Contact us: 01799 543222

April Market Commentary

Archive for the ‘Investments’ Category

April Market Commentary

Wednesday, April 3rd, 2019

Introduction

We have commented before on the difficulty of ‘hitting a moving target.’ Sometimes in writing this commentary you run the risk of what you write being overtaken by events, and that has never been more true than this month. In the short time between us publishing notes and you reading them it is possible that the Brexit section will be different.

Given the fact that Brexit continues to dominate the news headlines it’s tempting to think it is the only important story. Nothing could be further from the truth. There were clear signs that the US/China trade dispute might be moving to an end, and it was an interesting month in the US with clear pointers to a sea-change in the car industry – something that has worldwide implications.

In the UK we had Chancellor Philip Hammond’s Spring Statement, the usual gloom from the high street and continuing good news on employment.

World stock markets had a reasonably good month, buoyed by hopes of an agreement between the US and China. We have also taken a look at the performance of all the major markets in the first quarter of 2019. Let’s look at all the detail…

UK

There was, of course, the usual round of gloom from the UK retail sector. Debenhams issued a profit warning – failing to meet forecasts it made just two months ago – and Sports Direct boss Mike Ashley duly contemplated a £61m bid for the company. As of April 1st, the Debenhams board appears to have secured refinancing to fend off Mr Ashley’s amorous advances, but you suspect it is only a matter of time…

More widely the high street suffered its worst February for ten years with sales down 3.7% and John Lewis paid its lowest bonus to staff since the 1950s. What was once Staples and is now Office Outlet went into administration. There was also a very clear sign of things to come from the traditional high street travel agent as Thomas Cook announced plans to close 21 shops and cut 300 jobs.

Elsewhere in the UK there was the usual mixture of good and bad news…

Chancellor Philip Hammond delivered his Spring Statement: he made his opposition to a ‘no deal’ Brexit very clear, promising a £26bn ‘deal dividend’ if agreement was reached with the EU.

But despite the undeniable uncertainty, the UK economy continued to turn in some impressive figures as unemployment fell to its lowest level for 45 years and 32.7m people were in work. Figures from the Office for National Statistics showed that the economy had grown by 0.5% during January – more than double economists’ predictions of 0.2% – with the important services sector up by 0.3%.

Toyota announced that it would build its new hybrid car in Derbyshire – a welcome shot-in-the-arm for the UK car industry which saw manufacturing fall for the 9th month in a row. The BBC also reported that UK manufacturers were cutting jobs at a ‘record pace thanks to Brexit uncertainty’ as companies stockpiled raw materials ‘at a record pace’.

There was also bad news in the housing market, with prices in England falling by 0.7% in the first three months of the year, compared to the same period last year. This was the first fall since 2012, but Nationwide’s survey showed that rises in Northern Ireland, Wales and Scotland meant that the average price of a house across the whole UK was still increasing. UK inflation in February inched backed up to 1.9%, with increases in the cost of food and wine contributing.

What did the UK’s FTSE 100 index of leading shares make of all this confusion? It had a good month, rising by 3% to 7,279 where it is up by 8% for the first quarter of 2019. The pound fell slightly, ending March 2% down at $1.3036 – however, it is up by 2% for the first quarter of the year.

Brexit

Yet again, all the really important news regarding Brexit came at the end of the month as Theresa May brought her Withdrawal Agreement back to Parliament for a third time on 29th March – the day on which the UK should have left the EU – only to see it defeated yet again. The margin this time was 58 votes, with the DUP once again refusing to support it.

There were plenty of high profile Brexit supporters, such as Boris Johnson and Jacob Rees-Mogg, who did support the WA. They feared the only option left was to accept a bad deal or risk losing Brexit altogether – but in truth the Prime Minister never looked likely to do enough to convince either the DUP or 25 die-hard Brexit MPs.

So where does that leave us now? On Monday 1st April there will be another series of indicative votes as MPs look for something they can agree on. The Prime Minister has no control over this and – having promised to stand down if her deal passed – she will face plenty more calls for her immediate resignation as her deal lies in ruins.

If nothing is agreed – such as a further extension to Brexit – then the UK will leave the EU on 12th April. Depending on your point of view we will ‘crash out’ with no deal, or we will move to trading on World Trade Organisation terms. The situation is further complicated by European elections, due to be held in late May: if the UK is still in the EU then it must send MEPs to Brussels.

Europe

The news in Europe was not good. March began with the revelation that EU manufacturing was facing its worst downturn for six years. The European Central Bank was once again forced to act, offering banks cheap loans to try and revive the Eurozone economy.

