The news from the market feels like a broken record, as the main focus this month continues to be inflationary pressures around the global economies. For the last few months, talk from the central banks has focused on the high inflationary figures are temporary, and how they will decrease as we enter 2022.

However, there seems to have been a shift from suggesting these are transitory problems to the potential that inflation will be higher for longer.

Inflation could last longer than planned

On this note, the International Monetary Fund (IMF) advised that the global economies are facing inflationary pressures that will be “higher and longer than expected”.

The US Federal Reserve Chair Jerome Powell warned: “We now see higher inflation and the bottlenecks lasting well into next year”.

Interest rates are set to rise

Here in the UK, it is now widely anticipated that interest rates are set to rise sooner rather than later. The Bank of England’s (BoE) Monetary Policy Committee (MPC), currently have interest rates set at 0.1%; the lowest level in the history of BoE. However, they are tipped to rise by 15 basis points, if not by Christmas, certainly in the early part of 2022. For context, the UK’s annualised rate of consumer price inflation (CPI) actually fell from 3.2% to 3.1% in September but this remains well above the BoE’s target of 2%. There is now an expectation in some quarters that the CPI index could go as high as 5% during 2022.

The Chancellor of the Exchequer, Rishi Sunak, delivered his Autumn Budget on 27 October. I won’t go into too much detail in regards to this, as my colleague Robert Young has written a separate article on this for our monthly newsletter.

In short, he announced upgraded economic forecasts, along with some increased spending on public services. To help the hospitality, leisure and retail sectors, he unveiled a new 50% business rates discount to aid these companies. To add to the discussion on interest rates, he advised that the UK’s public finances are now twice more sensitive to changes in the rate than they were before the pandemic. By the end of the month, the FTSE 100 index had risen by 2.1%.

Across the Atlantic

In keeping with the inflationary news, the US economy only grew by 2% in the third quarter (down from 6.7% in the second quarter). This was largely blamed on the inflationary pressures, the impact of the Delta variant of Covid-19 and supply chain problems (we aren’t alone in this!). Throughout the month, the rate of unemployment in the US fell to 4.8% from 5.2%. However, this is still some way ahead of the 3.5% which was seen in February 2020, prior to the pandemic. Despite all this news, the Dow Jones Industrial Average Index increased by 5.8% over the course of October.

Rise in inflation in 'eurozone'

As you would expect, Europe is no different to the rest of the world, and the European Central Bank (ECB) have also seen inflationary pressures dominate the recent narrative. So much so that, ECB President Christine Lagarde observed after a recent meeting: “We talked about inflation, inflation, inflation”. In October, the eurozone’s inflation rose sharply from 3.4% to 4.1%. As with other central banks, the ECB expects these pressures to be a short term issue and to fall back during 2022. Although, they are acknowledging this will take longer than they had originally forecast - which seems to be a familiar theme for this review!

Japan provides a change of scenery

Japan is taking a different approach to the other major central banks. The Bank of Japan has kept its interest rate at -0.1% and is looking to maintain its policy easing. This is a far different approach, where most of the central banks are at the very least considering a tightening of their monetary policies in the near future.

As always, I hope that you have found this review a useful read. If you have any questions in regards to this, or any other financial matter please do not hesitate to contact one of us at Hanover.

Richard Brazier Director E RichardBrazier@hanoverfm.co.uk

Who should you contact for more information?

Director Richard Brazier

Financial Adviser Amanda Beacon

Senior Consultant Graham Smithson

What is it?

The aim of the policy is to provide a lump-sum benefit on the death of a single employee. This removes the need for the company to set up a registered group life scheme. The policy is designed to meet the requirements of a single-life relevant life policy under S393B (4) (b) of the Income Tax (Earnings and Pensions) Act 2003.
Relevant life policies are primarily aimed at 2 groups:

• High-earning employees who have substantial pension funds and don’t want their death-in-service benefits to form part of their lifetime allowance.
• Small businesses that don’t have enough eligible employees to warrant a group life scheme.

Relevant life policies can also be used by directors of a company.
Provided the arrangement meets the criteria below, a relevant life policy has a number of advantages.

