Category: Investment

High inflation continues to affect economies around the world. However, there are positive signs of recovery, and some surveys indicate that people are starting to feel more confident about the future. 

While many things can affect short-term market movements, remember you should invest with a long-term goal in mind. If you have any questions about your portfolio or investment performance, please contact us. 

UK

The UK economy flatlined in February, official data from the Office for National Statistics (ONS) shows. Despite expectations of growth, GDP remained the same.

The 0% growth has been linked to strike action. According to ONS, 348,000 working days were lost to strikes in February. Around two-fifths of strikes were in the education sector and are likely to have had a knock-on effect on other industries too. 

The news led to Fidelity branding the UK the “weak link” among developed economies. The organisation predicts the UK economy will be stagnant for the rest of the year.

The International Monetary Fund (IMF) also said the UK is on track to be the worst performing G7 economy. It predicts GDP will shrink by 0.3% in 2023. While this is an improvement when compared to the previously forecast 0.6% decline, it puts the UK behind other countries.

In addition, the IMF expects the national debt to continue rising over the next five years. It predicts debt will rise from 103% of GDP to 113% in 2028, putting one of prime minister Rishi Sunak’s key pledges at risk.

Despite the negative outlook from organisations, chancellor Jeremy Hunt remains optimistic. He claimed the UK would do “significantly better” than the IMF predictions. 

Inflation in the UK remains high. Despite hopes that the rate of inflation would fall to single digits in March, it was 10.1%. Soaring food prices are a key driver after they increased at the fastest rate in more than 45 years. 

Rising costs mean that workers are facing a pay cut in real terms. According to the ONS, regular pay, which doesn’t include bonuses, fell by 2.3% due to inflation. This could affect confidence and spending. 

High inflation is also affecting businesses. Soaring costs and weak consumer spending has been blamed for insolvencies increasing by 16% year-on-year in England and Wales.

Data from the S&P Global purchasing managers index (PMI) also indicates that despite exports growing, the recovery in the service sector is beginning to slow. 

While there have been challenges, there was positive news for investors too.

The FTSE 100 index posted its longest winning streak since 2020 in April. The index recorded eight consecutive days of increases due to hopes that interest rate rises may end soon.

Europe

In contrast to the UK, inflation is easing and there are stronger signs of growth in Europe.

Inflation in the eurozone fell to 6.9% in March. Again, food prices, which increased by 14.7%, are a driving factor for high inflation. 

PMI data also shows the third consecutive month of growth in the eurozone as demand for services picked up. Factory output also increased at the fastest pace in six months as supply chain issues are easing. The data could alleviate some of the concerns that the economic area will fall into a recession.  

However, figures for France demonstrate how high energy costs are still having a significant effect. While manufacturing bounced back in France in February, with an increase of 1.2%, energy-intensive industries have suffered sharp falls. For example, steel production fell by 25.9%. 

US

US inflation fell to 5% in March, the lowest it’s been since 2021. Despite this, the Federal Reserve said it’s still “far above target”. As a result, it’s expected that interest rate rises will continue in a bid to curb rising costs. 

A consumer index from the University of Michigan suggests that Americans are feeling more confident about the future. The Index of Consumer Sentiment found people are increasingly optimistic about the current climate and their economic prospects. 

However, PMI data suggests that the US service sector unexpectedly slowed in March as demand fell. The dollar weakened following the news.

Despite this, markets rallied in March and gave investors a reason to be optimistic at the start of April. In March, the S&P was up 3.51%, the Dow by 1.89%, and the Nasdaq by 6.69%. 

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

High levels of inflation and economic uncertainty continue to plague the investment markets. Investment portfolios are likely experiencing volatility – read on to find out what has been influencing markets.

Despite the doom and gloom statistics, financial services firm JP Morgan suggests that a global recession could be avoided as inflationary pressures ease.

As an investor, you may worry about what the current circumstances mean for your investments and financial goals. Remember, you should invest with a long-term time frame in mind and focus on performance over years, rather than weeks or months.

If you have any questions about your investment portfolio, please contact us.

UK

There were several pieces of big news in the UK during September.

Liz Truss was appointed prime minister on 6 September after winning the Conservative Party leadership race. Just two days later, Queen Elizabeth II passed away and many businesses chose to close or limit operations as a mark of respect during a period of mourning.

During the leadership race, Truss said she’d hold an emergency budget to tackle soaring energy bills and address other economic challenges.

