The World In A Week - A sparkle of hope
Written by Ilaria Massei.
Last Friday, we saw a positive UK GDP reading with the UK economy growing by 0.1% as services activity strengthened. Moreover, the Office for National Statistics data published last Friday showed that a recent fall in gas prices helped household finances and boosted savings. This data is certainly encouraging as it could suggest that the UK has avoided a recession (defined as two consecutive quarters of negative GDP growth). However, this might also suggest that the Bank of England will be forced to raise interest rates again, given that the positive GDP could lead to inflationary pressure. On a separate note, Rishi Sunak and his government rejected the request coming from businesses to reopen immigration. This is to especially help the hospitality sector, which is suffering from labour shortages, and is arguably holding back the UK economy from growing. The Prime Minister will re-address this and his plan will be one of the main points of the Budget in March.
In Japan, the Yen and the long-term Japanese government bond yields surged, raising uncertainties over the Bank of Japan’s policy board meeting this week. The Bank of Japan reviewed its long end yield curve policy measures by widening its 10y JGB yield target to +/- 0.5% (previously +/- 0.25%) in December. This measure was supposed to restore order in the Japanese bond market, distorted by the central bank’s ultra-loosing policy. However, the measure increased volatility, suggesting that the Bank of Japan might need to provide forward guidance to the market.
Elsewhere, Emerging Market stocks have seen a great rebound with the MSCI Emerging Market Index up +2.9% last week in local currency terms. This is the result of two forces both influencing the balance of trade in Emerging Markets, in a positive way. On one hand, we have seen signals of easing inflationary pressures globally that might suggest that the Federal Reserve will slow its interest rate rises. Conversely, China since lifting its Zero-COVID policy restrictions, is suggesting a recovery in the economy this year. An increase in activity in China will likely lead to a rally in Emerging Markets as Emerging Market countries are beneficiaries of higher demand for commodities and other services that serve the Chinese population.
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 January 2023.
© 2023 YOU Asset Management. All rights reserved.
The World In A Week - The smell of stagflation
Written by Millan Chauhan.
We saw some promising news on the inflation front as the Eurozone’s consumer prices rose by 9.2% year-on-year in December 2022 which was down from 10.1% in November. The reading was well below preliminary estimates of 9.7% and was the lowest point for four months. This was attributed mainly to a short-term decline in energy prices which still remain elevated. However, the core inflation print (which excludes energy, food, alcohol, and tobacco prices) increased slightly to 5.2% in December from 5.0% in November on a year-on-year basis which remains above the European Central Bank’s target of 2%. This could be a sign that inflation has started to peak in the region, European markets reacted well to signs of inflation slowing with the MSCI Europe ex-UK Index closing +4.1% last week.
In the US, the Institute for Supply Management (ISM) Services PMI print came in at 49.6 for December which was lower than initial forecasts of 55.0 and which compared to 56.5 for November. This was the first contraction in the services sector data since the height of the COVID-19 pandemic in May 2020. The report combines monthly question responses from over 370 purchasing and supply executives in the US. A reading below 50 generally indicates that the economy is contracting.
Finally, we saw further evidence of weakness in the UK Housing market as house prices fell -1.5% on a month-on-month basis in December which brought the annual house price increase to 2.0% on a year-on-year basis. Households are currently grappling with significantly higher mortgage rates following a series of interest rate hikes by the Bank of England. Households are having to contend with a higher variable rate or lock in a higher fixed rate as they re-finance their mortgage, both scenarios result in higher monthly payments, which many have not been accustomed to.
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 January 2023.
© 2023 YOU Asset Management. All rights reserved.
The World In A Week - The Santa Claus rally gets stuck up the chimney
Written by Cormac Nevin.
The last month of 2022 witnessed weak returns across asset classes, book-ending what has been one of the most challenging years for investors in decades. The MSCI All Country World Index was down -4.9% for the month of December in GBP terms, while the Bloomberg Global Aggregate Index of high quality global bonds was also down -1.3% in GBP Hedged terms.
