It is a theme that we constantly return to at Phillip Bates & Co Financial Services, but there really is no substitute for long-term, diversified financial planning.

It was just a few weeks ago that we were facing up to President Trump’s tariff wars and their potential consequences for economies around the world.

While there will inevitably be further twists and turns in the road over the coming weeks and months as the policy continues playing out, many of the financial markets have proven extremely resilient following the Spring wobble.

Only last week, our own FTSE 100 breached the 9,000-point level for the first time in its 41-year history, while other markets such as the Hang Seng in Hong Kong and the German Dax have also had a strong start to 2025. The S&P 500 in the United States continues to perform creditably if not to the same levels of a few years ago when the ‘Magnificent Seven’ tech stocks were delivering such phenomenal returns.

The recent success of the FTSE 100 market, where most of the revenues of the listed companies come from outside the UK, is not, however, reflective of the health of the UK economy with Chancellor Rachel Reeves still struggling to unlock the growth that was a key plank of their election winning strategy a year ago.

Latest economic data showed a small dip in GDP and a rise in inflation from 3.4% to 3.6%. 

Meanwhile, the Government’s climbdown on some of its flagship welfare reforms has also left it with a £5 billion black hole ahead of the Autumn Budget, reducing the already limited wiggle room that the Chancellor has and ramping up the feverish speculation that there may have to be some form of tax rises.

Part of our role as chartered financial planners is to help our clients read the road ahead and provide advice regarding potential steps that can be taken to protect your portfolios whatever stage you are at.

The recommendations we make are always aligned with a client’s individual plan and enabling you to achieve the retirement that you want.

As we look ahead to the Budget later this year, we will again be talking to clients about any additional pension contributions that could be made, while cash ISAs are something that often get ignored but are a useful means of shielding the future from tax.

You will recall from the October 2024 Budget – the first by a Labour government in 14 years – that as of April 2027 pensions would no longer be exempt from inheritance tax. We continue to await the findings of the consultation into these planned changes.

The reality is that the public purse needs more money with the likelihood that those with the so-called ‘broadest shoulders’ will be the ones most impacted.

Despite the febrile nature of our economy and, indeed, our politics with Nigel Farage’s Reform Party intent on continuing to upend the traditional political landscape, client portfolios continue to perform well with typical returns of between 5-7% over the last 12 months.

As ever, please do get in touch if you would like to talk through anything with a member of our team.

On the wall behind me in my office is a chart displaying the various ups and downs of the global economy over the last century.

Included within it are global recessions, world wars and various other events that have triggered financial downturns or upturns.

In terms of our own recent history, the collapse of the financial markets in the wake of the Covid pandemic is the event that comes most readily to mind.

Now, we are facing up to the latest ‘financial event’ in the form of President Trump’s so called ‘Liberation Day’ and the swingeing tariffs imposed on countries across the world.

President Trump claims that dozens of nations have responded as he wanted by reaching out to do deals that will see a reduction or removal of their set of tariffs. 

In the case of the UK, Prime Minister Starmer assures us that a trade deal is being worked on which will potentially result in more favourable terms than the current 10% across the board tariff that has been levied on UK goods entering the US market.

The response from China has been somewhat different, with both sides ratcheting up their respective tariffs and the looming threat of a serious trade war between the two superpowers.

The high levels of global volatility and the uncertainty of what President Trump will do next have triggered the inevitable turmoil we have seen in recent days on the international financial markets.

Initially, we saw three days of sustained falls across the various indexes, followed by a brief rally earlier this week. This was followed by further falls on Wednesday as the war of words between the US and China hotted up.

Even last night we had the latest twist in this saga with the President’s announcement that he was pausing tariffs on many countries for 90 days, with the resulting boost to the US markets.

As things stand, while market volatility is never a good thing, we are still some way from the deep market collapses we saw during the financial crisis of 2008 and, more recently, during Covid.

While the team at Phillip Bates & Co Financial Services are always here to field calls from clients who may have any questions or concerns about what is unfolding, it is reassuring that these have been few and far between so far.

As a couple of clients observed earlier this week, it is because we are always at pains to point out the importance of taking a long-term, diversified approach to financial planning and appreciating the varying levels of risk and reward that are involved. 

This is the coaching role of a good financial planner and the value that they can bring in terms of advising on the best strategies not for the short-term, but for the long-term results that you and your families are aiming for.

As the markets have again demonstrated during the last week, first with falls, followed by a rally and then further falls, there is no place for knee jerk reactions in sensible, well-balanced financial planning.

As the chart on my wall highlights, President Trump’s tariffs are the latest unfortunate bump in the road but, as before with other downturns, the markets will turn and there will be better days ahead again. 

