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Investment market update: April 2024

Interest rates and inflation continued to affect markets around the world in April 2024. Read on to find out what else may have affected investment markets and your portfolio in April.

Expectations of interest rate cuts were good news for gold. Investors who feared falling interest rates would lead to lower returns on cash and government bonds purchased more gold. It led to the asset hitting a record high on 8 April at $2,535 (£3,171) an ounce.

Yet, while many experts are predicting that interest rates will fall, Kristalina Georgieva, the managing director of the International Monetary Fund, warned that central banks must resist pressure to cut them too soon.  

UK

The UK ended 2023 in a technical recession – defined as two consecutive quarters of economic contraction. The latest figures suggest the UK is already out of the recession. According to the Office for National Statistics, GDP grew slightly by 0.1% in February 2024, following 0.3% growth in January.

UK inflation data was also positive. Inflation in the 12 months to March 2024 was 3.2%. While there’s still some way to go before reaching the Bank of England’s (BoE) 2% target, it’s the lowest figure recorded since September 2021. 

Clare Lombardelli, the newly appointed BoE deputy governor, tempered the news by adding that inflation is likely to be “bumpy” as pricing behaviour isn’t smooth. However, she added that the overall experience for people should be lower and more predictable inflation. 

On the back of good news and with a general election looming this year, chancellor Jeremy Hunt told the Financial Times that he’d like to cut taxes in the autumn fiscal statement “if we can”. 

While inflation overall is falling, business group British Chamber of Commerce has warned that new Brexit fees and checks could lead to higher food prices in the UK. Importers of animal products from the EU will face an additional charge from 30 April 2024 and new checks will be applied from October.

Data from S&P Global’s Purchasing Managers’ Index (PMI) also indicates that growth will continue. The service sector continued to expand in March and the construction industry returned to growth thanks to increased work in infrastructure projects. 

Official data shows average wages, excluding bonuses, increased by around 6% between December 2023 and February 2024. Once inflation is factored in, average wages increased by 2.1% in real terms.

Yet, other information suggests many households will continue to financially struggle. A BoE report suggests it expects the number of households and small businesses to default on debt to rise this summer. 

A report from consultancy firm KPMG also found that half of consumers are cutting back on non-essential spending. In fact, just 3% of consumers said they had been able to spend more in the first quarter of 2024. Eating out is the most likely expense to be cut from budgets, which could negatively affect the hospitality sector. 

In April, the FTSE 100 proved why investors need to be prepared to weather market volatility.

On 12 April, the index of the 100 largest companies on the London Stock Exchange closed at the highest level for over a year. News that the UK is likely to have exited a recession led to the index rising by 0.9%. 

However, just days later, on 16 April, the index tumbled by 1.95% and almost every stock on the index was in the red, with mining companies and banks suffering the largest falls. The downturn was linked to a market adjustment after the US Federal Reserve said it may not cut interest rates as soon as it hoped.

Then there was another turn as the FTSE 100 hit a record high of 8,068 points on 23 April due to expectations that the BoE will start cutting interest rates this year and fears about escalating tensions in the Middle East eased.

The ups and downs serve as useful reminders to focus on the long-term performance of investments rather than short-term market movements. 

Europe

Inflation across the eurozone fell by more than expected to 2.4% in the 12 months to March 2024. Despite optimism that interest rates would be cut, the European Central Bank opted to hold rates. Yet, the bank did signal that, if inflation continues to fall, it could cut them in the summer. 

PMI data indicates that the eurozone economy returned to growth for the first time since May 2023. The positive figures were driven by stronger than expected output from the service sector, with Spain and Italy providing the strongest boost. However, the two largest economies in the bloc, Germany and France, contracted. 

Some EU countries, including Italy and France, could be put under an infringement order procedure for operating budgets with deficits that breach the EU’s rules. Usually, governments have to keep budget deficits below 3% of GDP. The cap was set aside during the Covid-19 pandemic but could be implemented again, which might place pressure on public spending plans. 

Similar to the UK, European indexes suffered on 16 April when the Federal Reserve indicated it wouldn’t cut interest rates soon. France’s CAC index fell 1.8% and Spain’s IBEX was down 1.2%. 