Newly appointed chancellor Kwasi Kwarteng delivered the “mini-Budget” on 23 September. Among the announcements were:

• Confirmation that there will be a cap on household energy bills at £2,500 a year for a household with average use for two years. In addition, the new Energy Bill Relief Scheme will provide support to businesses, voluntary organisations, and public sector organisations.
• The additional-rate Income Tax band will be abolished from April 2023.
• The cut to the basic-rate of Income Tax from 20% to 19% has been brought forward to April 2023.
• The plan to raise Corporation Tax in April 2023 from 19% to 25% has been scrapped.
• The National Insurance hike that was introduced in April has been reversed, as has the Health and Social Care Levy.
• The Dividend Tax rise will be reversed from April 2023.
• A Stamp Duty cut means that the tax will not apply to the first £250,000 of a property purchase. The threshold for first-time buyers also increased to £625,000.

The raft of tax breaks announced by the chancellor led to market volatility and the value of the pound falling against the euro and US dollar.

Inflation also remained high – it was 9.9% in the 12 months to August 2022. In response to inflation, the Bank of England (BoE) increased its base interest rate again to a 14-year high of 2.25%.

The BoE also said that the British economy is now in a recession after contracting for two consecutive quarters.

Official wage data highlights the pressure many families are facing. While average pay (including bonuses) rose by 5.5% in August, it’s a fall in real terms once you factor in inflation.

The economic situation is also affecting aspiring home buyers. Not only do rising interest rates mean repayments will be higher, but some mortgage providers have withdrawn products from the market due to concerns about potential defaults.

Many businesses are struggling with rising costs too and data suggests there could be further challenges ahead.:

• The S&P Global purchasing managers index (PMI) suggests the manufacturing sector suffered its steepest downturn since the first Covid-19 lockdown as domestic and overseas demand fell.
• The PMI reading for the service sector fell to 49.6 in August, signalling that the sector is contracting.
• According to data from the Office for National Statistics, the value of sales by small businesses fell by 10% in July, when compared to the previous month. It’s the largest fall since April 2020, when lockdown restrictions were in place.

With these statistics in mind, it’s not surprising that research from the Confederation of British Industry shows a negative outlook. British manufacturers expect the biggest drop in production since the start of last year in the next three months.

Europe

European economies face many of the same challenges as the UK.

In the eurozone, inflation reached 9.1% in August. It led to the European Central Bank (ECB) lifting interest rates by a record amount to try and curb inflation – the base interest rate increased by 0.75 percentage points.

Forecasts for Germany’s economy highlight some of the obstacles to overcome. The Ifo Institute now expects the German economy to contract by 0.3% in 2023. Fears of energy shortages are also fuelling concerns, with a ZEW Institute economic sentiment tracker finding that investor morale is falling.

US

Again, inflation continues to be an issue in the US. Inflation fell slightly when compared to a month earlier in August to 8.3% but it was still higher than expected. Food inflation was also at its highest level since 1979 after a 13.5% year-on-year increase.

However, payroll data indicates that businesses are still confident as employment increased by 315,000 in August.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

When you imagine the worries that might come with taking investment risk, it’s probably “taking too much” that comes to mind. After all, you’ve likely heard stories of people that have invested in high-risk opportunities and lost some or all their money.

However, when you’re investing for the long term, taking too little risk can also be damaging.

As inflation remains high, considering how you’ll get the most out of your money is more important than ever.

While interest rates are also rising, they still remain far below inflation, which was 9.9% in the 12 months to August 2022. As a result, money held in a cash account is likely to be falling in value in real terms. So, you may be wondering if investing could provide you with a way to maintain or grow the value of your assets.

One important thing to consider is: how much investment risk should you take?

Too little risk could mean your money isn’t working as hard

All investments carry some risk. However, investment opportunities can have very different risk levels. So, it’s vital you understand what risk you’re taking and whether it’s appropriate for you. 

It’s natural to feel risk-averse when you’re making decisions. After all, no one wants the value of their assets to fall, or you may worry about what would happen if you lost the wealth invested.

Yet, if you’re taking too little risk, it could mean your money isn’t working as hard as it could be.

As a general rule, the more risk you take, the higher the potential returns. So, taking an appropriate amount of risk could help you grow your wealth and reach your goals.

While markets experience volatility, historically, they have recovered, although this cannot be guaranteed. Taking a long-term view of your investments and the risk taken can reduce worries that you may have.

There are steps you can take to give you confidence when investing too. For example, you should have an emergency fund that you can fall back on. This could provide a valuable safety net if the value of your investments fell.

That’s not to say you should take a high level of risk for the chance of securing higher returns – it’s about balance. There are several factors you should consider when reviewing your investment risk profile.