But will it get any better? For decades there have been three basic facts of life about cars: cars were driven by people, they were owned by people (or the companies that employed those people) and they were powered by internal combustion engines. Now all of those are under threat and the implications are serious and wide-ranging. The German economy has been the engine powering Europe for the last 10 to 20 years. As countries like Italy have had a decade of virtually no growth, Germany has produced a remorseless balance of payments surplus.

The German car industry employs more than 800,000 people: it accounts for around 20% of the country’s exports. If car production switches to driverless cars made in the Far East and/or California, then the implications for Europe are severe.

So, given their less than cordial relationship with the EU of late, it was no surprise to see Italy roll out the red carpet for Chinese Premier Xi Jinping. We have written previously about China’s ‘Belt and Road’ initiative and – with worries about the German car industry and the French economy stagnating – why wouldn’t the populist government in Italy look to closer ties with China? Despite the concerns of her European neighbours the upside for Italy is clear – a flood of Chinese investment and greater access to Chinese markets and raw materials.

Meanwhile in the Netherlands a new populist, anti-immigration party led by Thierry Baudet – inevitably dubbed the ‘Dutch Donald Trump’ – became the largest party in the Dutch Senate. With European elections due in May we can certainly expect to see far more Eurosceptic MEPs returned – which perhaps explains why the EU would prefer the UK not to take part in those elections…

On European stock markets the German DAX index had a very quiet month, rising just 10 points to 11,526. The French market did better, rising 2% in March to 5,351 where it is up by an impressive 13% for the year to date. The German index is up by 9% for the first three months of 2019.

US

It’s interesting to note that as the German car industry faces its biggest-ever threat, most of my notes for the US section of the Bulletin also concern their car industry. But it is not the traditional players like Ford and Chrysler – rather it’s the new kids on the block: Tesla, Uber and Lyft.

March got off to a bad start in the US as figures showed that the US had created just 20,000 jobs in February, well below expectations of 180,000 and the lowest figure since September 2017 when employment was impacted by Hurricanes Harvey and Irma. It was therefore little surprise later in the month when the Federal Reserve announced that it does not expect to raise interest rates for the rest of this year, voting unanimously to keep the US interest rate range between 2.25% and 2.5%.

Facebook suffered its longest ‘down’ time for more than ten years as the company’s main social network plus Instagram and message-sharing were all down for 14 hours. Meanwhile Levi’s – a company that has been around for rather longer than Facebook – returned to the US stock market and saw its shares leap by 32% on the first day of trading.

But the really interesting news was in the car industry as ride-sharing app Lyft made its stock market debut valued at $24bn (£18.5bn), making it the biggest IPO since China’s Alibaba. However, that figure will be dwarfed when Uber comes to the market, with early indications that the ride-sharing company – which is still losing billions of dollars – will be valued at around $120bn (£92bn). With the news that Tesla is also on course to outsell BMW and Mercedes in the US, there are very clear warning signs for the traditional car industry – and for the places it is based and the people it employs.

On Wall Street the Dow Jones index had a quiet month: it finished March up just 13 points at 25,929. It is, though, another market which has done really well in the first three months of the year, rising by 11% since 1st January.

Far East

March ended with real optimism about the US/China trade talks, so it was no surprise to see China’s stock market up by 5% in the month.

At the beginning of March there was much less optimism, and some continuing tension as China temporarily stopped customs clearance for Tesla’s new M3 car.

The trade dispute had certainly taken its toll as figures revealed that Chinese exports in February suffered their biggest fall for three years – down nearly 21% on the previous year.

Unsurprisingly, the Chinese government looked to domestic demand to counter this, unveiling a raft of tax cuts. China’s de facto number two, Li Keqiang, warned that the country faced “a tough struggle” as he laid out plans to bolster the economy. Opening the annual session of China’s parliament, he forecast slower growth of 6% to 6.5% this year, down from the 2018 target of 6.5%. He duly unveiled plans to boost spending with tax cuts totally $298bn (£229bn).

Meanwhile the soap opera around Chinese telecoms company Huawei rumbled on as the US told Germany to drop the company, warning that any deal to let Huawei participate in the German 5G network could ‘harm intelligence sharing.’ Huawei continued to deny that their products posed any security threat, and had the last laugh as figures for 2018 showed that their sales had passed $100bn. Total revenues were 720bn yuan ($107bn £82bn) with profits up by 25%.

The Shanghai Composite Index’s 5% rise meant that it closed March at 3,091 where it is up by an impressive 24% for the year to date. The Hong Kong Market was only up 1% in the month to 29,051 but is up by 12% for the first quarter of the year. The Japanese and South Korean markets turned in much more subdued performances, falling by 1% and 2% to end the month at 21,206 and 2,141 respectively. For the first three months of the year Japan is up by 6% and South Korea by 5%.