There were a number of contributing factors to the weak market performance in the final weeks of 2022. US jobs data on the 15th and 22nd of December came in stronger than anticipated, which were followed by stronger consumer confidence data released on the 21st. The market likely interpreted this as a green light for the Federal Reserve to continue the policy of monetary tightening to combat inflation which has terrified markets all year.
The month also saw a continued underperformance of growth equities vs their value counterparts, with the MSCI All Country World Growth Index down -6.5% vs -3.3% for the value-biased equivalent index (both in GBP terms). Many of the growth names which fared so well in 2020 and 2021 continued to come back down to earth.
As we begin a new year, things are looking arguably rosier for investors. Inflation is continuing to fall in the US at a faster rate than anticipated. It is also likely close to peaking in the UK and Europe (baring any further escalation in geopolitical tensions etc). Asset prices across the board are at some of the most attractive levels they have been at in years, with even high quality government bonds offering decent yields. While the last year has been painful, it presents opportunities and the ability for long-term investors to lock in future gains.
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 3rd January 2023.
© 2023 YOU Asset Management. All rights reserved.
Year ahead for personal finance: what will happen to your wealth in 2023?
The past 12 months have been a particularly turbulent time for our finances. Soaring inflation and consequent rising interest rates have been the theme of 2022. But is this set to continue?
Inflation has affected nearly every aspect of our lives. From how much we pay for groceries, to heating our homes and our investment portfolios – nothing is left untouched in financial terms.
But what can we expect in the next 12 months? No two years are ever alike so the challenges ahead will be different from those we have had to face in 2022.
Here are some of the major themes to be aware of.
Prices
Inflation was the watchword of 2022, and this doesn’t look like it is going to get much better very quickly.
In global terms the outlook is beginning to vary, with signs that price rises are beginning to slow in regions such as the US. But in Europe it is unlikely to get much better quickly.
This is because the inflation crisis in Europe and the UK is much more closely associated with energy prices, than in the US where inflation is predominantly a hangover from the COVID-19 pandemic.
Because of the war in Ukraine, energy prices are going to stay higher for longer thanks to limitations on the supply from Russia, on which many European countries had become all too reliant upon in the past few years.
High energy prices are pernicious for the economy because they impact just about everything else in our lives – from powering and heating our homes to the input costs of making and transporting the food we eat, or just about anything else – it all requires energy. If that energy costs more, so will everything that relies on it.
In terms of practical forecasts, the Bank of England sees the consumer price index (CPI) inflation beginning to fall slowly from early next year – but that it will take around two more years to reach its target level of 2%.
So, expect pressure to begin easing, but to persist for some time to come.
Interest rates
This forecast will have direct implications for the level at which the Bank of England sets the base rate. The Bank has hiked the rate hard in the past few months to try and get inflation under control.
However, now it sees inflation beginning to slow its progress, it’s likely that its rate hiking path will also start to ease, as it waits to see the effect on the economy. The Bank has warned that it thinks investment markets are pricing in too many hikes, but those expectations have yet to come down.
The current expectation is that the Bank of England will reach its ‘terminal rate,’ i.e. the high point of interest rates in the cycle of rises, at around 4.25% – it is currently 3%. So, expect more rises to come, with more expensive credit, mortgages, and better savings rates.
Economy
Interest rates and inflation have a major impact on the health of the economy. The Bank of England has already predicted that the UK economy is in a recession, but at the time of writing this is unconfirmed.
An official definition of recession is two consecutive quarters of negative economic growth. The UK did contract by 0.2% between July and September, according to the Office for National Statistics.
If the economy does continue to contract, inflation could come down more quickly than expected as people stop spending to protect their core assets. Unemployment could also begin to rise, something we’ve yet to see much sign of despite tough economic conditions already prevailing.
The Bank of England ultimately predicts that we’ll go through one of the longest economic recessions on record. But the good news is that it expects this recession to be relatively shallow compared to others, with GDP ultimately not falling more than 2.5% in its projections. By contrast the Great Financial Crisis saw the UK economy fall by around 6%.
