiate.
It has also been criticised for the increasing number of families liable to the duty every year since its creation. Of CGT, the OTS suggested aligning the allowances with income tax, making it less attractive a way for many to take earnings.
Current rates of 10% for basic rate and 20% for higher and additional rates would have been moved to align with 20%, 40% and 45% rates of income tax respectively. The first £12,300 of capital gains earnings each year is currently tax-free.
Instead, the government accepted some minor changes to CGT rules, including the amount of time divorcing couples are allowed to transfer assets between each other before becoming liable for CGT.
Married couples and civil partners are able to transfer assets between each other without incurring any CGT liability. But for divorced couples this perk expires at the end of the tax year in which they divorce. This time limit is set to be extended.
What now for CGT and IHT?
The decision by the Treasury suggests the reform of CGT and IHT is dead in the water – for now at least. But that is not to say that the taxes might not come in line for reform in the future.
In the Treasury’s response to the OTS, financial secretary to the Treasury Lucy Frazer wrote: “These reforms would involve a number of wider policy trade-offs and so careful thought must be given to the impact that they would have on taxpayers, as well as any additional administrative burden on HMRC.
“The government will continue to keep the tax system under constant review to ensure it is simple and efficient. Your report is a valuable contribution to that process.”
Indeed, according to an article in The Times newspaper, Rishi Sunak is planning to make sweeping changes to taxes ahead of the next General Election.
According to the report, part of his plans include increasing the threshold for IHT. This would have the impact of making many less families liable to the tax and would likely be a popular measure among Conservative voters.
The World In A Week - Are we in for a wild ride?
Written by Richard Warne.
It was a real mixed bag last week in terms of returns within the equity markets with the MSCI All Country World Index down -0.6%, and the S&P 500 in the US down -1.1% in Sterling terms. It was really pleasing that it was not a sea of red across the board, with MSCI Emerging Markets +1.7% and the FTSE All Share Index +0.2% in Sterling terms, while the worst performing region was MSCI Europe Ex-UK with the region down -1.4%. This worked fantastically in terms of our tactical equity positioning, as we are overweight in Emerging Markets and the UK and underweight in the US & Europe ex UK.
Looking back over the last week there has been a barrage of headlines in the media in regard to food price inflation “Italian’s face pasta price increase of almost 40%”, then “Empty shelves”, “Off the menu”, “Flight curbs”, “Raising cane”, “Winter winner”, “Soaring butter”, “Getting hit” & “Peak fertiliser” are just a few to catch our attention. So, we have shortages of fried chicken in Japan, dairy prices spiking in the US, swine flu killing the pork market in parts of Europe, supply chain chaos in India impacting sugar cane prices, flight curbs in Hong Kong disrupting importation of goods. Higher fertiliser prices, difficulty recruiting labour, rising transportation costs and materially higher energy costs. We have talked about inflation in previous issues, and it certainly appears to be perforating through many areas – one suspects it will remain high on the agenda as we move through 2022. The jury is out on if we are getting close to “peak” inflation, with markets pricing in four possible rate hikes for 2022, and a balance sheet runoff that highlights just how different these tighter financial conditions are compared to just a few months ago.
Markets have had a wild start to the year. The news flow, volatility and macro events have come thick and fast, sending rates higher as the US 10 year Treasury yield ended the week at 1.78%, and the Nasdaq 100 was down for a third straight week. If this start is anything to go by, it’s fair to say this could be a challenging year. Valuations, fundamentals, the ongoing pandemic, tightening Fed cycle and increased political tensions are the backdrop for investors to navigate. This all sounds bearish, and we all should be acutely aware of the risks, but if markets don’t necessarily grind higher as they did through last year, then it could be an environment where positioning and stock picking can add real value to portfolios.
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 17th January 2022.
© 2022 YOU Asset Management. All rights reserved.