US

The US private sector added 40,000 more jobs than expected in March 2024, with businesses hiring an additional 184,000 employees. Job growth is one of the measures the Federal Reserve will consider when deciding whether to cut interest rates, so the data led to speculation that rates would fall soon. 

Yet, when the rate of inflation was released, it dampened the optimism. In the 12 months to March 2024, inflation was 3.5%, an increase when compared to the 3.2% recorded a month earlier. 

Investment markets did benefit when fears that Iran’s attack on Israel would lead to an escalation in the Middle East didn’t materialise. On 15 April, the Dow Jones saw a rise of 0.9%, while the S&P 500 increased by 0.7%, and tech-focused index Nasdaq was up 0.6%. 

Asia

China beat its GDP forecast when it posted growth of 5.3% for January to March 2024 when compared to a year earlier. However, China’s National Bureau of Statistics recognised that growth could be hampered. The organisation said the external environment was becoming more “complex, severe, and uncertain”. 

Indeed, the country faced several headwinds in April.

First, credit rating agency Fitch has cut the outlook of China’s debt from “stable” to “negative”, as it said the country was facing uncertain economic prospects. 

Then, US treasury secretary Janet Yellen voiced concerns that China’s excess manufacturing capital could cause global fallout. She said China was too big to rely on exports for rapid growth and excess capacity was putting pressure on other economies.

While Yellen didn’t make any announcements about trade tariffs on Chinese goods, she said she would not rule out taking more action to protect the US economy from Chinese imports. 

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 investments (and any income from them) 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. 

Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

The taxation of the investment is dependent on the individual circumstance of each investor, and may be subject to change in the future.

Britain’s housing dubbed “worst value for money” of any advanced economy

Britain’s housing stock has been dubbed the “worst value for money” in a Resolution Foundation report. With the media reporting that the UK is in the midst of a housing crisis, you might not be surprised by the news, but how the UK compared to other countries could still shock you.  

Read on to find out more about the research conclusions and why soaring house prices could mean it’s more important than ever that you secure a competitive mortgage. 

British property buyers are “paying more for less” 

Many other countries are battling a housing crisis too. In a lot of developed countries, demand for property is outstripping supply and it’s led to climbing house prices, even after concerns that the Covid-19 pandemic and rising interest rates would lead to a fall. 

Across almost every metric the Resolution Foundation measured, including housing costs, floor space, quality, and wider price levels, the UK fell short. Indeed, the study found that Brits are “paying more for less” and the UK housing stock offered the “worst value for money of any advanced economy”. 

UK homes were found to be some of the smallest among the countries included in the report. Indeed, the average floor space per person in the UK is 38m2. That’s significantly smaller than many similar countries, including the US, Germany, France, and even Japan. Indeed, even properties in high population density New York were found to offer a more spacious 43m2 per person. 

It’s not just the space that could present challenges for UK homeowners – the UK’s housing stock is also the oldest of any European country. 

The Resolution Foundation report noted that more than a third of homes in the UK were built before 1946. In comparison, the number of homes built before the end of the second world war is just 21% in Italy and 11% in Spain. 

As older properties tend to be poorly insulated when compared to newer counterparts, Brits could be paying higher energy bills as a result and might be more likely to face damp issues. 

With a general election set to be called this year, the housing crisis could become a key topic during election campaigns. 

Rising house prices could mean a competitive mortgage is crucial for your budget 

If you’re looking to purchase property, news that the UK’s house prices are high can be frustrating. 

Signs suggest the market is slowing – house prices fell by 1% in March 2024 when compared to a month earlier, according to the Halifax House Price Index. However, experts aren’t predicting a sustained fall. Indeed, Halifax noted that house prices have shown “surprising resilience” in the face of higher borrowing costs due to interest rates rising. 

There might be little you can do to bring down house prices, but you could save money by choosing a competitive mortgage deal.

Even a small decline in the interest rate you’re paying could cut your household's outgoings in the short term and really add up when you calculate how much interest you’d pay over the full mortgage term. 

The table below shows how the interest rate would affect your expenses if you borrowed £250,000 through a 25-year repayment mortgage.

Screenshot 2024-06-05 122253.png

Source: MoneySavingExpert 

As you can see, taking some time to secure the right mortgage deal for you could reduce your regular outgoings and potentially save you thousands of pounds over the full mortgage term.