Taxation
The health of the economy has a direct impact on how the Government plans and organises its economic plans and taxation measures.
As we’ve written elsewhere this month, the Government has hiked taxes and cut allowances already to help it balance its budget.
But if economic conditions worsen then the Government might feel compelled to tighten tax rules further in March to bring in more money.
There has been much debate about whether or not raising taxes as the economy contracts is a good idea, but the reality is that the Government has to pay its bills or else cut services. With its debts getting more expensive thanks to rising rates, it faces little else in the way of choices.
Housing
The property market is one of the most high-profile casualties of rising rates, and has been further impacted by the financial and bond market implications for mortgages caused by the disastrous mini budget in September.
According to Halifax Bank, house prices fell 2.3% in November, the biggest monthly drop since the financial crisis in 2008.
Unfortunately for homeowners looking to sell in the next year, this situation is unlikely to improve significantly. That being said, mortgage rates have improved somewhat since the worst effects of the mini budget eased, making it slightly easier for prospective homebuyers.
But the overall economic issues, inflation and interest rate rises combined could depress prices for the foreseeable future, after many years of explosive growth.
Investing
It has certainly been a tough year for investments, from equities to bonds – nothing has gone unaffected by rising rates.
While it is impossible to predict where investment markets will go, what is consistently true is that there will always be good opportunities available, especially for those that use carefully planned wealth management to achieve their long-term goals.
It’s important to remember that building wealth through investing is a long-term pursuit, so the short-term impacts of market movements have to be managed with a bigger-picture perspective in mind.
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 13th December 2022.
Autumn Statement 2022: everything you need to know for your money
After a controversial mini budget in September, new Chancellor Jeremy Hunt announced a series of measures in his Autumn Statement on 17 November.
The update contained a raft of measures that will affect households – some quickly and directly and others obliquely, affecting your wallet over time.
Here is a breakdown of everything you need to know that is changing.
Income tax – the thresholds at which we pay income tax have been frozen for longer. This means the personal allowance will stay at £12,571 and the higher rate of 40% which kicks in at £50,271 will remain until 2028 at least. The 45% additional rate has been lowered from £150,000 to £125,140. This will take effect in the new tax year on 6 April 2023.
Dividend allowance – the dividend allowance will be slashed by 50% – from £2,000 to £1,000 from the new 2023/24 tax year. It will then be cut even further to just £500 in April 2024.
Capital gains annual exemption – the capital gains tax (CGT) annual exemption is being more than halved from £12,300 to £6,000 from the new tax year. This will be halved again in April 2024 to just £3,000.
National Insurance – the current thresholds, like income tax, will stay at the same level until 2028.
Inheritance tax – the thresholds for inheritance tax (IHT) will stay the same until April 2028. The nil-rate band for IHT is £325,000 with an additional residence nil-rate of £175,000. The taper for the residence nil-rate band kicks in at £2 million.
Stamp Duty – Stamp Duty Land Tax (SDLT), which was cut in the mini budget in September, will retain the new nil-rate threshold of £250,000 for normal buyers and £425,000 for first-time buyers. But this will only remain in place until March 2025 at which point the thresholds will revert to their previous levels of £125,000 and £300,000 respectively.
How will the changes affect your wealth?
As mentioned above the changes to financial rules by the Government will have some quick effects on your money, while others will take more time to be felt.
For instance – the dividend allowance and CGT exemption cuts will be felt quickly, and measures will need to be considered to mitigate the impact. With little time left to benefit from the higher allowances, anyone with tax-free allowances in pensions or ISAs should consider using those up if possible.
The changes to income tax – or lack of changes – have a more oblique impact on your earnings. While there are no changes to the thresholds, this will mean that whenever you receive a pay or income increase you won’t feel as much benefit as you might have previously.
This is especially pernicious in a high-inflation environment as pay rises tend to be pushed higher to meet living costs. This just serves to send more money towards the Treasury, especially as people are tipped into higher tax bands.