• The benefit won’t form part of the employee’s lifetime pension allowance.
• The premiums paid won’t form part of the employee’s annual allowance (the amount that can be contributed by, or on behalf of, an individual to any registered pension scheme with the benefit of tax relief). So the employee is still able to make full use of their annual allowance to make contributions to a registered pension scheme.
• Premiums paid by employers are not normally assessable for employer or employee National Insurance contributions.

A terminal illness benefit is available on most contracts. In the event of the employee being diagnosed as suffering from a terminal illness i.e. one where the expectation of life is less than twelve months, the sum assured under the contract will become payable.

Eligibility

The policy must meet the following rules to qualify as a single-person relevant life policy:

• The policy must only provide for a lump-sum death benefit payable before the age of 75.
• No other benefit must be conferred under the policy.
• The policy must not be capable of having a surrender value. There are circumstances in which a small surrender value is allowed.
• Any benefit must only be payable to an individual or a charity.
• The main purpose of the policy must not be tax-avoidance.

Taxation

Premiums paid by employers are not normally assessable on the employees as a benefit-in-kind so they’re not subject to income tax.

The premiums may be treated as an allowable expense for the employer in calculating their tax liability provided that the local inspector of taxes is satisfied they qualify under the ‘wholly and exclusively’ rules.

As the benefits are payable through a discretionary trust, in most cases the benefits are paid free of inheritance tax as the payment is not part of the employee’s estate. But the trust will be subject to normal inheritance tax rules for discretionary trusts, which in some circumstances may give rise to the following charges:

• Up to 6% of the value of the trust fund on each 10th anniversary of the date the trust was established (the periodic charge). A periodic charge will only apply if there is a value held in the trust at the 10th anniversary. This could happen if, for example, an employee dies shortly before the 10th anniversary and the benefits have not been distributed to the beneficiaries.
• Up to 6% of the value of the fund on appointment of benefits out of the trust to a beneficiary (the exit charge).

All statements concerning the tax treatment of products and their benefits are based on our understanding of current tax law and HM Revenue and Customs’ practice. Levels and bases of tax relief are subject to change.

Risk considerations

There are a number of risk considerations that need to be taken into account. It is important that you are aware of these.

• This contract is designed to provide a high level of cover at minimal cost and therefore does not acquire a surrender value at any time.
• If for any reason premiums are not paid, cover will cease.
• Failure to disclose any requested or relevant information may adversely affect any future claims.
• At the end of the term selected, cover will cease and no further benefit will be payable.
• The present tax-free treatment of the policy benefits may change.
• If any relevant information provided, when applying, is not disclosed accurately and honestly, this could result in any cover offered becoming invalid and/or may result in the non-payment of any future claims.
• If this policy is to replace any existing policy offering the same type level of cover, the existing policy must not be cancelled until the new policy is in force.

If you think this will be beneficial to you, your company or your charity, please get in touch with one of our team members.

September was a month which saw a number of different factors at play, all of which caused concerns to the investment markets. In no particular order those concerns included:

·        Rising inflation;

·        Stuttering economic growth;

·        More hawkish rhetoric from central banks;

·        Energy prices rapidly increasing; and

·        The ongoing speculation around the Chinese real estate company, Evergrande, which could be on the brink of collapse.

In the UK inflation continues to dominate the investment picture. Having fallen to 2% in July the consumer price index increased to 3.2% in August. A lot of the reasoning for this increase was explained by prices 12 months ago being significantly lower as part of the government’s Eat Out to Help Out scheme. As we will all be aware, gas prices have surged in recent weeks, which is only going to fuel (no pun intended!) inflationary pressures. The Bank of England (BoE) is still expecting a figure of around 4% by the end of the year, but still considers this to be a temporary issue.

Once again, mirroring comments made in the US, the BoE advised that there was no need for immediate action on the increasing inflationary figures. However, the recent prices have probably increased the likelihood of some tightening of monetary policy in the not too distant future. For instance, the BoE have not ruled out interest rates increases this year, and the markets are pricing in an increase as early as February next year.

Growth in the economy still falls way below its pre-pandemic levels. In July the UK economy expanded by 0.1%. The three months to July saw unemployment fall to 4.6% and average wages increase by 6.8% (excluding bonuses). During September the FTSE 100 was down 0.5%.