Emerging Markets

March was a relatively quiet month for the Emerging Markets section of the Bulletin with two of the major markets we cover unchanged in percentage terms. The Brazilian stock market closed the month down just 169 points at 95,415 while the Russian market managed a gain of just 12 points to 2,497. However both markets have done well in the first quarter of the year, with the Brazilian market up by 9% and Russia up by 5%.

It was a much better month for the Indian stock market, which rose 8% to close March at 38,673. It is up by 7% for the first quarter of the year.

And finally…

Gloucestershire pensioner Stephen Mckears was baffled. Every night he left a few things out on his workbench (in his garden shed, where else) and every morning they were neatly back in their plastic tub.

It wasn’t Mrs Mckears doing some late night cleaning and neither was it a friendly neighbourhood ghost. So what was it? Questioning his own sanity, Stephen set up a camera in his garden shed with the help of a neighbour.

He discovered that a mouse was tidying his workbench. Whatever Stephen left out, the mouse duly tidied away in the plastic tub. “I’ve started calling him Brexit Mouse,” quipped Stephen, “As he’s stockpiling things for Brexit!”

Sadly, all too many of us are addicted to the occasional McDonald’s and, to help us with our choice, the chain has just spent $300m (£227m) on an Israeli technology company that specialises in artificial intelligence. According to McDonald’s CEO Steve Easterbrook “It [the AI] can know the time of day and it can know the weather” thereby helping the chain serve the right food for both the time of day and the weather.

Now call us old-fashioned but we wonder whether you really need to spend over £200m to know that you should take the breakfast menu off at three in the afternoon.

Maybe we’re wrong…

The perks of saving into a Junior ISA

Wednesday, March 20th, 2019

There are so many factors for a parent to consider in doing their best to make sure their children are prepared for the world when they reach adulthood. A lot of those things will be out of your control, but one thing you can consider that could make a real difference is investing into a Junior ISA. If you start early you could accumulate a pot of over £40,000; that’s a birthday present that no 18 year old would be disappointed with.

Entering adulthood with that level of finances comes with life changing opportunities and great freedom of choice. Depending on their priorities, your child could put down a deposit on a property, start a business, pay for training or tuition fees, or even travel the world to their heart’s content.

On April 6th 2019, the amount that can be saved annually into a Junior ISA or Child Trust Fund account will increase from £4,260 to £4,368. Just like an adult ISA, your contributions are free from both income and capital gains tax and often come with relatively high interest rates. For example, Coventry Building Society offer an adult ISA with an interest rate of 2.3% per annum, whereas their equivalent Junior Cash ISA comes with a 3.6% per annum interest rate. Junior ISAs are easy to set up and easy to manage: as long as the child lives in the UK and is under the age of 18, their parent or legal guardian can open the ISA on their behalf. On their 18th birthday, the account will become an adult ISA and the child will gain access to the funds.

Both Junior Cash ISAs and Junior Stocks and Shares ISAs are available, and you can even opt for both, but your annual limit will remain the same across both ISAs. When making that decision there are a few considerations to make; cash investments over a long period of time are unlikely to overtake the cost of inflation but come at a lower risk than their stocks and shares equivalent. With a Junior ISA, however, you can benefit from a long term investment horizon. Although the stock market comes with a level of volatility, you can ride out some of the dips and peaks over a long period. Combined with good diversification, it’s possible to mitigate a fair amount of risk.

Taking a look at potential gains, had you invested £100 a month into the stock market for the last 18 years, figures from investment platform Charles Stanley suggests that a basic UK tracker fund would have built you a pot worth £39,313. In comparison, had you saved the same amount into cash accounts, you’d be closer to £24,000, a considerable difference of nearly £16,000.

With this latest hike in the saving allowance, it’s time to make the most of Junior ISAs and prepare to swap bedtime reading from Peter Rabbit and Hungry Caterpillar to stories of how a stocks and shares portfolio can secure your child’s future.

Tips on how to avoid ‘FOMO’ investing

Wednesday, February 20th, 2019

We’ve all experienced FOMO at one point in our lives, or to give it its full name; fear of missing out. It’s the feeling you get when there’s an event taking place that you can’t attend. It’s the “But, what if?” when considering whether to turn down an opportunity. It’s the anxiety that is all too common when we want to agree to something but are over-committed.

In an age of social media and 24 hour news cycles, where there’s a missed opportunity or the promise of ‘the next big thing’ right under our noses, it’s impossible to avoid FOMO without becoming a hermit. (We’d hazard a guess that even the most ascetic cave-dwelling philosophers wonder what they’re missing out on!)