Having different asset classes helps to shield financial portfolios from the worst but, whenever there is a storm, we all unfortunately get a little bit wet.

We will continue to track developments in the White House and the rest of the world and share further thoughts as the situation unfolds. In the meantime as ever, do please contact a member of the team if you would like to talk through anything with us.

Chancellor Rachel Reeves has not enjoyed the happiest of starts to 2025 with calls in some quarters for her to even be removed from her post.

While this is unlikely to happen any time soon, there is no question that this Government’s management of the UK economy is under intense scrutiny as the fallout from last November’s Budget decisions continues to reverberate.

Central to the Budget is the approach of increased taxes to enable greater public spending, something the Government believes is vital if it is to achieve its oft stated goal of turbo-charging growth in the economy.

The UK, as with other countries, has begun the new year with sharp rises in gilt yields.

Governments generally borrow money by selling bonds to big investors, such as pension funds. UK government bonds are known as gilts.

The yield on the 10-year gilt – the interest rate at which the government pays back a decade-long loan to investors – dropped marginally to 4.88% on Tuesday, having risen to nearly 4.9% on Monday, its highest level for 17 years.

Meanwhile, earlier this week the 30-year gilt yield stood at 5.46%, itself the highest rate for over 25 years.

This level of turbulence is unusual as gilts are normally considered very safe with little risk that money will not be repaid. The higher the rate the riskier the markets feel the repayment is over the agreed period whether that is 10, 20 or 30 years.

While Chancellor Reeves’ handling of the UK economy is under the microscope, it is also the case that government debt costs in countries such as Germany, France and Italy have also been rising.

Some commentators believe that the decisions announced by the Chancellor in last year’s Budget have, potentially, made our economy more vulnerable.

After a bruising few days, there was some more positive economic news yesterday with the UK inflation rate falling slightly from 2.6% to 2.5% which led to renewed hopes that a further cut in interest rates might be feasible. The unexpected fall in the inflation rate had the knock-on effect of a drop in gilt yields.

Despite this, there is undoubtedly an uptick in economic volatility in the UK and globally. With President Trump being inaugurated for the second time on Monday, the world will be watching to see if he follows through on the threat to impose stringent tariffs on the import of goods into the United States. 

We will continue to monitor events at home and abroad, but, as ever, with our focus ensuring our clients are taking a long-term, diversified approach to their financial planning which factors in the inevitable ebbs and flows of the global economy and the reaction of the markets.

The politician in Chancellor Jeremy Hunt must have wanted to go further in his Autumn Statement giveaways, but that was never likely to happen.

The Chancellor has put too much effort into reassuring the markets and the British public that he is a careful custodian of the economy to jeopardise all of that for a few quick wins. 

That’s why measures such as cuts to income tax or inheritance tax were parked for another day.

Instead, yesterday’s Autumn Statement was dominated by two major announcements, firstly the reduction in the main rate of National Insurance from 12% to 10% from January 6, affecting over 27 million people. 

Class 2 NI, paid by the self-employed earning more than £12,570 will be abolished from next April, while Class 4 NI for self-employed paid on profits between £12,570 and £50,270 will be cut from 9% to 8% from April.

The other significant announcement was the decision to make the so called “full expensing” tax break – allowing companies to deduct spending on new machinery and equipment from profits – permanent.

The first announcement regarding the NI breaks is intended to give a large proportion of the British electorate an almost instant saving, whereas the tax break for businesses should give a medium to long term boost to the UK economy.

Other announcements of note included state pension payments increasing by 8.5% from April in line with average earnings and a much-deserved boost to the minimum wage – officially known as the National Living Wage – which will rise from £10.42 to £11.44 an hour from April. The new rate will also apply to 21 and 22-year-old workers for the first time, rather than just those 23 and over.

Given the need to balance the requirement to engineer growth but without damaging the downward trajectory of inflation, the Chancellor had limited room for manoeuvre. 

There was also a real sense from both the Chancellor’s statement and the response from the Labour opposition that we are at the start of an election year, with both sides setting out their likely positions for the battle ahead, namely the Conservatives wanting to be seen as the party of economic responsibility and Labour as the party that can bring change after 13 years of Conservative government.

Chancellor Hunt will have one more roll of the dice – the main Budget in the spring – to go further than he was able yesterday with the need to do something about the fiscal drag, when tax thresholds do not keep up with the rising cost of living, pulling more people into higher tax brackets, likely to be high on the agenda.

Our 25^th Anniversary

We were delighted to celebrate our 25^th anniversary with a small party at The Neston Club earlier this month. It was lovely to mark this occasion with some of our longer standing clients as well as staff and other friends of the business. We even made the local news!

Thank you to everyone who has helped us to reach this milestone and we look forward to continuing to provide all clients with the same high level of service over many more years.