As with the UK, it appears that the US is edging towards tapering its programme of asset purchases, and this could begin as early as this year. The Federal Reserve (Fed), has pointed towards a strong jobs market, economic growth and temporary inflationary pressures. Like the UK, there is a feeling that interest rates could rise in 2022, when this wasn’t expected until 2023. However, the Fed have indicated this is all dependent on pandemic containment.

In August, the annualised rate of inflation fell slightly to 5.3% from 5.4% in the US. There was some moderation in economic growth prospects for this year, with an expected figure of 5.9% down from 7%. Although this was countered by an increase to 3.8% for 2022, from the previous figure of 3.3%. It is clear that policymakers on both sides of the Atlantic are looking to prepare markets for future tightening of policy measures. September saw the Dow Jones Industrial Average fall by 4.3%.

Following a similar theme, the European Central Bank (ECB) announced it would look to draw back on the Pandemic Emergency Purchase Programme (PEPP). However, they stated that this wouldn’t be until March 2022 at the earliest, which helped to reassure the financial markets. Maybe in a further effort to calm the markets, the ECB President referred to this as recalibrating not tapering.

Meanwhile in Germany, voters went to the polls to determine a successor for Angela Merkel after 16 years in power. As widely predicted, the results of the poll were a coalition government, for which an agreement will need to be reached. The Dax Index was 3.6% down in September.

There will also a change of leadership in Japan, where Prime Minister Yoshihide Suga plans to stand down and be replaced by Fumio Kishida. Second quarter growth in Japan was higher than originally calculated, increasing to 1.9%. The Nikkei 225 Index rose by 4.9% by the end of September.

Fingers crossed the supply issues currently being seen in the UK haven’t impacted on you too much. I did have some difficulties with finding petrol in my local area but thankfully this seems to be easing now.  As always, if you have any queries in regards to any aspect of your financial planning, please do get in touch (link) with myself or one of the team.

We were approached by a company whose Managing Director was about to cease membership of their firm-wide Death-in-Service scheme. He had passed the retirement age of the scheme but was not intending on retiring.

As he was not intending to retire, the company wanted to provide him with the same level of life cover that he was entitled to under the Death in Service scheme. For various reasons he was not able to simply re-join the Death-in-Service scheme as a discretionary member, and the company weren’t prepared to increase the retirement age of the scheme.

We were asked if there was anything we could recommend in this instance. Our recommendation to the company was to take out a relevant life policy to age 75 for when the Managing Director intended to retire. This provided the same level of cover he had under the Death-in-Service scheme.

A relevant life policy had a number of advantages for the company and the Managing Director:

• The benefit won’t form part of the employee’s lifetime pension allowance.
• The premiums paid won’t form part of the employee’s annual allowance (the amount that can be contributed by, or on behalf of, an individual to any registered pension scheme with the benefit of tax relief). So the employee is still able to make full use of their annual allowance to make contributions to a registered pension scheme.
• Premiums paid by employers are not normally assessable for employer or employee National Insurance contributions.
• The policy is set up using a discretionary trust, which means the benefits should be free of inheritance tax, and do not form part of the employee’s estate.

In regards to these plans, the company is the owner of the plan, and the individual is the life assured. Due to the age of the client, and the sum assured, there was a requirement by the insurer for medical underwriting. Once this was completed the plan was placed on risk, and the Managing Director now has life cover until he turns 75.

For more details on Relevant Life Policies, please don't hesitate to contact a member of our team.

As the US economy continues to recover at a pace quicker than the US Federal Reserve (Fed) expected, they have indicated they may begin reducing their stimulus packages sooner than previously anticipated. The minutes from the Fed’s July meeting, which were released in August, and Fed Chairs Jerome Powell’s annual speech at the Jackson Hole symposium, both provided strong indications for a tapering of the current stimulus. However, Powell was very keen to emphasise that policymakers would be in no rush to tighten interest rates. In August, The Dow Jones Industrial Average Index rose by 1.2%.