There’s no shame in experiencing a fear of missing out, it’s how you act on that feeling that makes all the difference. How often do we step out of our slow-moving supermarket queue to join what seems to be the fast-track only for it to grind to a halt as we watch our old queue fly past us? The same is often true when we switch lanes in the motorway. Getting your shopping home a few minutes later is hardly the end of the world, but when we apply the same principles to investing, the results can be much more severe.

Chasing a star performing fund is always going to be a risk. Trying to perfectly time your moves in and out of markets is extremely difficult, and even the greatest investors out there get it wrong more often than they get it right. The temptation that comes from FOMO is to make knee-jerk reactions and focus on the volatility of the markets, looking at the daily ups and downs. This can lead to irrational decisions. Your returns are not going to be a perfectly straight line from the bottom left to the top right of a graph, but that doesn’t mean you should jump ship and change lane at every inevitable up and down along the way. Patience is key to a sound investment philosophy and although it can be very tempting to try the quick-fix, if it sounds too good to be true, it usually is.

One way to counter any FOMO concerns is to have a properly diversified multi-asset fund. In the words of Harry Markowitz, pioneer economist, “diversification is the only free lunch in finance”, so don’t put all your eggs in one basket.

What is the Innovative Finance ISA?

Thursday, February 14th, 2019

Innovative Finance ISAs (IFISA) are a little-known type of ISA that can see great returns. Here’s a summary of what they are and how they use P2P lending to secure steady rates of growth:

P2P lending

P2P lending stands for peer to peer. It’s founded on a pretty straightforward idea: you lend your money to individuals or businesses using a P2P platform as a middleman. Because the interest rates on loans are considerably higher than on savings accounts, they are often an attractive option. With P2P lending, you can expect returns of between 3% and 7% depending on the account you choose.

The IFISA

Three years ago this coming April, the government introduced the IFISA. This allows consumers to invest part or all of their £20,000 ISA allowance in P2P lending. On the surface, the IFISA seems perfect. It’s a tax efficient way of achieving high returns with relatively low volatility.

However, so far the IFISA has been a bit of damp squib.

In the 2017-2018 tax year, £290 million was invested in IFISAs, with an average of £9,355 per person. This might sound like a lot of money, but when you compare it to the £69.3 billion invested in adult ISAs the same year, it pales in comparison.

Industry surveys point the finger at a lack of awareness about the IFISA. Just 6% of Brits are aware of them. Whereas 75% were aware of traditional cash ISAs and 40% knew about stocks and shares ISAs in the same research.

Part of the issue is that P2P platforms have taken a while to bring their IFISAs to the marketplace. Almost three years after their introduction, only 36 IFISA products are available with regulatory delays cited as a reason for this slow uptake by major P2P platforms.

People who are already aware of P2P lending are far more likely to invest in IFSAs. More and more people are investing in IFISAs and it’s thought that much of this growth has been driven by existing P2P investors converting their existing accounts into IFISAs.

Converting a Help to Buy ISA to a Lifetime ISA

Wednesday, January 16th, 2019

With help-to-buy ISAs being phased out on 30th November 2019, many people are considering transferring their funds into a Lifetime ISA. You’ll still be able to access existing help-to-buy accounts until 30th November 2029, but it’s worth knowing which option is right for you.

Help-to-buy ISAs have been around since before the Lifetime ISA was introduced – each have different conditions. With a help-to-buy ISA, you can use your savings and the government bonus to purchase a home that costs up to £250,000 outside of London, or £450,000 in London. With a Lifetime ISA, the property price limit is £450,000 whether the home is inside or outside of London. With a help-to-buy ISA, your government bonus is paid upon completion, whereas with a Lifetime ISA you can use that bonus towards your deposit when you exchange contracts. You may have previously set up a help-to-buy ISA but are now looking at properties outside of London that exceed that £250,000 limit – so what can you do?

You are free to transfer the savings in your help-to-buy ISA over to a Lifetime ISA, increasing your property price limit outside of London by £200,000; however, you must wait 12 months to access those savings and the associated bonus. The 12 month countdown begins from the date of the first payment, and that includes transferring money from a different type of ISA. If you were to transfer savings from one Lifetime ISA to another, however, the 12 month countdown would not be reset.

Converting to a Lifetime ISA can be a savvy move, but it may not be the right one for you. The help-to-buy ISA is still an option at the moment, and although the Lifetime ISA bonus is added regularly, rather than at the point of purchase, it comes with its own caveats. If the saver decides to use their funds for a different purpose (for long term savings for later in life, for example), there can be penalties.