Considering how lenders may view your application could be worthwhile. For instance, are there any red flags on your credit report that might mean a lender offers you less competitive terms or even rejects your mortgage application?

Identifying the lenders that are more likely to offer you a lower interest rate could be useful too. According to the Bank of England data, there are around 240 regulated mortgage lenders and administrators operating in the UK. So, shopping around might lead to a deal that’s better suited to you.

Understanding the lending criteria of each lender can be difficult, but may be important for assessing how likely they are to approve your application. An independent mortgage adviser could search the market on your behalf to find a lender that may be right for you – it could make securing your new property or mortgage smoother and less stressful. 

Contact us to talk about your mortgage needs

If you need to find a mortgage that suits you, we could help. We’ll work with you to understand your needs and provide support throughout the mortgage application process. Please contact us to arrange a meeting. 

Please note: This blog is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.

The information and guidance provided within this blog is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Not all mortgage contracts are regulated by the Financial Conduct Authority.

ESG for beginners: The basics you need to know about ESG investing

If you’ve come across the phrase “ESG investing” but weren’t sure what it meant or if it’s right for you, read on. You’ll discover what it means and some key considerations if it’s something you want to incorporate into your investment strategy. 

ESG investing simply stands for “environmental, social and governance” and involves considering factors from these three pillars alongside financial information when you’re making investment decisions.

It’s an approach to investing that’s been around for decades. Indeed, the initial concept of “ethical investing” is thought to have originated in the Quaker community in the 18th century. However, it’s only since around the 1960s that it started to become mainstream, and it’s gradually gained momentum in the decades since. 

It’s an approach that more investors could incorporate into their investment strategy in the future. According to a report in FTAdviser, more than half of investors plan to increase their ESG investments in 2024. 

ESG covers a broad range of categories 

The term “ESG” covers a huge range of categories that consider how a company operates. 

Under the environmental pillar, the following issues might be considered:

  • Carbon emissions
  • Deforestation 
  • Waste management.

Social considerations may include:

  • Data security
  • Human rights within the supply chain 
  • Customer satisfaction. 

Finally, governance might cover:

  • Diversity of board members
  • Executive pay 
  • Political contributions. 

Factoring ESG issues into your decision-making process could help align your investments with your values. For instance, if you choose Fairtrade items when you’re grocery shopping because you want farmers to receive fair pay, you might consider how a company treats its employees and supply chains when you come to invest. 

Some opportunities use other phrases when they’re describing investment criteria. For example, an investment fund that’s focused on reducing its impact on the environment might use “green” or “sustainable”. Or if a business’s practices are scrutinised, it could use “corporate social responsibility” or “CSR”. 

Incorporating ESG doesn’t mean overlooking the finances 

Incorporating ESG principles into your portfolio doesn’t mean you overlook the financial side of the business or fund. After all, you still want to generate a return on your investment.

You might want to think of your portfolio as having a double bottom line – the returns you receive and the positive impact it could have on the world. So, making ESG part of your portfolio doesn’t have to mean settling for lower returns or adjusting your plans. 

In fact, some people argue that ESG investing could deliver greater benefits for investors as companies that have embraced ESG practices are more likely to be forward-thinking and prepared for potential government or economic changes.

Of course, investment returns cannot be guaranteed, and you should still ensure you understand the risk of investing in ESG opportunities and assess if it’s right for you. 

You can start ESG investing by buying stocks or using a fund

Much like when you invest without an ESG criteria, you can choose to purchase stocks and shares or invest in a fund. 

If you choose to invest in stocks and shares, you’d select which companies you invest in. Understanding if they meet your ESG criteria may be difficult, as there’s no standard way for businesses to report the information. You might also need to consider the individual risk of each stock and how to create a diversified portfolio that suits your needs. 

The alternative option is to invest in an ESG fund.

A fund would pool your money with that of other investors and then invest in a range of companies. As a result, using a fund may be a useful way to diversify your investments. The fund will define what its ESG focus is, and how it decides which businesses to invest in.

One thing to keep in mind is that, as ESG is so broad, it might be challenging to find a fund that matches your values exactly. So, you may need to compromise in some areas. 

