The World In A Week - Will The Year End In Tiers?
A fresh round of vaccine optimism underpinned another strong week for global equities with benchmarks hitting fresh new highs, including the Dow Jones Industrial Average crossing the 30,000 points threshold. The UK has secured another 7 million doses of the Moderna vaccine, which takes the total to 357 million doses of vaccines across 7 different providers. This is the equivalent of providing enough vaccine for 3.5 million people.
As the UK is set to phase out of its month-long lockdown, new tiers have been established which see much of the UK either remain or fall into tighter restrictions as we head into the festive period. Most of the North has been placed in tier three with London being in tier two.
Meanwhile, Chancellor Rishi Sunak presented the country’s latest spending forecasts with underlying debt set to rise to 109% of gross domestic product (GDP). The net debt as a percentage of GDP of the UK government was 83.9% in January 2020; however, given the public outcry for business loan support and the furlough scheme, this value has peaked to 100.8%. Sunak foresees a rise in the unemployment rate to 7.5% and a forecasted yearly GDP growth of -11.3% for 2020. In 2008, the unemployment rate spiked to 8% of the working population and currently sits at 4.8%. This figure is masked by the furlough scheme that came into effect in March, which has supported workers’ incomes as business functionality grinded to a halt.
Sunak also suggested that house prices would fall in 2021 and 2022 as income support schemes and the stamp duty holiday would be pared back. Housing activity has surged in recent months as buyers seek to profit from the stamp duty holiday which is set to finish at the end of March 2021. The average asking price has increased by 5.5% compared to a year ago with the number of sales rising by 70%. This has been fuelled by a greater savings rate as a large proportion of the workforce has shifted to working from home, benefiting financially from reduced commuting costs. Inner London house prices fell per the House Price Index data, however outer London prices grew. Pre-pandemic, a house could be purchased using a 5% deposit. However, this has surged to at least 10% as mortgage lenders are wanting more assurances, given the surge in demand and inherent risk.
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 30th November 2020.
The World In A Week - Vaccine Variety
Last week was a broadly positive environment, which continued the buoyant mood of the markets over the course of November to date. Global Equities, as measured by MSCI All Country World Index (ACWI) rose +0.4% in local terms, but a strengthening Pound Sterling meant this was marginally negative for GBP investors. Riskier forms of Fixed Income continued to put in a good performance, with High Yield Bonds returning +0.6% over the week.
November has been a remarkable month in that we have seen the investment trends of the last year reverse violently. This has been driven by the announcement on the 9th of November of the efficacy of the Pfizer vaccine against COVID-19 and has been sustained by subsequent successful vaccine announcements since then – notably the Oxford/ AstraZeneca vaccine results announced just this morning.
The market impact of these news developments and their implications for a return to economic and social normality have been remarkable. Value equities have strongly outperformed Growth equities, almost doubling their return for the month-to-date. Growth equities, spurred by expensive tech names and those that benefit from work-from-home, have vastly outperformed more economically sensitive Value names which tend to be comprised of Banks, Materials and Industrial companies. Similarly, we observed strong outperformance of UK and European markets vs their US, Japanese and Emerging Market equivalents which had previously outperformed.
In Fixed Income markets we saw a strong rise in interest rates (albeit from very low levels) and a pivot from safe government bonds to riskier high yield and emerging market debt. This was coupled with a weakening of the US Dollar, which has been quite strong.
We think it is reasonably likely that these trends will continue, but challenges remain in the short term. Cases of COVID-19 are rising quickly in the US, and this could serve to dampen sentiment as we come into the year end. What is now clear, however, is that the world has a variety of vaccines to choose from, which are effective at a variety of temperatures and formats. The market likely has quite a bit to go when it comes to fully pricing in a World inoculated against COVID-19.
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 23rd November 2020.
The World In A Week - The Cummings And Goings Of UK Politics
Hot off the back of Biden’s election victory, Pfizer and BioNTech announced that phase III trials for a vaccine against COVID-19 were 90% effective and, unlike previous trials, there also appears to be no real secondary effects. No vaccine has gone from the drawing board to being proven highly effective in such a short period of time and Pfizer and BioNTech expect to have enough safety data by the third week of November to approach the Food and Drug Administration (FDA) for emergency approval. If the FDA approve the vaccine, production is poised to begin as early as December, with a limited number of people expected to receive the vaccine by the end of 2020.
