The financial markets may be complex in many ways, but in other ways they are very simple.
After a turbulent few weeks, the appointment of a new Chancellor in Jeremy Hunt and the subsequent instalment of a new Prime Minister in Rishi Sunak has given the markets the one thing they crave more than anything else – competence.
If the rest of the world is going to buy the UK’s debt, do they have the confidence that they are going to get their money back? Like any lender, the greater the uncertainty, the higher price they are going to want for the debt they are carrying.
Clearly, there is still a long way to go to restore full economic confidence and trust, but as many commentators have said in recent days, at least it feels like the “grown-ups” are back in charge.
One of my own clients viewed the events of the last six weeks as a “bad episode of The Apprentice”.
The announcement that the Autumn Statement has been moved back to November 17 from the rather less auspicious Halloween also makes total sense.
The bond markets have started to stabilise and the short-term volatility that we witnessed has been corrected. Bond prices rose sharply as soon as it looked likely that Mr Sunak was on course to become PM.
Three weeks of further stability and calmer market conditions should mean the Government will not have to pay as much interest on money it borrows because it is not considered as much of a risk.
Official projections suggest that the government’s bill for the interest on its debt could be up to £10bn lower than feared just a few weeks ago.
This could potentially change how much it needs to cut spending and raise taxes by to balance the books.
Our attention will turn next to the Autumn Statement on November 17, now upgraded from a Fiscal Statement, with the likelihood of wider tax and spending decisions being unveiled.
While I don’t anticipate changes to income tax, it is possible that pension tax relief could be in the Chancellor’s cross hairs.
We will, of course, review the Chancellor’s Autumn Statement in our next newsletter and any implications for clients.
Despite everything that we have seen in recent weeks, it is important to remember that investing in the financial markets is turbulent with longer term growth requiring a level of risk.
In the last five years – and despite a financial crisis, pandemic, energy emergency and war in Ukraine – portfolios have, on average, made between 20-25% during this period.
This, hopefully, reinforces the importance of the long-term and diversified planning that we undertake on behalf of our clients.
Market confidence returns after chaotic few weeks
/0 Comments/in News /by EdwardLambThe financial markets may be complex in many ways, but in other ways they are very simple.
After a turbulent few weeks, the appointment of a new Chancellor in Jeremy Hunt and the subsequent instalment of a new Prime Minister in Rishi Sunak has given the markets the one thing they crave more than anything else – competence.
If the rest of the world is going to buy the UK’s debt, do they have the confidence that they are going to get their money back? Like any lender, the greater the uncertainty, the higher price they are going to want for the debt they are carrying.
Clearly, there is still a long way to go to restore full economic confidence and trust, but as many commentators have said in recent days, at least it feels like the “grown-ups” are back in charge.
One of my own clients viewed the events of the last six weeks as a “bad episode of The Apprentice”.
The announcement that the Autumn Statement has been moved back to November 17 from the rather less auspicious Halloween also makes total sense.
The bond markets have started to stabilise and the short-term volatility that we witnessed has been corrected. Bond prices rose sharply as soon as it looked likely that Mr Sunak was on course to become PM.
Three weeks of further stability and calmer market conditions should mean the Government will not have to pay as much interest on money it borrows because it is not considered as much of a risk.
Official projections suggest that the government’s bill for the interest on its debt could be up to £10bn lower than feared just a few weeks ago.
This could potentially change how much it needs to cut spending and raise taxes by to balance the books.
Our attention will turn next to the Autumn Statement on November 17, now upgraded from a Fiscal Statement, with the likelihood of wider tax and spending decisions being unveiled.
While I don’t anticipate changes to income tax, it is possible that pension tax relief could be in the Chancellor’s cross hairs.
We will, of course, review the Chancellor’s Autumn Statement in our next newsletter and any implications for clients.
Despite everything that we have seen in recent weeks, it is important to remember that investing in the financial markets is turbulent with longer term growth requiring a level of risk.
In the last five years – and despite a financial crisis, pandemic, energy emergency and war in Ukraine – portfolios have, on average, made between 20-25% during this period.
This, hopefully, reinforces the importance of the long-term and diversified planning that we undertake on behalf of our clients.
Kwarteng rolls the dice with UK’s economy
/0 Comments/in News /by EdwardLambThe Government may not have called Friday’s ‘fiscal event’ a Budget, but it certainly packed more of a punch than many Budgets put together.
In just over 25 minutes on his feet, new Chancellor Kwasi Kwarteng took the biggest economic and political gamble in 50 years – the last time there was a tax cutting event of a similar scale.