4 essential factors to consider when creating a risk profile

A risk profile can help you understand what level of risk you should take. Within your investment portfolio, you’re likely to have investments with different levels of risk. However, overall you should align your portfolio with your profile.  

Here are four key things you should consider when creating a risk profile.

1. The investment time frame

You should always invest with a minimum five-year time frame. This provides time for the peaks and troughs of the investment market to smooth out and, hopefully, deliver returns.

However, there are many situations where you’ll be investing for much longer. You may be investing for your retirement over several decades, for example.

A rule of thumb is that the longer you invest, the more risk you can afford to take. So, it’s important to set out an investment time frame from the outset.

2. Your investment goals

What are your reasons for investing? Your response could change what investment risk is appropriate for you.

Let’s say you have a defined benefit (DB) pension that will provide you with a comfortable lifestyle in retirement. You want to invest so you can have more luxury experiences, such as long-haul holidays. You would be in a better position to take more investment risk than someone who is investing to create a retirement income that will pay for essentials.

3. Your financial circumstances

You shouldn’t make investment decisions without looking at your wider financial circumstances.

If you’re in a secure financial position, you may be able to take a greater amount of risk, as volatility is less likely to affect your lifestyle.

Ideally, you should have an emergency fund in place before you invest. You may also want to consider other steps, such as financial protection, to ensure you’re financially secure.

4. Your attitude to risk

Finally, it’s important you feel comfortable and confident about the steps you’re taking, so your attitude to risk matters.

Talking to a professional about your options and the potential risks can put your mind at ease. Once you understand how investing could fit into your portfolio, it may be something you decide to move forward with, or you may consider alternatives.

Contact us to discuss your risk profile and investment portfolio

It can be difficult to understand how much investment risk is appropriate for you, so we’re here to help. Whether you don’t know where to start or you’d like a professional to review your existing portfolio, please contact us to arrange a meeting.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Throughout February, tensions between Russia and western countries caused concern for investors. As Russia invaded Ukraine, stock markets around the world fell and it’s expected that volatility will continue.

If you’re an investor, remember to keep a long-term outlook when reviewing your portfolio, and if you have any questions, we’re here to help you.

UK

Inflation continued to be a significant influencing factor in the UK in February.

According to the Office for National Statistics, inflation reached a 30-year high of 5.5% in January. This led to the Bank of England (BoE) deciding to increase its base interest rate. While still relatively low at 0.5%, it was the second increase the Bank made in three months, and several policymakers wanted a steeper increase. As a result, the interest rate could rise again this year.

While rising inflation is affecting the cost of living overall, food and energy prices are rising rapidly.

Market analysts Kantar suggests that the annual shopping bill in the UK is set to rise by around £180 this year. Energy prices for many families will increase even more sharply. Energy regulator Ofgem will increase the energy price cap on 1 April 2022 by 54% to £1,971. This decision is expected to affect around 22 million customers.

Once inflation is considered, disposable income will shrink. The BoE expects disposable income to fall by 2% this year and by 0.5% in 2023. This would represent the biggest fall in living standards since comparable records began 30 years ago.

With this in mind, it’s unsurprising that a YouGov poll found that UK households have a gloomy outlook about their financial prospects.

Official figures show that, while GDP in the UK fell by 0.2% in December 2021, over the final quarter of last year it increased by 1%. Consulting firm EY now expects the UK economy to grow by 4.9% this year. This is down from its previous forecast of 5.6%, largely due to the squeeze on household spending power.

Trade and the effects of Brexit also continue to affect businesses across the UK.

UK exports in 2021 to the EU fell by £20 billion when compared to 2018, according to data from the Office for National Statistics. A survey conducted by the British Chambers of Commerce suggests that many businesses are facing post-Brexit challenges. 71% of UK exporters said the post-Brexit trade agreement wasn’t helping them.

While the overall figures paint a picture of an economy that is struggling to recover after the pandemic, there are some companies and sectors that are doing well. TUI, for example, reported that UK summer holiday bookings are up by a fifth when compared to pre-Covid levels.

Europe

The European Commission (EC) cut its forecast for growth in the eurozone as inflation affected economies. The EC now expects the eurozone to grow by 4% in 2022. This compares to its forecast of 4.3% in November 2021.

Inflation in the eurozone reached a record 5.1% in January – significantly higher than the 4.4% forecast. The figure is more than twice the European Central Bank’s target of 2%.

While inflation is presenting some challenges for households and businesses, there was some good news in Europe. The eurozone unemployment rate fell to a record low of 7%, which compares to a rate of 8.2% a year earlier.