News of a potential vaccine was much needed, and markets responded very strongly with unloved sectors such as financials, energy and airlines soaring. This news was particularly positive for the UK equity market which, after being in the doldrums for much of 2020, led other equity markets; the FTSE All-Share returned more than +7% at last week’s close. Economic data for the UK also showed signs of recovery, despite being down 9.6% on the same quarter last year and GDP increased by 15.5% in Q3 ’20 as lockdown measures eased.
In other news, Dominic Cummings, Chief Strategist, was ejected by Boris Johnson and left No. 10 for the last time on Friday; this follows the earlier resignation of Lee Cain, Director of Communications, an ally of Cummings. Johnson was left with little option but to fire Cummings following growing pressure from MPs and evidence that the pair were briefing against the Prime Minister. The departure of Cummings will provide a much needed ‘reset’ for the Conservative party, with Johnson focusing on rebuilding his relationships with his MP’s, fighting the COVID-19 pandemic and Brexit negotiations.
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 16th November 2020.
Revealed: The Wellbeing And Emotional Impact Of Financial Advice
It should come as no surprise that we believe financial advice adds real value to the lives of our clients. While the financial benefits of advice are often discussed, the value it can add in terms of wellbeing is sometimes overlooked but is just as valuable.
The improvements to wellbeing that financial advice can offer can be difficult to assess. After all, every client will have differing goals, priorities and challenges. New research from Royal London has measured how professional financial advice can support emotional wellbeing.
Financial advice helps people feel in control and confident
The research found that the vast majority of the 17 million people who seek financial advice in the UK benefit from a positive experience. Overall, it helps people to feel confident, in control of their finances and gain peace of mind. Clients rated three key areas that highlight the positive impact of a relationship with a financial adviser:
- Quality of advice and expertise (82%)
- Communication style (81%)
- Trustworthiness (81%)
One of the important ways the report found advice is adding value through understanding financial matters.
When searching for financial products or information, you’re often confronted with jargon and complex terms. Even when you have a good handle on your financial situation this can be daunting, making it difficult to know what’s right for you. Besides, products, legislation and regulation frequently change and keeping up to date can be challenging if it’s not part of your day-to-day role.
Those receiving advice feel up to three times more confident in their understanding of products and their finances than those who haven’t worked with an adviser. Some 23% of non-advised individuals said they would not know where to start when asked about life insurance, compared to just 7% of those taking financial advice.
The financial decisions you make have a long-lasting impact and it’s important to understand products and your options. We’re here to explain to clients how different products work, as well as outlining the pros and cons with their situation in mind. It means clients can have confidence in not only their plans but also their financial knowledge.
The benefits of preparing for the unexpected
When people first approach a financial adviser it’s often to seek advice on something they know is going to happen or would like to happen. For example, planning for retirement or setting up an investment portfolio to create an income.
However, an important part of creating a financial plan is to look beyond this to plan for the long-term, including the unexpected. As a result, financial planning can improve financial resilience and ensure you’re better prepared for an unexpected shock, such as redundancy or illness.
It’s a step that boosts emotional wellbeing. Some 63% of clients said they felt secure and stable, as opposed to 48% who did not receive advice. The report highlighted how it can have an impact on emotions too. Four in ten (41%) of those that do not take financial advice said they feel anxious about their household finances, compared to three in ten (32%) who receive advice.
Protection products in particular improved financial and emotional wellbeing. These insurance products pay out under certain circumstances and should align with your priorities and concerns. For instance, life insurance can provide peace of mind that your family will be financially secure should you pass away, while income protection can provide an income if you’re unable to work due to illness. Clients who received advice on protection said it helped them feel more prepared and less worried about the future.
Unsurprisingly, the COVID-19 pandemic has reinforced how planning for the unexpected can be valuable. With millions of employees seeing their income fall and facing redundancy, 35% said they felt anxious about their financial situation. This has led to 65% saying they’ve come to appreciate the value of being more prepared for life-shocks that may be outside of their control.
On average, financial advice clients are £47,000 better off
While the emotional benefits of advice are important, the financial benefits are too. After all, financial freedom can help you to achieve goals and feel more confident about your future.
The report also covers previous research conducted by the International Longevity Centre UK. It found that customers who took financial advice were on average £47,000 better off. Those who fostered a long-term relationship with their adviser were up to 50% better off than those who received one-off financial advice.
Tom Dunbar, Intermediary Distributions Director at Royal London, said: “We have long suspected that the benefits of advice go far beyond financial gains alone and our research confirms that individuals who have received advice are more likely to feel confident about the future, and less likely to feel anxious or worried.