The key measures announced were:
The slew of tax-cutting and tax cancelling measures outlined by the Chancellor follows the announcement a few days earlier of the energy package for consumers and businesses which could end up costing the taxpayer in the region of £150billion.
While some of the Chancellor’s actions, such as those on infrastructure and housing, make sense, there is a lot that has left many people at best baffled and at worst seriously troubled. Measures such as reducing the 45% top rate of tax and the removal of the bankers’ bonus cap do not seem to be those of a responsible government with a steady hand on the tiller.
The consequence of Friday’s ‘fiscal event’ is that interest rates will continue to be hiked up beyond the 0.5% rise announced by the Bank of England on Thursday.
It is likely that a further rise of 0.5-0.75% can be expected over the coming months. For many households the resulting increased mortgage payments will take away any gains from other measures contained in the Chancellor’s statement.
Only time will tell whether the decision to embark on a tax-cutting spree has worked. With the next General Election two years away at most, it does feel like new Prime Minister Liz Truss and her Cabinet have decided that a bold gamble of such a scale gives them the best shot at re-election.
Should the gamble fail, and Labour wins the next election, the party’s leader Keir Starmer has already started to make clear that many of the measures would be overturned.
The initial reaction of the markets to the Chancellor’s statement was not favourable with sterling falling to its lowest level against the US dollar in 37 years. Bonds and equities also fell sharply.
Interviews over the weekend suggest that Liz Truss and Kwasi Kwarteng remain emboldened and plan to continue pursuing an aggressive tax-cutting agenda over the coming months.
The great concern, though, is that the UK is now set on an irreversible path of ‘boom and bust’.
We must all hope that this proves not to be the case, but what the events of the last few days do demonstrate is the importance of our clients having sensible, balanced, long-term financial plans with a global rather than UK-centric approach.
Testing times for UK & global economy
/0 Comments/in News /by EdwardLambIn any other week, the Government’s much trailed announcement on energy prices would have dominated the news headlines.
However, for entirely understandable reasons, Prime Minister Liz Truss’s package of measures – which could cost up to £150billion – almost slipped under the radar.
A typical household energy bill will be capped at £2,500 annually until 2024, while businesses will also be supported with a six-month price cap.
As the new PM observed: “We are facing a global energy crisis, and there are no cost-free options.”
Inevitably, the markets reacted strongly as they like few things more than a boost to money supply.
The fear remains that such a bold move will further stoke inflationary pressures. The potential size of the energy bail-out – more than was spent on the furlough scheme during the Covid-19 pandemic – will have serious ramifications for the national debt, money supply and the future economic landscape.
Inflation continues to run higher than expected, currently standing at 10.1%, although it is to be hoped that this will peak before the end of the year.
The new Chancellor, Kwasi Kwarteng, has reiterated his “full support for the independent Bank of England and their mission to control inflation, which is central to tackling cost of living challenges”.
The Chancellor also confirmed that he would meet twice a week with Andrew Bailey, Governor of the Bank of England, from now on to discuss the rising cost of living.
The death of The Queen caused the Bank to postpone the Bank’s Monetary Policy Committee’s decision regarding interest rates until September 22 with some economists suggesting the rate could rise to 2.25% – the highest level since December 2008.
Further rises could be damaging for people who are not sufficiently prepared, although the hope must be that inflation starts to come under control which, in turn, would reduce the need for further hikes.
The Government is expected to lay out its economic course with a mini-Budget sometime in the next few weeks. This should give us guidance as to the intended direction of travel between now and the next General Election, due in 2024.
Her Majesty Queen Elizabeth II
Along with the rest of the nation, we were deeply saddened by the passing of The Queen.
Our thoughts are with the Royal Family as they grieve the loss of our longest-serving monarch.
Our office will be closed on Monday, September 19th – which has been declared a Bank Holiday – reopening as usual on Tuesday 20th.
New PM will need to hit the ground running
/0 Comments/in News /by EdwardLambThe sooner the Conservative leadership race is concluded, the better.
In the current economic climate, the last thing the UK needs is a caretaker Prime Minister managing the shop, and with no authority to take decisions on the pressing issues of the day, most notably the continuing cost of living and energy crisis.
We now know that the new PM will not take office until after September 5th – seven weeks of further delay UK consumers and businesses can ill afford.