Whichever option you choose, it’s essential you still consider the factors that you would when investing without an ESG focus, such as your investment time frame, risk profile, and how it fits into your financial plan. This can help you balance your ESG goals with your aspirations and circumstances. 

Contact us if you’d like to consider ESG factors when investing

Balancing ESG factors and the other considerations you might need to make when investing can be difficult. We’re here to offer support and could work with you to select investments that not only align with your ESG values but support your other goals too.

Please contact us to arrange a meeting to talk about your investment strategy. 

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 investments (and any income from them) 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. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The essentials you need to know about critical illness cover

If you face a serious illness, it could place pressure on your finances and mean you’re not able to focus on what’s most important – your health. Yet, research suggests many families could be overlooking the protection that critical illness cover could provide. Read on to find out how critical illness cover works and how it could improve your financial resilience. 

Critical illness cover may pay out if you were diagnosed with a serious illness. It could help you pay off large financial commitments, such as your mortgage, maintain your lifestyle, or provide for dependants. 

Serious illnesses might be rare, but that doesn’t mean they won’t affect your family. According to Macmillan Cancer Support, someone receives a cancer diagnosis at least every 90 seconds in the UK. So, while you or a loved one falling ill might not be something you want to think about, taking steps to provide a safety net could be valuable.

Not having to worry about your finances should you fall seriously ill could support your wellbeing and mean you’re able to focus on recovering or adjusting your lifestyle. 

Despite the potential benefits, many families haven’t taken out or even considered critical illness cover. A survey published in IFA Magazine found that 73% of adults under the age of 40 don’t have critical illness cover to support themselves or their families, and more than half didn’t understand what it’s for. 

If you don’t already have critical illness cover in place, here are some of the essentials you need to know. 

1. Critical illness cover could pay out a lump sum

When the conditions are met, critical illness cover would pay out a lump sum. You can use this money however you wish. As you’ll only receive a single payment, you might want to consider how you’d use the money to create long-term financial security if you’re unable to return to work. 

When you take out critical illness cover, you can set how much you’d receive. So, spending some time understanding your finances and how you’d be affected if you were unable to work could be valuable. Reviewing your other assets or protection, and setting out what your priorities would be could help you select an appropriate level of cover.

Typically, the greater the potential payout, the higher your monthly premiums to maintain the cover will be. 

2. Not all illnesses would be covered

Critical illness cover will only pay out under certain conditions, and not all illnesses would result in receiving a lump sum. It’s important to understand how comprehensive critical illness cover is, as it can vary between providers.

According to a report in FTAdviser, half of people with critical illness cover are not fully aware of the conditions they would be covered for if they needed to make a claim. In many cases, families believed they had a greater level of cover than they did. It could mean their financial safety net isn’t as resilient as they believe, and they might face a shortfall at what may be an already challenging time.

As well as covering particular conditions, critical illness cover might specify severity too. For instance, a cancer diagnosis may not automatically result in a payout. Before you take out critical illness cover, it’s important to understand if it provides the protection you want and exactly in what circumstances you could make a successful claim. 

If critical illness cover isn’t right for you, there may be other options. For example, income protection would pay a regular income if you were unable to work due to an accident or illness and may cover more conditions.

3. There may be additional exclusions based on your health

In addition to understanding what conditions are covered, there might be further exclusions. Pre-existing medical conditions or illnesses that a close family member has been diagnosed with will likely be excluded. 

While it might be tempting to omit information, doing so could mean the cover is cancelled and a claim refused. 

4. A range of factors will affect the cost of critical illness cover

Many factors will affect the cost of maintaining your critical illness cover, from your health to whether you smoke. But with many providers offering cover from less than £10 a month, it could be cheaper than you think. 

It’s worth shopping around and comparing different providers. The premiums could vary significantly. However, the cheapest deal isn’t automatically the right option. For example, if the cover is less comprehensive than alternatives, it may not provide the peace of mind you want. 

5. In 2022, 91% of critical illness claims were paid 

While you might believe that providers don’t pay out when claims are made, the statistics paint a different picture. Data from the Association of British Insurers shows that in 2022, 91.6% of critical illness claims were paid – more than 19,000 families received a lump sum payment that may have helped them deal with a serious condition and challenging circumstances. 