Investors in eurozone bonds may also have benefited from high levels of inflation. In expectation of an interest rate rise, bond yields have lifted.

Danish shipping firm Maersk also demonstrates how some firms have profited from the current situation. Thanks to the global economy rebounding, the firm posted record profits.

US

Much like the UK and the rest of Europe, the US is experiencing high levels of inflation. According to the Bureau of Labor Statistics, inflation hit 7.5% in January – a 40-year high.

Unsurprisingly, consumer confidence has been affected by the pressure caused by high inflation, as well as the economic outlook. The University of Michigan’s consumer sentiment barometer fell to its lowest levels since late 2011.

Some key figures suggest that the US economy could be struggling to recover from the effects of the pandemic. The US manufacturing sector’s Purchasing Managers Index in January was at a 15-month low with a reading of 55.5. While the figure still represents growth, slower demand and firms struggling to hire staff meant the pace is slowing.

In addition, ADP Jobs reported an unexpected drop in jobs in January as businesses cut 301,000 positions. The leisure and hospitality industry was the hardest hit.

Statistics also show the US trade deficit has reached an all-time high. The gap between imports and exports jumped by 27% in 2021.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

ESG investing means considering environmental, social, and governance factors when deciding how to invest.

ESG investing continues to grow and more investors are considering how they reflect their values in financial decisions. It covers a broad range of areas, but here are some of the trends that are set to affect ESG investing this year.

The rise of net zero pledges

As part of commitments to reduce companies’ contributions to climate change, many firms have already made pledges to reduce their carbon emissions. In 2022, it’s expected that more will make net zero pledges.

A net zero pledge means a company commits to removing as much carbon from the atmosphere as it adds. This will involve companies reducing the amount of carbon they produce by making changes to their operations.

In addition, the number of companies that engage in carbon offsetting is also expected to rise. This will allow firms to offset those emissions they can’t remove from their process by supporting projects that remove emissions.

Some companies have already made net zero targets, including Microsoft, BT, Sainsbury’s, and PwC. The range of companies that have already committed highlights how it’s a trend that will cross different industries.

However, investors still need to keep greenwashing in mind. Greenwashing is where a company brands products or initiatives as eco-friendly when this is not the case.

Analysis conducted by the NewClimate Institute found that the climate pledges of 25 of the world’s largest companies in reality only commit to reducing their emissions by 40%, not 100% as terms like net zero suggest.

Addressing the social effects of climate change

Climate change has been high on the agenda for ESG investors for years. Now, social factors are gradually being incorporated into this to understand how the consequences of climate change and policies will affect people and communities.

It’s a complex area that can cover many different things. For instance, it may consider how the direct consequences of climate change, such as more extreme weather events, will affect communities and how companies should respond to these events. Or it may look at how the transition away from fossil fuels will affect the progress of countries that are still developing.

The push to consider the social effects of climate change is partly being driven by a pledge made at the COP26 climate conference in November 2021.

The conference brought together governments and other parties to agree on action towards climate change goals. During the conference, more than 30 countries pledged to support workers and communities that will be harmed by the transition to a green economy.

As ESG becomes more mainstream, we’ll likely see more issues that combine the three core areas in some way to tackle complicated challenges.

Scrutinising supply chains

The last two years have highlighted how important supply chains for businesses are, and just how global.

Due to the pandemic, many firms experienced a disruption in their supplies and operations, with the effects being felt across entire supply chains. Even now, some businesses are still struggling to access the materials and products they need to operate at the same level they did before the pandemic.

A robust supply chain can provide security for businesses. On top of this, whether a supply chain reflects a company’s ESG commitments will also come under closer scrutiny.

While this trend can provide more confidence for ESG investors, reviewing complex supply chains could present challenges for both companies and investors.

Pressure for companies to pay their “fair share”

The amount of tax that companies pay in the regions they operate has made headlines in the last few years. Again, the effects of the pandemic mean this trend will be in the spotlight even more.

As governments were forced to borrow more money to provide health and social support during the pandemic, taxes are expected to rise. As the tax burden increases for individuals, it’s anticipated there will be growing pressure for businesses to pay their “fair share”, particularly if they benefited from government support during the pandemic.

While large companies hire whole teams to ensure they pay the correct amount of tax in each jurisdiction, these teams will also use loopholes and reliefs to pay as little tax as possible. As pressure grows for companies to pay a “fair share” it will be interesting to see how this translates to company policy and investor action in 2022 and beyond.