In the United States, there is always a lot of emphasis placed on the ‘First 100 Days’ of a new President’s term in office, but whoever the new PM is in the UK will also have to hit the ground running and ensure that a robust economic plan is ready to be implemented as quickly as possible.
This may even necessitate an emergency Budget, sooner than the planned Budget scheduled for November.
Looking at the wider global picture, since my last newsletter, the markets have largely stabilised. We must remain watchful regarding inflationary pressures, but I am hopeful that we are nearing the peak globally. There also continue to be supply issues which have not been fully resolved.
The sell-off of pretty much anything other than so-called ‘old school’ stocks such as utilities and banks has ended and there is now a more balanced economic picture.
Interestingly, the S&P 500 Index in the United States has just endured its worst six months on record, but a closer look at its performance over the last 12 months shows a 3% uplift – something most investors would be comfortable with.
So, while there is reason for cautious optimism, the continuing uncertainties in the UK and worldwide reinforce the importance of having a long-term, well-balanced and, crucially, diversified portfolio, something that is integral to the advice and services provided to our clients.
Best Wishes to Laura
We would like to take this opportunity to send our best wishes to our paraplanner colleague Laura Rees who is temporarily leaving us to have a baby.
We are also delighted that our new administrator Chris Archer is settling in well and getting to know our clients.
Finally, as we bask in a rare UK heatwave, on behalf of everyone at Phillip Bates & Co Financial Services, I would like to wish you all a lovely summer.
Can you help mental health charity Chapter?
/0 Comments/in News /by EdwardLambLast week was Mental Health Awareness Week and one of our clients, Lee Mooney, has recently taken on a Trustee role at a local mental health charity.
One in four people will experience a mental health problem in the UK every year. We all deserve support when in need, but we know how difficult it can be for people to get it.
Chapter is a local charity dedicated to improving the lives of people experiencing mental ill-health in West Cheshire, Wirral, and the surrounding areas. We provide a pathway of support that gives hope, the opportunity to make connections, and vital new skills.
We support individuals with a range of mental health needs, from a diagnosis of serious mental illness (e.g., schizophrenia or bipolar disorder) to people experiencing mild or moderate mental ill-health. Our work includes services for individuals and community spaces such as our facility at The Haven (featured on BBC Radio Merseyside this week).
Chapter also offers professional mental health training for local groups and businesses including accredited Mental Health First Aid. It is often difficult to identify mental ill-health in the workplace and challenging for managers to provide the support needed. Chapter can design courses to suit your business need and help to ensure the right response is available to you to support your staff and protect your business.
If you would like to find out more about how Chapter can help your business please contact:
Lee Mooney, Trustee – lee.mooney@chaptermenmtalhealth.org
Jolene Weaver, CEO – Jolene.weaver@chaptermenmtalhealth.org
Supporters can also fundraise for Chapter through our JustGiving page. You can find out more about the work we do at chaptermentalhealth.org
Crypto: Has the bubble burst?
/0 Comments/in News /by EdwardLambIt has been an interesting few days for followers of the cryptocurrency market with panic selling as the market took a battering.
At one point, the Bitcoin digital currency had fallen below $26,000 from a peak of more than $69,000. Meanwhile, the Terra [LUNA] cryptocurrency fell by more than 99%, wiping out the fortunes of many crypto investors.
Terra, which was ranked among the ten most valuable cryptocurrencies, dropped below $1 at one stage last week, having peaked close to $120 in the previous month.
Although we are not permitted to recommend cryptocurrencies to our clients, it is something we are often asked about.
We prefer to focus on the real economy where stocks may be overvalued but are never worthless – unlike the world of cryptocurrency.
Diversification key to riding out economic storms
/0 Comments/in News /by EdwardLambYou could be forgiven for thinking that the issue of rising inflation and interest rates had come out of nowhere given the frenzied doom and gloom among some sections of the media.
But, as regular readers of this newsletter will know, the onset of tougher financial conditions was something that had long been anticipated.
The likelihood is that the Bank of England base rate will continue to rise by 0.25% month on month for much of the rest of the year and that inflation could top 10% as many economists expect.
But while the pressures facing many households will doubtless intensify during the remainder of 2022, it is likely inflation will return to more acceptable levels during 2023.
This is not a cyclical problem, but rather one that is driven by year on year increases in prices with those price increases being significantly more acute this year.
Nevertheless, for the time being, the UK and wider world economy continues to face uncertain times and a volatile period for stocks with many experiencing sharp falls in values.
Fixed rate investments and cash held in the bank are particularly badly hit during periods of high inflation, whereas property, infrastructure and commodities typically fare much better.