Other moves – such as the sunsetting of the Stamp Duty Land Tax (SDLT) nil-rate band levels – have been criticised by experts who warn that setting an end-date for such measures in the future sets a target time for sellers and buyers which could cause chaos in the market.
What’s clear from these measures is that managing money and wealth isn’t getting easier, making financial advice more relevant than ever. Don’t hesitate to get in touch if you want to discuss your options.
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 13th December 2022.
Car finance rates rising: what’s the best way to pay for your next car?
Prospective car owners are finding that buying their next vehicle isn’t as straightforward as it once was, thanks to rising interest rates.
The economy has benefitted from over a decade of low rates, making car financing affordable for many. But those rates are now rising considerably, with the indication that the Bank of England isn’t going to stop hiking yet. With that in mind, buying a car with finance isn’t as good value as it used to be. But there are still some good options for prospective owners.
Here are some key ideas to consider when deciding on your next car.
PCPs
Personal contract purchases or PCPs have become a ubiquitous way to buy a new car in the past few years.
Typically, these kinds of deals mean that you pay lower monthly instalments than hire purchase or via personal loan, making it more affordable for families.
But the upshot of this is you never really own the car. At the end of the deal (typically around three years) you either:
- Pay the ‘balloon’ payment – a lump sum – and take full ownership of the car
- Return the car to the dealership and get a new PCP deal with a new car
- Return the car and walk away.
The trouble with option three is that, typically, the dealer will become a lot more officious about any scratches, dents, or mileage overuse and is likely to charge you fees. It’s in their interest to see you roll into a new finance deal.
As interest rates rise, credit on PCP deals is getting more expensive. This means opting for longer four-year contracts or facing higher monthly repayments. According to data from motoring group What Car, PCP costs have risen around 40% since 2019, reflecting a tight car market and rising interest rates.
Recent stats from automotive IT firm NTT Data UK&I suggest that the majority of people who have PCP contracts currently are now likely to try and refinance their current cars when their deal comes up rather than opt for a new PCP loan with a new car.
Hire purchase
Hire purchase is the more traditional route for anyone looking to buy a car and comes with less caveats. Once you’ve paid off the HP loan, the car is yours and there is nothing further to worry about.
But this means that monthly payments will generally be higher than for PCP. HP loans are also impacted by the rising bank rate, which means these deals are getting more expensive too.
Leasing
Leasing a car is different from PCP or HP because you never actually have the opportunity to own the vehicle. In effect, you are paying a monthly rental fee for a fixed period, after which you give back the car and walk away.
The benefit of leasing deals is that there is no credit calculation made on the car, so these kinds of deals aren’t directly affected by rising interest rates, according to Leasing.com.
That being said, the car market has experienced very unusual circumstances in the past 18 months thanks to supply chain shortages. This means new and used car prices have gone up, which in turn has made leasing more expensive.
Unsecured personal loan
An unsecured personal loan can be a good option when looking to buy a car, especially for those of us who don’t trust dealers to offer the best deal. Getting an unsecured personal loan will require you to shop around for the best deal available and make an application.
Once you’ve been successful and the loan has been given to you, you’re free to use that cash to buy a car. But like the other forms of credit, this market has also seen interest rates go up in the past few months.
There’s another caveat here that your credit rating needs to be in good shape in order to secure a good deal. MoneySavingExpert has a great loan calculator that can help you see which deals you might be eligible for.
It’s also important to remember with these kinds of deals that the APR you see for the loan after a soft check might not be the one you actually get after making an official application. This is because loan companies only need to offer that rate to 51% of their customers in order to be able to advertise it.
If you do go down this route and find the APR you’re offered wasn’t what you expected, you’re under no obligation to accept it – just make sure you tell the provider you’re not interested in moving forward with the application. However, the hard search made on your credit report will appear, so making more applications could harm your credit score.
Buy outright/buy cheaper
Buying outright is perhaps the best way to go if you have the cash funds available, as it eliminates a lot of the variables mentioned above.