Increasing demand for standardised reporting 

As greenwashing becomes a key concern for investors, there will be an increased demand for regulation and reporting standards.

At the moment, it can be difficult to hold firms accountable if they make claims or set vague targets in their reports. This can also make it challenging for investors to compare different investment opportunities against their ESG criteria. To combat this, there will be an increase in demand for more standards.

This is a process that the Financial Conduct Authority (FCA) has already begun. Last year, the FCA published a discussion paper on potential criteria for classifying and labelling investment products that would provide investors with more clarity. However, it’s likely to be a slow process and many years before standard reporting is seen across the industry.

Get in touch

Would you like to consider ESG factors when you invest or review your investment portfolio? We’re here to help you understand how investing can help you reach your goals.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

The UN Climate Change Conference (COP26) took place in November in Glasgow. The climate change summit brought together countries to discuss how they can tackle the global issue. It was the first time since COP21, which took place in 2015, that parties were expected to enhance their commitments to climate change.

The outcomes were disappointing for some, with activists arguing they did not go far enough. Yet, an agreement was made that, while not legally binding, sets the global agenda on climate change for the next decade.

If you’re an investor, agreements and governmental policies that relate to climate change could have an impact on your portfolio. For instance, reducing certain activities or penalising companies that pose a risk to climate change agreements could mean that some of your investments aren’t as profitable as they once were.

So, what was agreed at COP26 and how could it affect investors?

The COP26 agreement

Among the key parts of the agreement are:

• For the first time at a COP conference, there was a plan to reduce the use of coal. However, after an intervention by China and India, the plan to “phase out” coal was watered down to “phase down”
• Over 140 countries signed up to a forests and land use pledge, with the leaders of countries home to 90% of the plant’s forests committed to halting land degradation by the end of the decade
• Around 20 countries have said they would end overseas funding of fossil fuels by 2022
• Almost 100 countries agreed to slash methane emissions by 30% by 2030
• World leaders agreed to phase out subsidies for fossil fuels, although no dates have been given
• Countries pledged to support developing countries coping with the effects of climate change and help them switch to clean energy alternatives
• Financial organisations controlling $130 trillion (£96 trillion) agreed to back “clean” technology and direct finance away from industries that burn fossil fuels.

While parts of the agreement may have been watered down, the outcome shows a commitment to moving towards cutting out the use of fossil fuels. These steps aim to keep temperature rises within 1.5C above pre-industrial levels. Rises above this are predicted to cause “climate catastrophe”.

However, a report in the New Scientist, suggests the pledge put forward in Glasgow doesn’t go far enough. Research estimates that current climate plans would lead to temperatures rising 2.4C. As a result, world leaders and businesses could find that they face increasing pressure to make further commitments.

The effects for investors

While the outcome of COP26 may not have an immediate effect on your investments, it does suggest that political and regulatory scrutiny will increase.

A UK commitment at COP26 highlights the increased scrutiny businesses will face. By the end of 2023, all large companies and public enterprises will be required to publish a net-zero transition plan.

Companies that don’t start taking action against climate change could face two challenges:

1. As regulation changes, they could find that activities are hampered or that costs begin to rise. Business leaders will need to consider how they can operate when global commitments are being made to cut fossil fuels and preserve the environment.
2. Companies that fail to make changes could also find that negative press and customer views have a direct impact on sales and operations. Again, it could affect the profitability of a business.

Investors should be aware of the impact that climate action could have on their investments and the level of risk they’re taking. Taking climate action into consideration when making investment decisions, doesn’t just mean reducing your exposure to some areas. It can also mean seeking opportunities.

As fossil fuels are phased out, the reliance on renewable energy and electric vehicles will rise. For some investors, these industries could present an opportunity.

Should you start considering climate change in your investments?

As an investor, you may already consider other factors that aren’t financial when you’re making decisions. Adding climate change to these considerations can help align your portfolio with long-term outlooks.

However, it’s just as important to keep things like your risk profile and goals in mind. If you’d like to talk about how climate change could affect your investments over the long term, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

You may have seen inflation in the headlines recently. While the cost of living rising is normal, the rate of inflation has increased over the last few months.

The Bank of England (BoE) has a target to keep the annual rate of inflation around 2%. However, the current rate of inflation is 4.2%, the central bank’s figures show. The rate of inflation used is the Consumer Price Index (CPI), which collects the prices of around 700 items. This is then used to calculate how prices have increased.

There are steps the BoE can take to reduce inflation. One of these is to increase interest rates. While there have been hints that interest rates could rise, the Monetary Policy Committee (MPC) decided to keep rates at historic lows in November. An interest rate rise would have been welcomed by many savers who have suffered from low interest rates for more than a decade.