Inflation continues to be a main headline in the US, and Powell used part of his speech to again address these concerns. Once again, he insisted that the inflationary pressures are merely a temporary issue caused by pandemic-related factors. Perhaps backing up his claim, the rate of inflation fell from 0.9% to 0.5%. This was the biggest fall seen in this index for over a year. He did, however, acknowledge that pressure on prices is higher than the Fed would like.

Much like the US, inflation is very much in focus in the UK. The annualised rate of consumer price inflation fell by 0.5% in July to 2%. The Bank of England (BoE) has indicated that inflation could rise as high as 4% by the end of the year. However, like the Fed, the BoE stands by its previous statements that they see these rises as “transitory” and expect the rate to fall back towards their target of 2% during 2022.

The issues that we have seen in regards to supply chain are not helping inflationary pressures in the UK are. Manufacturers are said to be experiencing the worst ever shortage of stock, according to The Confederation of British Industry (CBI).  During the three months up to July, job vacancies reached their highest level at 953,000. Maybe most publically, and certainly not helping the supply chain, has been the reported shortage of HGV drivers currently in the UK. During August, the FTSE 100 Index rose by 1.1%.

Japan managed to host the delayed Olympic Games during August, which were seen largely as a success. However, these took place against a backdrop of a country still battling Covid-19, and in particular, the Delta variant. There are concerns on how this is affecting the ability for continued economic growth, whilst the country is still under a state of emergency. In August, the Nikkei 225 Index increased by 3%.

At the risk of sounding like a broken record, Germany’s inflation rate rose to levels not seen since 2008 in August. The annualised increase of 3.4% was well above the European Central Bank’s 2% target. The second quarter saw a revised quarter on quarter growth estimate of 1.6%, helping to show Germany’s economic growth continues to rebound in 2021. Elsewhere in Europe, and showing that it’s not just an isolated problem for the UK, there have been supply chain disruptions. The German Dax Index rose by 1.9% by the end of August.

I very much hope that as the lockdown restrictions have relaxed in the UK, you have been able to take advantage of this over the summer. As always, if you have any queries in regards to any aspect of your financial planning, please do get in touch with myself or one of the team.

The benefits of regular savings

In the complex world of investment, timing appears to be crucial. However – unless you are gifted with foresight, and believe me very few investors are – you cannot predict what the stock market will do. This presents a problem for investors: not only to decide when to invest, but also when eventually to pull their money out of the market. This is where the benefits of ‘pound-cost averaging’ – or, in laymen’s terms, regular saving – come into play.

Pound-cost averaging works on the basis that, by regularly putting smaller amounts of money into a fund or other investment, you will reduce your overall risk of investing at the wrong time. Compared with investing one large sum in a single transaction, the risk is mitigated by the fact that smaller, regular sums will be invested over a period of time at a variety of prices.

Of course, in a rising market, regular savings will underperform the growth of a single lump sum because the later investments will miss out on the increase of the early days. However, in an up-and-down or falling market, the opposite is true. Later investments will buy in at lower or alternating prices – some lower than the original price – and will therefore gain a little more when the market finally does rise.

Similarly, regular saving is a great way to build up a lump sum from almost nothing. Setting aside a lump sum of £5,000 is a tall order for plenty of people, but putting aside £100 a month from your income might be less of an issue – and the addition of investment growth or interest means you could quickly build up a reasonable amount without necessarily noticing. And the longer you can leave that growing amount alone, the more impressive it potentially becomes.

Most investment products offer regular savings as an option, including investment funds, Individual Savings Accounts (ISAs), life assurance and pension plans. If you are considering equities for the first time, this is also an ideal way to start – if prices fall, your regular sum will buy a greater number of units in your chosen fund, which will then generate higher proportionate gains when prices start to rise again. Moreover, the small amount you invest every month should have a minimal impact on your cashflow and your lifestyle, and will also reduce your sensitivity to the short-term ups and downs of financial markets.

For more information and advice on regular saving, please get in touch with a member of our team.

Robert Young, Hanover financial management, pensions and employee benefits specialist reflects on the latest budget update and dissects what they mean for individuals with businesses, pensions, savings and investments.