That being said, buying a new car is one of the worst ways to use your money in investment terms. According to The AA, new cars lose around 60% of their value (assuming an average mileage of around 10,000 miles a year) in the first three years out of the showroom, meaning the cash you’ve put into that vehicle is essentially gone forever.
There are however variables to this including condition, make and model, fuel type and other factors that will affect the price over time, with some holding up better than others.
With that in mind, lowering your expectations and going for a used car could be the soundest financial decision of all. Older cars that have some mileage on them tend to depreciate in value much more slowly, and in many cases these days you’ll find 4–5-year-old vehicles will have many of the bells and whistles you might expect in a brand new one.
It is also important to remember with cars that the cost isn’t just in the price of the vehicle. Running costs of fuel, insurance, maintenance and repairs all factor in to the ownership of a vehicle, so finding the right one that doesn’t keep you reaching for your wallet is key.
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 13th December 2022.
Christmas budgeting: 12 tips to save money during the holidays
Christmas is just days away, but there are still ways to save ahead of the holidays. It’s also a great time to think about next year too.
There’s no doubt that Christmas is an expensive time of year. From turkeys to crackers – gifts and travel, we spend a lot to be with our families and friends at this time of year and that puts pressure on everyone’s budgets.
With inflation rampant and energy bills getting higher as the weather gets colder, it pays to keep saving money at the front of our minds as we go through the holidays.
But it’s not just this year you should be preparing for – the best time to think about how to make Christmas 2023 more affordable is now!
Here are some ideas to help your money go a bit further.
Christmas 2022
- Set expectations
There is understandably a lot of pressure at Christmas to buy lots of gifts, get your loved ones the latest gadgets and generally to spend a lot of money. It has become a highly commercialised holiday.
But this year, more than ever, it’s important to set the right expectations. If you feel like buying lots of gifts for all your friends and loved ones is going to stretch you too far, it’s important to talk to them so they understand why you might want to go more low-key.
Good alternative solutions include Secret Santas, setting price limits for gifts and opting for ‘free’ gifts such as giving each other time together instead.
- Use cashback and vouchers
Cashback is an easily forgotten trick to save money when making purchases. Using websites such as Quidco and Topcashback can save you valuable pounds when buying big ticket items at a variety of high street retailers. It can also save money on the Christmas food shop.
There are no catches either, as the retailers are paying the cashback firms to bring them your business.
- Don’t overspend your salary
It’s quite common for salaried employees to get their pay early before Christmas. Employers do this as a perceived act of kindness to help people through the holidays.
But this act of kindness can come with a sting in the tail because it accidently lengthens the time in which you have to stretch one month’s pay to the end of January (depending on when you normally get paid).
If you do get your salary early this month, make sure you’re planning for those days in January long after Christmas is over.
- Make sure you’re getting a good deal
It’s easy to get sucked into the hype when retailers push big ‘sales’ to shift products. This becomes all the more true the closer Christmas comes and the more products they have unsold.
But these discounts aren’t always as they seem. Make sure you shop around for the best price on the product and use services such as Camelcamelcamel – which can tell you if products on major sites such as Amazon really are a good price.
- Look for second hand
With the cost-of-living crisis, the second-hand market for all sorts of products is looking pretty rosy. People are looking to raise a bit of extra cash for their stuff, and there are many great services to match sellers and buyers.
Services such as eBay and Facebook Marketplace are the go-to, but other upstart apps such as Depop and Vinted are soaring in popularity. Be prepared to haggle though, and don’t send any money without being 100% certain you’ll get the item. This is especially true on Facebook Marketplace, where there’s little buyer protection in place.
- Don’t overbuy
It’s easy to think you need reams and reams of food, drink, and other consumables over the holidays. Afterall, what is Christmas for but a bit of indulgence? It’s also easy to think that shops will be closed, so you need to stock up as much as possible.
But the truth is that most retailers are open again by Boxing Day, so not overbuying could save you some money overall. A quick trip to the supermarket to top up on the food and drink after Christmas could also yield some big discounts, as shops look to shift unsold items too.