With the MPC deciding to hold interest rates for now, it’s worth seeing if you’re getting the most out of your savings.

Most accounts will be offering an interest rate that is below the rate of inflation. Over the long term, this gap can mean your savings lose value in real terms. While the figure may grow as interest is added, inflation means that it will buy less. For short-term savings, inflation will have little affect but if you’re saving over several years, it can add up.

Are you getting the most out of your savings?

While you may not be able to change the interest rate, there are some steps you can take to give your savings a boost.

1. Take advantage of offers to move your account

Some banks and building societies offer new customers incentives to move. Taking advantage of these could give your savings a boost.

These incentives could be a one-off deposit to your account or a higher rate of interest for a defined period. Even a small incentive can help you keep up with inflation. Keep an eye out for offers that you’re eligible for. While switching accounts can seem like a chore, it’s often a simple process and banks can even transfer direct debits and standing orders for you.

2. Shop around for the best interest rate

Interest rates might be low across all providers, but there are still differences. Shopping around to find the best interest rate you can access can help you to close the gap between how much your savings are growing and inflation. As with the above, it’s often easy to switch your account.

3. Consider savings accounts with restrictions

Some savings accounts will offer a higher rate of interest but come with restrictions. This may include how much you can put into the account each month, or your savings being locked away for a defined period.

You should assess whether these types of accounts match your goals and would still leave you with an emergency fund. If they do, they can give your savings a welcome boost that could help you bridge the gap.

When to consider moving your savings to investments

As well as reviewing your savings, you should also consider if investing is right for you.

Investing does expose your money to some risk and volatility. However, if you’re saving for a long-term goal, it also presents an opportunity to earn returns that are higher than inflation to preserve your spending power.

If you have an emergency fund in an accessible savings account and your saving goal is more than five years away, investing the surplus savings may be right for you.

While all investments do carry some risk, the level of risk varies. So, it’s important to weigh up how much risk is appropriate for you. We’re here to help you understand investment risk and create a risk profile that matches your situation and goals. We’ll consider areas like your other assets and general attitude to risk.

If you’d like to discuss whether investing and getting the most out of your money, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

The pandemic has led to more people taking control of their finances and investing. If you’re looking for some investing tips, the following pearls of wisdom from Warren Buffett are a great place to start.

Known as a businessman and philanthropist, Warren Buffett consistently ranks on lists of the world’s richest people, with an estimated net worth of over $80 billion in October 2020. He primarily made his money through investing and is often known as one of the world’s most successful investors. So, while the antics portrayed in The Wolf of Wall Street may seem more exciting, learning investment lessons from Warren Buffett can be far more valuable.

Here are just a few of Warren Buffett’s quotes to guide your investment outlook.

1. “We’ve long felt that the value of stock forecasters is to make fortune-tellers look good.”

While everyone wishes they could see into the future and accurately predict market movements, it’s impossible. So many factors influence the market that consistently predicting how stocks will perform isn’t an option. As Buffett previously noted, even professional investors with a wealth of resources at their fingertips make mistakes, as do stock forecasters.

So, if you’re not trying to time the market to maximise investments, what should you do? It starts with building a long-term plan.

2. “Only buy something that you’d be perfectly happy to hold if the market shut down for ten years.”

Backing up the above point, don’t continuously chop and change your investment portfolio. You should buy stocks with the view to holding them for the long term. Don’t try to predict the market or make knee-jerk decisions when values fall. Have faith in the investment strategy you’ve put in place. In most cases, sitting tight is the best course of action, even amid volatility.

As a general rule, you should invest with a minimum timeframe of five years. This provides an opportunity for market peaks and troughs to smooth out. When you look at the long-term market performance it will usually show a general upwards trend, with market volatility balancing out.

3. “Don’t watch the market closely.”

Complementing a long-term outlook, don’t check the market or your portfolio too regularly. Daily movements can be sharp, and it can mean you end up making investment decisions that aren’t right for you and your goals. It’s the same with the media, which often focuses on large falls or big gains, rather than long-term performance.

Focus on the long-term, not how your portfolio has performed in the last day, week, or month.

4. “Never invest in a business you cannot understand.”

Understanding the value of your investments is important and that means you need to understand the business.

That doesn’t mean you have to miss out on opportunities. You can take some time to research potential investments you don’t understand, or discover plenty of alternative options to major trends. For example, Buffett admitted he missed out on opportunities to invest in the likes of Amazon and Alphabet, which owns Google, because he didn’t understand the value they offered – and yet he’s still one of the most successful investors in the world.