State Pension Underpayments

Just in advance of International Women’s Day on Monday 8 March, there is some good news for women from The Department for Work and Pensions (DWP). They have determined that State pensions have been underpaid to women dating back two decades. This position is to be redressed over the next 5 years, and estimated to cost the Government £3 bn - suggesting  this impacts more women than the pension industry anticipated.

Lifetime Allowance

The Lifetime Allowance is to be fixed at this year’s amount of £1,073,100. It will no longer rise in-line with the Consumer Price Index (CPI). This will not just impact really high earners, but particularly in the short term will impact long serving employees at a senior level in the medical and teaching professions.

After the introduction for the 2020/21 tax year of a higher level of remuneration before the tapered annual allowance kicks in, largely to ensure that senior doctors and medical practitioners and senior teachers did not suffer the reduced annual allowance this creates, these same groups are being hit by the freezing of the Lifetime Allowance (LTA). This seems a poor return for those who have been working hard to help us all pull through the coronavirus pandemic.  If you are impacted by this, now is the time to take some advice and see what if any options are available to you.

Instead of freezing the LTA, given that there is already in place an Annual Allowance which limits the amount that can be paid in and receive tax relief, consideration should be given to removing the LTA. Government wish to encourage all of us to save for retirement but the LTA penalises those who invest consistently over a long time and achieve good investment performance and which is ultimately more likely to stop us saving for retirement.

Green NS&I Product

The Chancellor announced in the budget a “Green Bond” launching in the summer by National Savings and Investments (NS&I). These bonds will raise funds for “green” projects and help the country on its journey to being carbon neutral, while at the same time helping to boost saving. The terms are not yet known but with government backing through NS&I it is anticipated these will prove to be popular, given the growing demand for sustainable investments.

Inheritance Tax

The Inheritance Tax (IHT) threshold is to remain frozen at £325,000 and the residential nil rate band will also be fixed at £175,000 until 5 April 2026. The result is that more and more people will fall into the IHT net so now is a good time to take advice and review what actions you can take to reduce or remove your liability to IHT.

Auto enrolment charge cap consultation

An auto- enrolment charge cap consultation is to be launched in the next month. The primary aim of this is to encourage pension schemes to invest in a wider range of assets, particularly venture capital and growth equity assets. There is a significant amount of capital in defined contribution workplace pension arrangements and the Government wishes to unlock this to help support the UK economy post-covid. In particular, this will look at averaging performance fees over a number of years. This could be a win for the economy and a win for pension savers with enhanced investment returns (just be aware of the LTA cap though!)

Stamp Duty and Mortgage Guarantee Scheme

The cut in stamp duty has been extended to 30 June 2021 but be aware that the transaction must be completed by then. To smooth the transition back to normal levels, the nil rate band will be £250,000 up to 30 September, reverting to the normal level of £125,000 from 1October. In addition, the Government is introducing a guarantee scheme to encourage lenders to offer mortgages with only a 5% deposit, as these mortgages will benefit from a government guarantee. If you are looking at moving onto the housing ladder, now may be a good time to do so. If you don’t have the deposit money, or cannot raise a large enough mortgage, perhaps a family member may be able to provide this, helping to reduce their potential IHT at the same time. These are serious financial matters so don’t forget to take advice on all aspects.

Aspects of the budget relating to businesses and business owners

Corporation Tax

The Corporation Tax rate is to increase to 25% but only for financial years beginning on or after 1 April 2023 and for businesses with profits over £250,000. For small businesses with profits below £50,000 the rate will remain at 19%. There will be marginal relief introduced for businesses with profits between £50,000 and £250,000. Businesses both incorporated and unincorporated will be able to carry back trading losses for three years rather than just one year in 2020/21 and 2021/22 subject to certain thresholds. Business should look at the fine details of these changes and take advice on their impact.

Coronavirus Support Schemes

The furlough scheme is being extended to 30 September 2021 and employees will continue to receive 80% of salary up to £2,500 a month. However, employers should note that from 1 July 2021 they will be required to pay 10% of unworked hours, rising to 20% in August and September. In addition employers must continue to meet the cost of employer National Insurance contributions and pension contributions.