“It’s easy to see why clients turned to financial advisers when the pandemic struck. But advice is most powerful – and most rewarding – when it goes beyond a one-off meeting. An ongoing relationship with an adviser amplifies the emotional, as well as the financial, benefits.”
Please contact us if you’d like to arrange a meeting to discuss how financial advice can help you and improve your wellbeing.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
The World In A Week - Biden His Time
It looks like it is finally over, as it would appear that the Democrats, with Joe Biden, have taken control of the US Presidency. The control of the Senate, however, is still in question, as it looks as though the Republicans may have retained control. The blue wave that was predicted by the polls may not have come in, but it is clear the US is extremely politically polarised.
What does that mean for markets? We would consider Trump’s strategy of continued court challenges to have little or no effect on stock markets. Immediate concerns though will be the content of the next fiscal stimulus package. With the Democrats controlling Congress and the Republicans controlling the Senate, how diluted will the economic rescue package be? Longer- term concerns will be the rising polarisation and prejudice, which could risk damaging US growth and hamper plans on achieving a sustainable fiscal position. Monetary stimulus was also delayed, with the US Federal Reserve deciding to maintain course against a background of political uncertainty.
In the UK though, monetary stimulus was increased. Against the backdrop of the second national lockdown, the Bank of England’s Monetary Policy Committee met to agree to keep interest rates on hold at the historically low level of 0.1%, and not stray into negative territory. However, it did decide to increase its quantitative easing programme by a further £150 billion, to provide stimulus during this second round of lockdowns. This was joined by the Chancellor, Rishi Sunak, announcing that the government’s furlough scheme would be extended beyond the lockdown period to March 2021.
With the UK facing rising COVID-19 cases initiating a second period of lockdown, and an uncertain Brexit, it was essential that both monetary and fiscal stimulus responses were strong and co-ordinated.
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 9th November 2020.
The World In A Week - The Final Countdown
The weekend saw Boris Johnson announce a four-week national lockdown to try and curb the number of hospital admissions and avoid the NHS becoming overwhelmed. The timing of the national lockdown has been questionable since the UK has been a late mover, with most other major European countries already in a lockdown phase again. All non-essential shops and leisure activities will be forced to close but the decision to keep schools, colleges, and universities open has faced significant backlash, although closure would cause long-term harm for children and students’ education. The Cabinet Office minister, Michael Gove admitted that the national lockdown could be extended beyond its four-week period if the rate of transmission does not fall sufficiently.
Since this is the second national lockdown, we already know what to expect and what is to come, so the transition is expected to be much smoother. The job retention scheme has been extended during this month-long lockdown with employees able to receive 80% of their wage based on their current operating hours, however businesses are still facing rent and rates pressures.
Elsewhere, the US Presidential Election is entering its final stage, as Americans vote tomorrow. According to the latest polls, Democratic candidate, Joe Biden is in the driving seat over the incumbent Donald Trump. Ninety-five million Americans have already voted via post, which equates to 70% of the voting turnout in 2016, hence a much higher voting turnout is expected for this election and polls might not be as accurate. This has been the most expensive presidential election on record, with spending already at $14 billion.
The ongoing Brexit negotiations also enter their terminal phase with the rights to Britain’s fishing waters still in dispute. Chief UK negotiator, David Frost has been reluctant to concede the UK fishing territory since this is a significant source of income for domestic fisheries and the UK are justified to demand full jurisdiction on fishing in British waters despite EU pressures.
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 2nd November 2020.
The World In A Week - Wave Motion
Markets had a little bit of a wobble last week, with the MSCI All Country World Index of global equities falling by -1.1% in Sterling terms. The best performing markets were in the Emerging Markets and Japan, which posted small positive gains. This was, however, offset by falls in the US and Continental Europe. Within Fixed Income, High Yield Bonds managed to rally despite the wider risk-off mood, while Global Treasuries and Investment Grade Bonds posted losses.
In the forthcoming US Presidential Election, polls have been pointing towards a “Blue Wave” whereby the Democrats would take both the presidency and both houses of Congress. Markets believe this would result in larger stimulus spending, higher inflation and higher interest rates. This has seen a recent pivot towards parts of the market that have been unloved for quite some time, namely Value stocks, Small Cap stocks and away from US Treasury Bonds. The persistent outperformance of US Large Cap Tech stocks may end following a Biden victory, as the Democrats are likely to call for increased taxation and regulation.