The same goes for products, make sure you understand how your pension or ISA works. If you’re not sure or would like to learn more about product options and how they fit into your plans, please get in touch.

5. “Beware the investment activity that produces applause; the great moves are usually greeted by yawns.”

In the media, investing is often portrayed as exciting and a way to get rich quick; think The Wolf of Wall Street. It can mean investors focus on finding the next ‘winning’ stock to deliver astounding growth in a short space of time.

The truth of investing is very different. It can be a means to help you grow your wealth, but it’s far more likely to take places over long periods without the excitement of buying and selling shares every day. The ‘dull’ investment strategy is often more likely to be suitable and deliver the long-term growth you want.

6. “In the business world, the rear-view mirror is always clearer than the windshield.”

It’s easy to think “I should have invested in Amazon” with the benefit of hindsight, as the quote from Warren Buffet highlights.

This also plays into a common financial bias called “hindsight bias”, where people perceive past events as having been more predictable than they actually were. It can cause overconfidence and may mean you end up taking more risk than is appropriate for you. Remember, events are rarely easy to predict, which is why a long-term outlook is important.

7. “Price is what you pay. Value is what you get.”

Finally, there’s often a focus on the price of stocks and shares when investing. But even when prices fall, it doesn’t mean it’s a “good” investment that will deliver returns in the future. Likewise, the price of investments falling doesn’t mean you should immediately sell them – look at the bigger picture and the value they offer.

Your investments should consider the value they bring you too. This links back to your financial plan. Rather than numbers being the focus, how will investing help you? It may mean a more comfortable retirement or the ability to buy a holiday home.

Please contact us to talk about your investment portfolio and how it can help you achieve your goals.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

A year after lockdowns around the world began, Covid-19 continues to affect economies and investment markets. While the volatility experienced almost 12 months ago may have calmed, uncertainty remains and it’s important for investors to focus on their long-term plan.

In February, Kristalina Georgieva, managing director of the International Monetary Fund (IMF), called on leaders of the G20 to deliver strong policies to support the global economic recovery. She set out three points to achieve this:

1. Speed up vaccinations
2. Provide more support to households and businesses
3. Provide additional support for the poorest countries.

With millions now vaccinated, there is light at the end of the tunnel. However, Covid-19 continues to present risks and there are concerns of new waves emerging when restrictions ease.

UK

Official figures from the Office for National Statistics show UK GDP suffered its worst annual slip on record, falling 9.9% in 2020. However, we avoided a double-dip recession following growth of 1% in the final quarter. After introducing a third national lockdown at the end of 2020, it’s uncertain if the growth will continue into 2021.

Highlighting the challenging economic circumstances faced by the UK is a recent Bank of England announcement. The central bank opted to keep interest rates where they are, at a historic low of 0.1%, but said banks should prepare. Negative rates aren’t guaranteed but consideration suggests the bank is preparing further hardship. It’s a move that would have a significant impact on savers.

Another key indicator of the economy is unemployment figures. Official statistics show the UK jobless rate was 5.1% in the final three months of 2020. This compares to 3.8% at the end of 2019 and represents a five-year high. Crucially, the furlough scheme is providing some cushioning. Provisional HMRC estimates show there were 4.7 million jobs furloughed at the end of January.

Despite supermarkets being among the “winners” of lockdown, Asda has announced a major shake-up to operations that will put thousands of back-office jobs at risk in a further blow to the unemployment figures.

There are some positive signs for the retail sector, however. According to figures from data company Springboard, footfall is rising. In the last week of February, the company reported a 10.5% increase in high street footfall, as well as a 4.5% and 1.2% increase in shopping centres and retails parks, respectively. The reopening of non-essential shops is still several weeks away but the increase suggests pent-up demand that could deliver a much-needed boost to the sector.

The pandemic has overshadowed Brexit, but two months after the UK left the EU, companies are reporting trade challenges. A report from the Chartered Institute of Procurement and Supply found two in three supply chain managers are experiencing delays of at least two or three days. This compares to 38% that said the same in January. It could signal that businesses will face further obstacles as markets and businesses reopen.

Europe

Statistics from Eurostat suggest the eurozone could be on track for a double-dip recession. In the final quarter of 2020, the economy shrank by 0.7%, adding to the 6.8% decrease for the whole of 2020. The dip follows many governments introducing new Covid-19 restrictions towards the end of the year.