Both options are helpful for encouraging first time buyers to build their savings, but your personal situation will be unique. If you have any questions around this topic, please feel free to get in touch with us directly.

December Market Commentary

Thursday, December 6th, 2018

Introduction

It is always difficult writing a report like this, as you are always trying to ‘hit a moving target.’ While you can record the stock market levels at the close of business on, say,  30th November, there is always the risk that the commentary is overtaken by events.

That has never been more true than this month: we wrote these notes on Monday 3rd December and, of course, you have to press ‘publish’ at some stage. However, we are very conscious that the situation regarding Brexit – and perhaps also the civil unrest in France – may have moved on by the time you read this.

That said, on to business, and the majority of the stock markets on which we report in this commentary enjoyed a good, if unspectacular, November. There were also some signs at the end of the month that the trade war between the US and China might at least be thawing. Following a meeting at the G20 summit in Argentina, the two countries agreed not to impose any further tariffs for 90 days, to allow talks to take place.

Away from stock markets the oil price fell below $70 a barrel for the first time since April – leading to calls for a reduction in the price of petrol – and those of you who keep an eye on the performance of cryptocurrencies will have seen that Bitcoin had a disastrous month. The price of the virtual currency fell by 37% in the month, and – when we checked the price over the weekend – stood at £3,107.

UK

Despite the political chaos in the UK there was plenty of good news for the economy in November with figures for the third quarter (July to September) confirming that it had grown at 0.6%, three times faster than the equivalent rate in Europe.

There was more good news as figures showed that wages rose by 3.2% in the same three month period, the fastest rate of wage growth for almost a decade. However, people did not appear to be spending the money on the high street, which once again lost out to online shopping in the Black Friday/Cyber Monday bonanza. And there was more gloom for town centres as Thomas Cook issued its second profit warning in two months, blaming the record-breaking summer.

The retail picture did not improve when Marks and Spencer reported falling sales for food and clothing, and a report from management consultants PwC said that retailers were facing their ‘toughest trading conditions for five years’ with 14 shops closing every day.

New car sales were also down and 850 jobs were lost as Michelin closed its factory in Dundee.

But against that, profits at the UK’s publicly listed companies jumped nearly 14% in the third quarter of the year, pushing total profits over the last 12 months to a record £217.9bn.

Sadly, the FT-SE 100 index of leading shares sided with shop closures not record profits and closed November down 2% at 6,980. The pound had a relatively quiet month – despite the continuing uncertainty over Brexit – and ended the month trading at $1.2748.

Brexit

In 1942, as the tide of World War II finally began to turn in the Allies’ favour, Winston Churchill said, “It is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

Is that where we are now with Brexit? Theresa May has done a deal with the European Union. According to the campaign group Leave Means Leave, it is ‘the worst deal in history’ seeing the UK paying £39bn and getting nothing in return.

According to Downing Street, it is the best possible deal and a triumph for the Prime Minister’s dogged diplomacy. It is vastly superior to a Canada or Norway-style deal,  the dreaded ‘no deal,’ or staying in the EU. It is a deal that ‘delivers on the result of the referendum’ and the full Government publicity machine has been wheeled out to support it.

Well, we shall see next week, when the MPs vote on the deal. At the moment it looks likely to be defeated, as Conservative MPs and ex-ministers line up to criticise it.

Quite possibly it will be heavily defeated and the Opposition will table a motion of no confidence in the government, leading to a General Election. Quite possibly there will be more late night meetings and trips to Brussels and a new deal will come back to parliament. Quite possibly Theresa May will be replaced as Prime Minister. Quite possibly we could have a second referendum – the so-called ‘People’s Vote.’

So no, it does not look like we have reached the beginning of the end, or even the end of the beginning. The picture may be a little less murky by the end of December, if only because some options – almost certainly the current deal – will have been ruled out.

At the moment, we are still due to leave the European Union on 29th March next year: We have written previously that we could see that date being pushed back to allow ‘more time for constructive talks with our European partners.’

Europe

The big story in Europe came at the end of the month as the worst civil unrest since 1968 broke out in France.

The headlines had French President Emmanuel Macron threatening to impose a state of emergency and demanding new police powers as he struggled to contain the unrest, with 75,000 people estimated to have taken part in the action over the weekend.

The Gilet Jaunes (Yellow Jackets/Vests) movement began three weeks ago as a protest against Macron’s climate change inspired fuel tax rises. But in reality it goes deeper than that as protesters claim that Macron is a ‘president of the rich’ who does not care about the concerns of ordinary French people and the higher living costs they are facing.