Support for the self-employed continues up to 30 September 2021. A fourth grant for the period February 2021 to April 2021 will provide 80% of three month’s average trading profits subject to a cap of £7,500. Eligible self-employed workers will be able to be claim in late April. To be able to claim you must have filed a 2019/20 tax return, so if you became newly self-employed in 2019/20 you will now be able to claim. A final fifth grant for the period 1 May 2021 to 30 September 2021 will be available to claim in late July and will be subject to a turnover test.

To discuss the impact of the budget on your business, investments, pensions or savings please get in touch. We would be happy to discuss your requirements and ensure your funds are working effectively for you.

Robert Young | Partner & Consulting Actuary

Hanover Financial Management Limited is an appointed representative of Culver Financial Management Limited which is authorised and regulated by the Financial Conduct Authority No. 114852. Hanover Financial Management Limited is registered in England and Wales with number 8586887. Culver Financial Management Limited is registered in England and Wales with number 01157569. The Financial Conduct Authority does not regulate tax advice or trusts. The value of investments can fall as well as rise. You may not get back what you invest.

The Financial Ombudsman Service is available to sort out individual complaints that clients and financial services businesses aren’t able to resolve themselves. To contact the Financial Ombudsman Service please visit www.financial-ombudsman.org.uk.

I hope that you are keeping safe and well. Depending on where you are reading this will dictate the current Covid restrictions you are currently following. Looking back, although my experience of the lockdown 2.0 in England was not as restrictive as the first, we will have to see how effective the various lockdowns and subsequent tier system measures were in due course.

In the last few weeks, we have finally seen some positive news in what has been an incredibly tough year; namely about the number of possible vaccines for the virus. Firstly, Pfizer and BioNTech announced trial results which were incredibly encouraging, which was quickly followed by similar results from Moderna, and the initial results from the Oxford University vaccine soon after.  Following this, Pfizer have just announced their approval from the MHRA, and the vaccine will be rolled out as early as next week.

On the day the Pfizer and BioNTech results were announced, the FTSE100 increased by over 5% immediately, finally closing the day over 4% higher. I believe this shows how the investment markets, and indeed ourselves, are looking for the light at the end of the tunnel. Let us hope that more of these vaccines indeed pass all the regulators tests and are available as early as this month.

On a more downbeat note, we are still seeing a rise in Covid cases, not only here, but across Europe and in the US. This has tempered some of the rises that we have seen in the markets. However, the FTSE100 has risen over 12% from the start of November, which is very welcome news for your investment portfolios. At the moment, the markets are very much weighing up the short term with cases rising, against the longer term prospects of successful vaccines.

Brexit is very much back in the news as the deadline to agree a deal with the EU approaches at the end of this year. The outcome of these negotiations will certainly have an impact on our investment markets. Although there appears to be ‘tentative’ possibility that a deal can be agreed, we will wait for further news on this.

In the US, we have recently seen the results of their presidential election. Although it is clear that Joe Biden has won, as we know, President Trump has so far not conceded defeat. His legal challenges are declined on an almost daily basis and the results for the individual states will soon have to be certified. Even if President Trump never concedes defeat, on 20 January 2021, Joe Biden will inevitably become the next President.

Since the election, the US investment markets have hit record highs; and the Dow Jones Industrial Average had its best month since January 1987 in November, as the index passed 30,000. However, I suspect this may be a reflection of the positive vaccine news, in addition to the reaction to Joe Biden being the next President.

Away from the election in the US, there is another government shutdown pending in December. However, optimism appears to be growing that a ‘stopgap’ stimulus package can be agreed to avoid this from happening.

Finally, as we count down to Christmas and look forward to the New Year, let’s hope that the optimism with the vaccines is not unfounded and that we finally start to see a return to normality in early months of 2021. As always, if you need to discuss any aspect of your investments or financial planning please do not hesitate to contact us.

Richard Brazier – Director – Hanover Financial Management Limited

I hope you are keeping well, and as I am writing this the temperature outside is 34 degrees so I trust that you are managing to enjoy the weather (although being British, I do feel this is a bit too hot!).

As I predicted in my previous update, the latest GDP figures for the UK have officially shown that we have entered a recession. As predictions go, it wasn’t a particularly bold one, and I think that we all knew this was coming.