Despite this, confidence is rising in some parts of the economic area. German business confidence beat expectations, rising to 92.4 in an index run by the Ifo Institute, a few points higher than the 90.5 forecast. The index also showed renewed confidence in the constriction, retail, and other service sectors. As the largest economy in the eurozone, this is a welcomed sign. 

US

With Joe Biden’s inauguration taking place on 20 January 2021, February was his first full month in office, and it was a month of mixed signals.

The Chair of the Federal Reserve warned the US economic recovery was uneven and “far from complete”. Echoing this, the University of Michigan’s monthly consumer sentiment hit a six-month low. The results found future economic prospects are a concern for the general public. Despite this, there are positive signs. Retail sales, for example, jumped 5.3%, far stronger than the 1.1% expected, according to the Commerce Department.

There are also signs that the travel industry is picking up, although Boeing has faced another blow. The company has already endured the worst period in its history after its failings were found to be the cause of two fatal crashes, leading to its bestselling plane being grounded, which was then followed by the pandemic. Now, further questions are being asked about the safety of some of its 777 engines, leading to additional bans and stock prices falling.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

2020 has been an eventful year for investment markets. Impacted by the Covid-19 pandemic and government responses to this, there have been many valuable investment lessons that will apply in 2021 and beyond.

As the extent of the pandemic became known in March, stock markets around the world suffered sharp falls. In fact, fears of a recession meant the FTSE suffered its biggest fall since the 2008 financial crisis and trading was temporarily suspended on Wall Street as circuit breakers were triggered, according to the Guardian.

Since then, markets have bounced back but continued to experience volatility. The uncertainty of the situation, with governments changing restrictions and support as they try to control the virus, affected markets throughout the summer and autumn.

So, 2020 has been useful in highlighting the investment lessons we should keep in mind.

1. The unexpected does happen

A year ago, who would have predicted that a global pandemic would have occurred? It’s probably not something you’ve ever considered when weighing up investment risks. Yet, it’s had a huge impact on investment volatility and opportunity in 2020.

This year has taught us that the unexpected does happen. We can’t consider every eventuality but preparing for the unexpected can improve your financial resilience. In terms of investing, this may mean having liquid assets or a rainy-day fund you can use if investment values fall. This is particularly important if you’re drawing an income from investments. Having options for when the unexpected does occur should be part of your financial plan. 

2. Volatility is part of investing

No one wants to see the value of their investments fall. But volatility is part of investing. When you invest, you need to be aware of the risk that values can fall.

This is why a long-term time frame and goal is so important when investing. Short-term volatility is often smoothed out once you look at investment performance over a longer time frame. It can be frustrating to see that investment values fell in 2020, but when you look at performance over the last five years, for example, you’ll probably still see an upward trend.

3. Diversifying is important

We all know we should diversify our portfolio. Investing in a range of assets, industries and geographical locations can help spread the risk. When one investment falls, another may perform better helping to create balance.

Covid-19 has had a far-reaching impact, with countries around the world affected by the virus. However, some industries have been affected far more than others. Travel and hospitality businesses, for instance, have been forced to close for weeks at a time in many places. In contrast, the pandemic has created opportunities for some firms too. While a balanced portfolio will still have suffered volatility, it can lessen the impact.

4. Financial bias can affect us all

Investment markets have featured in the news more heavily than usual this year, thanks to the volatility experienced. If headlines or talk about the markets meant you considered changing your strategy, financial bias is likely to have played a role.

Financial bias simply means other factors besides facts have influenced your investment decisions. When markets fell sharply at the beginning of the pandemic, an emotional reaction that means you considered taking money out of the markets is normal. However, recognising where bias occurs and limiting the impact is important. Working with a financial adviser can help you with this as you have a professional you trust and one that understands your situation to talk to.

5. You can’t time the market

Finally, the events of 2020 have supported the saying: It’s time in the market, not timing the market.

If you’d tried to guess when to put your money into the stock market and exit this year, you’d probably have ended up making mistakes. Trying to time the market to maximise returns is incredibly difficult, as so many factors play a role. Even investment professionals with a huge number of resources make mistakes.

Rather than trying to time the market, creating a long-term plan and sticking to it is usually the most appropriate strategy for investors.

What to expect in 2021

So, what lies ahead for the next 12 months? With lockdowns and restrictions continuing around the world, we expect further investment volatility as we head into 2021. But if 2020 has taught us anything, it’s that we can’t predict what’s around the corner. Think about your aspirations and build a long-term financial plan around these, including investing where appropriate.

Please get in touch if you’d like to review your investment portfolio for the year ahead.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.