A recent poll showed that Macron had broken new ground by becoming the most unpopular French President ever at this stage of a Presidency – he is roughly 1½ years into a five-year term – with populist leader Marine le Pen (whom he beat in the Presidential election) now more popular.

Quite where Macron goes from here is anyone’s guess. It is not just the fuel protests: growth in the Eurozone has slowed to a four year low, and France still has a high level of unemployment – 9.3% in August, which is far closer to the 9.7% of Italy than it is to the 3.4% in Germany.

In other news, the government in Italy continued to defy the EU over its proposed Budget – although there were no such budgetary worries for France and Germany as they agreed a new budget for the whole Eurozone.

In company news, Volkswagen became the latest company to plough huge sums of money into electric cars as it committed to spending $50bn (£39bn) and announced plans to become the world’s most profitable manufacturer of electric vehicles. Given that the emissions scandal is reported to have cost the company $30bn (£23.6bn), it probably has some catching up to do…

Neither of Europe’s major stock markets enjoyed a good month. The German DAX index was down by 2% to 11,257 and the French index fell by a similar amount, ending November at 5,004.

US

Barely two months ago Apple won the race to be the first company valued at a trillion dollars (£780bn), but throughout November the shares slid as investors worried about declining iPhone sales and the company’s vulnerability to a protracted dispute between the US and China.

As we have written elsewhere, those fears may now be receding but Apple has now been overtaken by Huawei as the world’s second largest manufacturer of smart phones (and by Microsoft as the world’s most valuable company). There are mutterings that the innovation and attention to detail of former CEO Steve Jobs is being missed.

There was better news for the wider US economy, which added 250,000 new jobs in October, saw wages rise by 3.1% and unemployment down to 3.7%. “Wow! Incredible numbers. Keep it going,” tweeted the Commander-in-Chief.

But there was less good news for Donald Trump as the US mid-term elections saw the Democrats gain 40 seats in Congress and regain a measure of control. Previously, the President had benefited from Republican control of both the Senate and Congress, and this may make it more difficult to get some of his more contentious proposals approved.

In other company news, Amazon finally announced the location of its second HQ – and went for both New York and Virginia. Uber may be struggling to afford even one HQ: it lost a cool $1.07bn (£821m) in the three months to September, as it prepares for a public share offering next year.

Fortunately, the Dow Jones index does contain some companies that cling to the hopelessly outdated notion that the profit and loss account should be in the black, and rose 2% in November to end the month at 25,538.

Far East

The month began with Chinese leader Xi Jinping promising to cut import tariffs and open up the Chinese economy, amid continuing criticism that its trade practices are ‘unfair.’ Xi was speaking at a Shanghai trade expo and also made a robust defence of the global free trade system, widely seen as an attack on the US as the tariff war continued.

However, there was perhaps a glimmer of light at the end of the tunnel by the end of the month following the G20 summit in Argentina: as we noted in the introduction, the two countries agreed not to increase tariffs any further for 90 days to allow time for talks.

A week after Xi’s speech and China turned its attention to the annual shopping bonanza which is Singles Day (on 11th November) which far outstrips Black Friday and Cyber Monday. Once again all online records were broken as Alibaba – roughly China’s equivalent of Amazon – took $1bn (£780m) in just 85 seconds of trading.

Over in Japan, it was a very different picture as the economy contracted by an annualised rate of 1.2% in the third quarter, with the blame placed on natural disasters. Japan has been hit by both a typhoon and an earthquake this year, which have significantly impacted the economy.

Also ‘significantly impacted’ were the shares of Nissan which slumped after boss Carlos Ghosn was arrested, for under-reporting his income by the small matter of £34.5m over the last five years.

There were also problems for Huawei, as New Zealand became the latest country to ban purchases of mobile networks from the company, as it expressed security concerns, following similar action in Australia.

It was a better month on the region’s stock markets, with only China’s Shanghai Composite Index falling in November. That was down by 1% to 2,588, but the other three major markets in the region all rose. Hong Kong led the way with a rise of 6% to 26,507 whilst South Korea was up 3% to 2,097. Despite the gloomy news on the economy the Japanese market also rose, finishing November up 2% at 22,351.

Emerging Markets

It was a quiet month for the emerging markets which we cover, with no major news stories, although clearly the continuing tension between Russia and the Ukraine looks as though it has the potential to flare up at any moment.

On the stock markets India led the way with a rise of 5% in the month, ending November at 36,194. The markets in Russia and Brazil both rose by 2%, to close at 2,392 and 89,504 respectively.