In times of such volatility, the importance of having a long-term, well-balanced and, crucially, diversified portfolio is brought sharply into focus.
On this note, our team is currently in the final stages of reviewing client portfolios with limited changes anticipated.
Helen named in prestigious UK guide
/0 Comments/in News /by EdwardLambWe are delighted to announce that Helen Brown has been included in a prestigious guide of the UK’s top financial advisers.
Helen, a Chartered Financial Planner at Phillip Bates & Co Financial Services, features in the newly published ‘VouchedFor’s 2022 Top Rated Financial Adviser Guide’, produced in conjunction with The Times newspaper.
Helen was one of the top performing advisers to make it into the list with 142 positive reviews from her clients. She has been included in the guide every year it has been published since 2014.
All advisers must undergo extensive checks prior to listing and be authorised by the Financial Conduct Authority.
Alex Whitson, Managing Director of VouchedFor, said in his foreword to the guide: “Uncertainty. It’s a word that has featured heavily in our past four guides. Whether due to Brexit, Covid or, now, the awful crisis in Ukraine.
“Unsurprisingly, such difficult times increase the value people place on good advice.”
Helen, who has been with Phillip Bates & Co Financial Services, for over 12 years, said: “I am delighted to have been included in the VouchedFor guide again this year. The guide gives people the confidence that they can trust the advice of the advisers who are included.
“As the guide says, this is even more important when we are living through such uncertain times.
“As ever, I am hugely grateful to all the clients who have given me reviews for the advice I have given them during the last 12 months.”
Helen works mainly with pensions and investments and has a long-standing specialism in “at retirement” work. This is a crucial part of financial planning as it involves arranging income for retirement in the most effective way for the individual.
Alan Mellor, Managing Director of Phillip Bates & Co Financial Services, said: “Helen is an outstanding Chartered Financial Planner who goes the extra mile for her clients. This is evident from the enormous number of reviews that she receives each year.
“She is part of a team that is committed to providing our clients with long-term, diversified plans that will enable them to achieve their financial objectives.”
Helen is one of three Chartered Financial Planners at Phillip Bates & Co Financial Services along with Alan Mellor and Margo Dorozik.
Ukraine: An Update
/0 Comments/in News /by EdwardLambWe continue to be shocked and concerned at the unfolding humanitarian crisis in Ukraine and the senseless loss of life.
I have had a few questions from clients asking how the conflict and the sanctions being imposed on the Russian regime may affect portfolios.
The reassuring answer I can give you is that our clients’ investments have virtually no exposure in financial terms.
Clearly there are wider economic implications the longer the conflict continues, something that we will track on your behalf and update accordingly at our regular reviews or in future editions of this newsletter.
Spring Statement highlights inflation concerns
/0 Comments/in News /by EdwardLambThe Chancellor’s Spring Statement did not make for easy listening last week.
Rishi Sunak’s announcements on the raising of the National Insurance threshold by £3,000 and the 5p a litre cut in fuel duty were welcome.
Likewise, the promise that he would reduce the basic rate of income tax from 20p to 19p in 2024 struck a positive note, albeit a rather political one.
However, the small amount of wriggle room that the Chancellor has for giveaways to help ease the growing cost of living crisis was overshadowed by the ever-deepening concerns surrounding the rising rate of inflation.
Currently standing at 6.2%, the Office for Budget Responsibility (OBR) is now forecasting that inflation will average 7.4% this year.
Alongside this, the OBR is suggesting that while the economy will grow by 3.8% this year, GDP will only grow by 1.8%, 2.1% and 1.8% over the following three years.
Further concern came with the news that debt service costs would rise to £83bn in the next fiscal year, the highest level on record.
When it comes to the issue of inflation, there is very little the Chancellor can do to resolve this directly.
We are in the midst of a global supply chain crisis the like of which we have not seen for decades.
There is an expectation in some quarters that after the 2008 global recession and the Covid-19 pandemic that governments will keep throwing money at the problems, but this is simply unsustainable.
The reality is that the various economic challenges, led by the rising inflationary pressures, mean that the financial markets will remain volatile in the short to medium term.
They are recalibrating and trying to work out what the economic headwinds mean for the value of businesses.
Volatility does, of course, also provide opportunities where stocks are mispriced.
While we continue to monitor what is going on in the UK and global financial markets, and advise you accordingly, our focus remains steadfast in ensuring that our clients’ portfolios have a longer term, diversified and balanced approach.