- Buy at the right time
Similar to the above – buying in advance can be a counterproductive strategy. As we get closer to the holiday days, shops will put more items on discount as they look to clear shelves.
Just be careful though as this can be risky if things go out of stock completely. This is especially true this year with a turkey shortage on the cards. But, if you have a good selection of supermarkets in your local area, trawling through them can really do the trick.
- Do online comparisons
Another supermarket trick people often forget is to do a comparison on the prices of essential Christmas goods. As above, you can trawl around local shops looking for the best prices, but it’s possible to do all that from the comfort of your own living room.
Sites such as Mysupermarketcompare do a great job of showing what items are most keenly priced and where, so do your research and save!
- Have a potluck
Christmas dinner can be an onerous task if you’re the host. It costs time and money and burning the pigs in blankets will not help anyone’s stress levels!
Potlucks are a potential alternative idea for Christmas dinner. Popular in the US, especially around Thanksgiving, it involves all the guests at your big dinner doing one dish themselves. This relieves some of the cost (and stress!) of hosting.
Christmas 2023
- Christmas in January
Christmas in January?! It’s the best time to start preparing. With the holiday season, crackers that cost £30 could cost £3 as supermarkets offload everything that didn’t shift.
The same goes for things like decorations, toys, electronics and pretty much anything else. Save your money by buying in advance and you’ll be set for the next one before you know it.
- Fund your gifts with clutter
It’s a little late to be paying for gifts with things you sell this year, but this is a great strategy to cover costs for 2023. Having a clear-out of items you don’t use or want any more is a great way to raise some extra cash in any event, but that money can be put towards the next Christmas pot to alleviate the costs.
- Save a year in advance
One of the best long-term strategies for paying for the costs associated with Christmas is to start early. With interest rates at more than decade highs, savings rates haven’t looked so good in a while.
There are a number of ways to go about saving money for next year. If you have a lump sum, a 12-month savings account can generate a return of around 4.35% at the moment. If you want to save small amounts regularly, an interest-paying current account could be a great option too.
Christmas savings clubs are an option too but come with some risk attached to them – sometimes providers go bust, leaving families without money as these schemes are generally not protected in the same way as normal savings. They can also put limits on where you spend the money, making it quite inflexible.
Generally, then, it is better to go DIY and put the money into a saver that will give you a nice little return for something extra next year.
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 13th December 2022.
The World In A Week - House of Cards
Written by Millan Chauhan.
Last week, we saw the release of further economic data which included US Producer Price Inflation (PPI) which surprised to the upside, coming in at 7.4% on a year-on-year basis with expectations at 7.2%. The US market did not react well to this data release and, as markets had estimated, there was a much faster slowdown in inflation. This saw the S&P 500 Index close down -4.0% in GBP terms last week. Markets are now looking towards the next Federal Open Market Committee meeting which is set to take place on Tuesday and Wednesday of this week, where we will learn the Fed’s decision on how aggressively it will increase rates in the US. Since June 2022, the Federal Reserve has forcefully hiked up rates in an attempt to slow down inflation which has seen rates climb to 4.0%. The expectation is that the Fed will begin curbing these hikes with a 50 basis point increase expected on Wednesday.
In the UK, house prices have fallen for the third month in a row which is also the fastest pace at which they have fallen since the housing crash of 2008. This has been caused by buyers being put off by higher monthly mortgage payments which have surged following a string of interest rate rises by the Bank of England. Halifax announced that average house prices declined by -2.3% between October and November which is the highest monthly price drop for 14 years. The Bank of England is set to announce its interest rate decision on Thursday and expectations are that we are likely to see a 50 basis point increase to move interest rates to 3.5%.
We will be taking a break from penning The World In A Week and will return on 3rd January 2023. We wish you all a Merry Christmas and a Happy New Year.
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 December 2022.
© 2022 YOU Asset Management. All rights reserved.