The other wave that markets are currently preoccupied with is, of course, the second wave of the Coronavirus pandemic which is sweeping Europe. France is facing up to 100,000 cases per day, and Italy and Spain announced sweeping additional restrictions on their populations on Sunday, in an attempt to get on top of the virus’s spread. These developments, among many others, affirm our belief that Continental European shares are relatively unattractive versus those in Japan and the Emerging Markets.
In better news, there have been positive developments in both the Oxford/AstraZeneca vaccine trial (which produced a robust immune response in elderly people) and the Pfizer vaccine (which is progressing for emergency approval from the FDA in the US). These developments could have big market impacts, and we feel we are well positioned for such opportunities. When navigating across a sea of choppy waves, investors would do well to look to the far-off horizon for stability… and try not to get seasick.
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 26th October 2020.
The World In A Week - A Tiered Wall Of Worry
COVID-19 weighed on sentiment, with cases globally increasing throughout the week. In Europe, figures jumped by more than 625,000, which meant new restrictions were implemented in the UK, France, Germany, Spain and the Netherlands. A worrying trend was also observed in Germany and Italy, who had previously managed to avoid a second wave of contaminations, saw an acceleration in such cases. The US also did not go unscathed, figures spiked to their highest level since July, with a recording of 350,000 in weekly cases.
As a result of a jump in cases, we expect fourth quarter growth will be subdued. Despite this, the International Monetary Fund (IMF) has revised its global growth forecasts higher for 2020, noting a better-than-expected rebound in post-lockdown activity. However, while growth has been revised upwards for 2020, the IMF has cut their outlook for 2021 citing the impact of persistent and reinforced social distancing measures.
Brexit negotiations continue to show little sign of progress, as neither the UK nor the EU is prepared to compromise. Planned discussions for the week ahead have been downgraded to a phone call, as No. 10 felt there was ‘no point’ in continuing if the EU is not prepared to discuss detailed legal text of a partnership. Fishing rights and state help for businesses is the latest bone of contention and has caused negotiations to falter. Moody’s has downgraded the UK’s credit status on the back of falling economic strength, as a direct result of the coronavirus pandemic and uncertainty over Brexit. We expect Brexit negotiations to feature heavily in the week ahead.
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 19th October 2020.
The World In A Week - Tackling The Inequality
Much of the talk in recent days has been about a proposed three-tier lockdown system which should provide greater clarity and outline the risk level of various regions. The Chancellor, Rishi Sunak, will also present his proposals for a regional job protection scheme to curb the economic impact of the virus. We have seen small businesses shut, then reopen their doors and now may be forced to close again, a truly devastating blow to the economic recovery.
Last week, the FTSE All Share was up 2.35% on the back of the encouraging economic news that the UK grew by 2.1% during August. This was below market expectations since August featured the “Eat out to help out” scheme which was embraced countrywide.
It was an encouraging week across the remaining equity markets, as the recovery continues for much of the global economies. We have seen a very fast recovery in the US with significant fiscal stimulus being the major catalyst for its modest performance. However, in much less developed countries, the economic impact has been much more significant, and the recovery is expected to take much longer. The IMF and the World Bank are set to meet in the coming week, with the major discussion being the large inequality in economic recovery seen globally.
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 12th October 2020.
The World In A Week - Focus On Floating
Last week was ultimately centred around the US Presidential Election. It started with an article on the lack of tax that President Donald Trump has paid and finished with the Commander-in-Chief of the US Armed Forces testing positive for COVID-19.
In the middle of this we had our first televised debate between Donald Trump and Joe Biden. While the debates are important to see how the candidates handle each other, it is the spin put on afterwards that really matters. Not to committed voters though, as they will not change their views; the spin is purely directed at the undecided voters.
Voters in the US are extremely polarised; you are either staunch Democrat or staunch Republican. Therefore, the debates and stories are targeted towards the floating voters, which is estimated to be around 10% of the voting population. So, do debates and stories matter? It does when the most recent US presidential elections were won on such narrow margins, so albeit small the floating vote is still large enough to affect the outcome of the race to the White House.
With the vote less than a month away, both candidates will be looking to gain as much airtime as possible. This is now complicated with President Trump having contracted COVID-19, putting future televised debates in jeopardy.
It is not just the President who has tested positive; many Republican Senators have also caught COVID-19, meaning the Senate will not be able to vote on any proposals for the next two weeks. This will delay the proposed fiscal stimulus package, which needs to be voted upon in the Senate, and could result in fear creeping back into the economy.