And finally…

The month kicked off in good style as Bradley Stoke Town FC of the Bristol and District League signed a player called… Bradley Stokes. It would certainly make it easier for the fans if teams only signed players with a similar name…

Meanwhile in Holland, Emile Ratelband – presumably unable to find a team called FC Ratelband – contented himself with bringing a lawsuit to lower his age. “We live in an age where you can change your name and change your gender,” said 69 year old Emile, “So why can’t I change my age?” Being 69 is, apparently, harming Emile’s chances on the dating app Tinder.

Still young, but clearly with plenty to worry about, are the students of Leeds Trinity University. Lecturers there have been told to avoid capital letters in their handouts as they can ALARM STUDENTS and ‘scare them into failure.’

Fortunately, the students do not live in North Korea where they would be alarmed to find that only fifteen haircuts for men and women are approved by the state. And no, you are not allowed to sit in the chair and say “I’ll have a trim Jong-un, please.” No-one is allowed to have a haircut like the beloved leader…

Finally, a nod of acknowledgement to the state broadcasting corporation in China which has introduced virtual reality newsreaders powered by artificial intelligence. Our sources tell us that the BBC will not be following suit. We can understand that: after all, there’d be no-one left to appear on Strictly…

November Markets in brief

Thursday, December 6th, 2018

November was an average, if unspectacular, month for global markets. This will be welcome news for many investors – it followed an October that investors described using language ranging from ‘slightly worrying’ to ‘catastrophic’ depending on where their money was invested, and events were interpreted on a scale of ‘massive fall’ to ‘temporary speed bump’ or a ‘natural rebalancing of markets’.

UK

In spite of the political turmoil around Brexit, there was some good news for the British economy, with figures for the third quarter (July to September) confirming that it had grown at 0.6%, three times faster than the equivalent rate in Europe. Over the same period, wages rose by 3.2%. Great news for now. However, as political events around Brexit run their course, the potential for widespread economic disruption remains.

The FTSE 100 fell by 2%, to close November down at 6,980, with anxiety about the ability of the US and China to end their trade dispute at the G20 summit hanging over the market like a dark cloud.

Europe

France suffered its worst period of civil unrest since 1968, with widespread protests against Macron’s heavy taxation of fuel gripping the country. He is currently the most unpopular president at this early stage of his presidency; just 18 months into a 5 year term.

Elsewhere on the continent, Italy’s right-wing government continue to defy the EU over their proposed budget. This saw an iffy month for Europe’s major markets. The German DAX and the French index both fell by 2%, down to 11,256 and 5,004 respectively.

US

There was good news for the US economy, which added 250,000 new jobs in October, saw wages rise by 3.1% and unemployment down to 3.7%. A strong showing to say the least.

The stock markets performed intermediately with the Dow Jones rising 2% in November to 25,538 and the NASDAQ fell slightly to 7,330.

Far East

There is possibly a glimpse of light at the end of the tunnel in the US-China trade war. At the G20 summit, the two nations agreed not to increase tariffs for 90 days to allow time for talks. Supported by a retail boost on Singles Day, the Chinese annual shopping bonanza, the country’s stock markets had a ‘less bad’ month than the last few, with the Shanghai Composite Index falling just 1% to 2,588.

Elsewhere in the region, Hong Kong led the way with a rise of 6% to 26,507 whilst South Korea was up 3% to 2,097. Japan also rose, despite its economy contracting by 1.2% in the last quarter, finishing the month at 22,351, up 2%.

The next month looks to be unsettled, with Brexit chaos likely to crescendo over the next few weeks.

The longevity challenge and how to tackle it

Thursday, November 8th, 2018

The longevity challenge: In the UK, we are faced with the challenge of an ageing population. Many of us will live longer than we might have expected. Already, 2.4% of the population is aged over 85. Because of improvements in healthcare and nutrition, this figure only looks set to rise.

The Office of National Statistics currently estimates that 10.1% of men and 14.8% of women born in 1981 will live to 100. A demographic shift to an older population brings unprecedented change to the way the country would operate, from the healthcare system to the world of work.

In addition, a long life and subsequently a long retirement, bring challenges of their own from a personal financial planning perspective.

Firstly, it means you have to sustain yourself from your retirement ‘nest egg’ of cash savings, investments and pensions. You need to ensure that you draw from this at a sustainable rate so you don’t run the risk of outliving your money.

Secondly, there’s the question of funding long term care. If we live longer, the chance that we will one day need to fund some sort of care increases. Alzheimer’s Research UK report that the risk of developing dementia rises from one in 14 over the age of 65 to one in six over the age of 80.

Of course, there are many different types of care, ranging from full time care to occasional care at home, with a variety of cost levels. All require some level of personal funding.

The amount you pay depends on the level of need and the amount of assets you have, with your local council funding the rest. This means that it’s definitely something that you need to take into account in your financial planning.