The World In A Week - They think it’s all over
Written by Chris Ayton.
Global equity markets were up in local currency terms last week; however, Sterling’s continued recovery left the GBP return for the MSCI All Country World Index up just +0.4%. In fixed income, the Barclays Global Aggregate Index was up +0.9% in GBP Hedged terms.
The S&P 500 Index was up +1.2% for the week in local currency terms but just +0.1% in Sterling terms. The US Dollar fell back sharply over the week as data suggested that both core inflation for consumers and cost pressures for the manufacturing sector were easing. A speech from Fed Chairman, Jay Powell, also raised hopes that the Federal Reserve would slow its pace of future rate rises. Similarly in the UK, the FTSE All Share Index rose +0.7% as data from the Bank of England suggested that inflationary pressures may be easing here too, potentially giving the Bank of England’s Monetary Policy Committee some room to be less aggressive on rate rises going forward.
Euro Area producer price inflation slowed more than expected, influenced by weakening foreign demand for German exports and strained supply chains. EU member states agreed to implement a $60 ceiling on global purchases of Russian oil in a deal designed to dent Russia’s oil revenues. The cap is set to also be adopted by G7 countries, allowing countries such as China and India to continue to buy Russian oil but at a lower price. That said, China and India have not yet confirmed they will implement the cap.
Emerging Market equities enjoyed another good week with MSCI EM up +2.5% in GBP terms. China was the key driver of this, with MSCI China up 7.6% on the week despite ongoing protests surrounding China’s Zero-COVID policy.
In Asia, India continued to perform well as investors are attracted to India’s strong GDP growth (predicted at 6.5%-7% for FY23) and they were further buoyed by a Reserve Bank of India bulletin signalling that inflation was slowing. Japan was the laggard as MSCI Japan fell back -3.0% in local currency terms although the losses for GBP investors were dampened by the continued rebound in the Yen which is being driven by hopes that the Federal Reserve in the US will start to slow its rates increases as well as the Bank of Japan’s efforts to prop up the currency.
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 December 2022.
© 2022 YOU Asset Management. All rights reserved.
The World In A Week - Are we there yet?
Written by Chris Ayton.
After a robust start to the year, global equity markets paused for breath last week with the MSCI All Country World Index down -0.2% in local currency terms. Sterling’s continued strength reduced that to -1.5% for GBP based investors. In fixed income, the Barclays Global Aggregate Index was up +0.2% for the week in GBP Hedged terms.
The FTSE All Share Index dropped -0.9% over the week but remains up over 4% in January so far. UK retail sales volumes were down for a second consecutive month as the increased cost of living continued to take hold on consumers. Forecasts had been for a small rise. However, UK inflation remained sticky at 10.5% in December 2022 which, although down from the 11.1% October high, remains elevated and way above target. It was also notable that UK food inflation increased by 16.9% over the month, the largest rise since records began in 1977. This data is unlikely to ease the pressure on the Bank of England to raise interest rates when it meets again on 2nd February.
In the US, the S&P 500 Index was down -1.9% for the week in Sterling terms. The market reacted negatively to US retail sales and industrial production both declining in December by more than expected, prompting fears of a US recession to rise. At the same time, prominent US companies such as Microsoft and Google’s parent, Alphabet, joined other tech firms by announcing they will be laying off tens of thousands of workers. Whether this will push the Federal Reserve to slow rate rises remains to be seen.
In Europe, the European Central Bank (ECB) president, Christine Lagarde, warned that rate rises in Europe still had much further to go in order to tackle inflation. She encouraged financial markets to “revise their position” that the ECB would soon slow down. MSCI Europe ex-UK finished the week down -1.4% although this index is still up +5.5% for January so far. Bank of America data suggests this is partially down to investors cutting allocations to the US stock market to their lowest level for 17 years, instead of favouring perceived cheaper opportunities in Europe. Assets have also been flowing into Emerging Market equities, which are also collectively up over 5% this year.
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 January 2023.
© 2023 YOU Asset Management. All rights reserved.