To put into context, GDP shrunk by 20.4% in the second quarter, which was broadly in line with the market expectations. Previously, GDP fell by 2.2% in the first quarter. However, lockdown was only announced on 23 March in the UK, so the effect of the pandemic was largely seen in the following quarter.

Nevertheless, this is the biggest GDP quarter drop on record, and is the first time the UK has been in recession for 11 years. However, amongst these very gloomy figures, it should be noted that GDP grew by 1.8% in May, and by a further 8.7% in June.

In addition, with the news of the UK falling into recession and a record quarterly drop, you would have expected the FTSE100 to have fallen in a similar manner. However, you would be mistaken. On the same day that the recession was announced, the FTSE100 actually grew by a very healthy 2.04%.

However, here lies the issues with investment markets compared with economic data and news. If you read the papers, listen to the news or read social media, they tend to very much reflect the economic news, which at the moment is not positive. And that is not necessarily wrong, as being in a recession can affect many aspects of our day-to-day lives.

However, share prices tend to be more a reflection of the future, rather than the present. Official economic data, is of course, in its nature, a record of the recent past. The investment markets already knew this had happened, and as mentioned, the GDP figures were very much in line with their expectations. The FTSE100 rose sharply on the day of the announcements as it sees tiny shoots of the economy beginning to recover, and is hopeful these will continue.

Another example of how the investment markets tend to be ahead of the economic data was seen at the beginning of the pandemic. From the end of February, the global investment markets plummeted as the virus outbreak became a global pandemic. At this point, the official economic data would not have reflected this at all, but the investment markets accurately predicted the impact this was about to have on the global economies.

Having said all this, to reiterate a point in my last update, I still feel the markets are in a ‘wait and see’ period. We are seeing an increase of cases across Europe, and there will be nervousness to see if these develop into second waves. Unexpected good news, such as a proven vaccine, or unexpected bad news, such as second waves, can see relatively volatile movements in the investment markets.

As always, if you would like more information or advice about your investments or any other matter in regards to the markets and the latest economic data, please do get in touch.

Enjoy the rest of the summer, and I hope the warm weather holds (albeit a little cooler for me please!).

Richard Brazier – Director – Hanover Financial Management Limited

I hope you are all keeping well as we come out of lockdown - fingers crossed the government are correct in their hope that we will see a return to normal by the end of the year.

In this month’s update, I thought I would look into the future and predict the investment outlook for the next few months. To recap, we saw the global markets fall dramatically through March as the pandemic really took hold around the world. As we have seen in the UK and internationally,  governments and central banks have been very quick to act in an attempt to ease the impact Covid-19 has had on the global economies. This has had a positive effect on the markets which have recovered some of the losses that they saw during March. However, I think we have now entered a ‘wait and see’ period. There is much uncertainty and nervousness around potential second waves; whether the stimulus packages will work; and indeed, the increasing number of cases in the US.

One thing we can say with some certainty is that we are about to enter a recession. However, the length and severity of this recession is unknown, as the economic repercussions are still to be fully understood. As lockdown measures are eased, the UK government will be hoping the reopening of the economy will see a quick recovery. Nevertheless, recent figures illustrate an eye-watering drop in GDP, and I think it will take some time to recover, and certainly won’t rise as quickly as it has fallen.

With the various stimulus packages that are being introduced, this is leading to the largest rise in government debt levels we’ve seen since World War II. At some point, how this debt will be repaid will need to be addressed, but that is very much an action for the future.

In addition to global pandemic, the US Presidential election is also on the horizon. As mentioned in a previous blog, prior to the pandemic, I thought that President Trump would have based his campaign on how well he had managed the economy. For this reason, he will require a swift recovery and further gains in the US stock market in the coming months. This is probably why he has been so keen to reopen the US economy - perhaps earlier than it should have.

I believe the markets could be best described as being pessimistic at the moment as they wait to see how the next few months unfold. For this reason, there could still be short-term volatility as good or bad news is reported. I certainly don’t think the economy will return to its original position as quickly as the down turn took effect.

As always, for more information and advice regarding your investments, please do not hesitate to get in contact with us. Hopefully, it won’t be much longer before we can resume as ‘normal’ and see you again.

Richard Brazier – Director – Hanover Financial Management Limited