Contact us to discuss your financial resilience 

Critical illness cover is just one way to create a safety net in case you fall seriously ill. There could be other steps you may take to improve your financial resilience too. Please contact us to discuss how you could provide financial security for you and your family. 

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

Note that financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.

Will disputes are on the rise. Here are 7 pragmatic steps you could take to minimise conflicts

A will is an important way of outlining what you’d like to happen to your assets when you pass away. Yet, figures suggest will disputes are on the rise. If you’re worried about potential conflicts when you pass away, read on to discover some useful steps you might want to take. 

According to a report in the Guardian, thousands of families have been embroiled in disputes dubbed “ruinously expensive” by solicitors. As well as the potential legal costs, court cases can be emotionally draining and place pressure on your loved ones. 

In 2021/22, 195 disputes went to court, up from 145 in 2017. While the figure is low, it’s thought to be just the tip of the iceberg as many cases are settled out of court. Indeed, the report suggests that as many as 10,000 families in England and Wales are disputing wills every year.

A dispute could mean your assets aren’t passed on in a way that aligns with your wishes, or even that someone who you wanted to benefit from your estate is overlooked. If it’s a situation you’re worried about, here are seven steps you could take to reduce the risk of your will being overturned. 

1. Speak to loved ones about your wishes

Speaking to your family about your wishes can be difficult. Nonetheless, it could be an important conversation and mean there are no surprises when your will is read, which could reduce the chance of a dispute arising. 

If someone in your life discovers they will inherit less than expected or are not a beneficiary in your will after your passing, they may be more likely to react negatively – especially if they’re also grieving your loss. Discussing it during your lifetime could give them time to come to terms with the decision, as well as allow you to explain your reasons.  

2. Write a letter of wishes 

Similarly, you can write a letter of wishes that could be read alongside your will. This provides an opportunity to explain why you’ve made certain decisions, which could be useful for beneficiaries, the executor of your estate, and, if a dispute arises, the court. 

You should take care that the letter of wishes doesn’t contradict what’s written in your will – you may want to ask a solicitor to review it to minimise mistakes. 

3. Include a no-contest clause in your will

You could choose to add a no-contest clause to your will. It doesn’t mean that someone can’t raise a dispute, but it can act as a deterrent. Essentially, the clause means that if someone did challenge your will and lose their dispute, they would forfeit any inheritance they may have been entitled to. 

So, if you’re worried that a beneficiary could challenge your will to try and receive a larger proportion of your assets, adding a no-contest clause might be useful. 

4. Hire a solicitor to write your will

You can write your will yourself without any professional legal support. Yet, a solicitor could provide essential guidance and check the language of your will.

For example, if you’ve used vague or contradictory phrases, there could be a greater opportunity for disputes to arise. It could be particularly important if your estate or plans are complex. Choosing to hire a solicitor may help you feel more confident that your wishes will be carried out. 

5. Ask a medical practitioner to witness your will 

For your will to be valid, it must be made or acknowledged in the presence of two witnesses. To act as a witness, a person must:

  • Be aged over 18 (16 in Scotland)
  • Have the mental capacity to understand what they are signing
  • Not be related to the person making the will or have a personal interest in the will.

However, if you’re worried that your will could be contested on medical grounds, you might want to ask a medical practitioner, such as your GP, to witness it. This could prevent later accusations that you weren’t of sound mind when writing your will.  

6. Regularly review your will

One of the reasons why a dispute may occur is that your beneficiaries don’t believe your will reflects your circumstances when you pass away. So, a regular review might be useful.

Going over your will every five years or following major life events could ensure it remains up-to-date. For example, you might want to make changes after you welcome a new grandchild into the family, remarry, or your wealth changes significantly. 

7. Store your will in a safe place 

Finally, make sure your will is stored in a safe place and your executor knows where it is. If you’ve rewritten your will, be sure to destroy previous ones to avoid potential confusion. 

Understanding your estate could help you make decisions about your will

If you’re deciding how to distribute your assets or need to update your will, understanding your estate could be an important step. Calculating the value of various assets and how they might change during your lifetime could alter how you want to pass them on. Please contact us to talk about your will and wider estate plan. 

Please note: This blog is for general information only and does not constitute advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning. 

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