Having the income in later life to sustain long term care really does require detailed planning. Because of the widespread shift from annuities to drawdown, working out a sustainable rate at which to withdraw from your ‘nest egg’ is essential.

There is no ‘one-size-fits-all’ sustainable rate at which to draw from your pensions and savings. Every person has their own requirements, savings, liabilities and views on what risks are acceptable.

There are some things which you will be able to more accurately plan when working out the sustainable rate to draw from your pension. These include your portfolio asset allocation, the impact of fees and charges and the risk level of your investments. Speaking with your financial adviser will help you on your way to working out the right withdrawal rate for you.

There are, however, some unknowns. These include the chance of developing a health condition later in life and exactly how long you’ll live. It is best to withdraw leaving plenty of room for these to change unexpectedly, improving your chances of having a financial cushion to cope with what life throws at you.

Should the Bank of Mum and Dad start charging interest?

Thursday, October 18th, 2018

If you’ve lent money to your children to help them with university fees, a deposit on their first home or even just to support them with the rising cost of living, then you’re not alone. Statistics suggest that around a quarter of all mortgages are now partially funded by the ‘Bank of Mum and Dad’.

But have you ever thought about whether you should charge your offspring interest when they pay the loan back? It’s a consideration that’s likely to make many parents feel like Dickens’ famous miser, Ebeneezer Scrooge. However, there are arguments to be made for adding on interest which might help to prevent you from donning a Victorian style top hat and uttering ‘Bah, humbug!’

If you’re concerned that any money provided to help out your children might end up becoming a ‘permanent loan’ that you might never see again, interest can be a good way to ensure this doesn’t happen. Whether you put an interest rate in place from the start, or make it clear that interest will start to be charged if the money isn’t paid back by a certain point, the idea of having to repay more than the initial amount can help the borrower take the loan seriously and ensure regular payments are made.

It’s also worth considering what adding interest could help teach your children about ‘real world’ loans, especially if they are still relatively young. Another way of achieving this is to refuse multiple loans – a bank wouldn’t agree to an endless stream of applications for further credit, so if you do want to see your money again you should ensure that your offspring don’t see you as an unlimited supply of funds.

Of course, the Bank of Mum and Dad isn’t really a bank at all, which is what makes it attractive for all involved. Young people will likely feel more secure borrowing from their family than risking being turned down by a bank and damaging their financial status; whilst parents who can afford to loan their children money know it might offer some protection from the difficulties of struggling to pay off credit. Charging interest might be something you’re completely comfortable with, or it might be an idea you would never entertain; ultimately, however, the choice is entirely yours.

Kids off to Uni? Congratulations – but have you been saving enough?

Wednesday, October 10th, 2018

The Institute of Fiscal Studies suggests that the average total debt incurred by today’s university students over the duration of their studies will amount to £51,000. This figure comes as those in higher education saw the interest rate on student loans rise to 6.3% in September. Total student debt in the UK has now risen to £105 billion as of March 2018, a figure £30 billion higher than the nation’s total credit card debt.

The rising cost of higher education perhaps makes it unsurprising that 40% of parents are now beginning to save towards future university costs before their children have even been born, with one in five hoping to have saved £2,000 by the time the baby arrives. Frustratingly, however, around two thirds of those who are saving are doing so by simply placing the funds in an ordinary savings account, meaning their money is earning them very little in interest.

An alternative option to consider is a Junior ISA (JISA) in the child’s name, which they can then access when they turn 18. The account currently allows £4,128 to be saved every year, and the best rate market rate for a cash JISA offers 3.25%. Saving the maximum amount at that rate for ten years would result in a nest egg of £49,427 tax free to cover university fees with plenty left over for other expenses.

Whilst a cash JISA offers dependability, a stocks and shares JISA is also worth considering as the potential reward on your investment can be higher. Both types of JISA can be opened at the same time with the allowance shared between them, so spreading your savings between the two can pay off in the long run.

Using your pension to save towards your child’s university education is also an option, thanks to the pension freedoms of recent years. With the ability to take a lump sum to put towards fees and other costs when you turn 55, pensions offer a tax-efficient way of putting away for both your child’s future and your own. This is an option which needs careful planning, however, as you’ll need to make sure you have enough for your retirement before paying for your child’s education.

For those able to do so, it may also be worth speaking to your own parents about helping towards their grandchildren’s university costs. Rather than leaving money to a grandchild in their will, a grandparent might consider gifting towards fees and other expenses or placing the money in a trust, reducing their inheritance tax liability and allowing their grandchild to benefit from their legacy when they really need it.