Our Views on the Markets and the Economy

The German elections could be a game changer. It is still too early to tell what impact they will have on future German and European policy, but the immediate reception they are receiving in Germany suggests it could yet prove profound.

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How Investors Can Meet the Income Challenge

Investors’ ambitions can typically be classified as one of two broad goals: accumulating and growing a pot of money for use in the future, or investing to provide ongoing income, such as a pension or for meeting the costs of education or care. For the latter, we often hear that when faced with future cashflow requirements from their investment portfolios, people only want to invest in income-oriented strategies.

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Strategic Allocation Review – Summer 2017

Recall that at Netwealth, our ambition is to deliver attractive portfolio performance over the medium-to-long-term in order to give our clients the best chance of meeting their investment goals.

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Beat School Fee Inflation by Investing

Private school fees in the UK rose by 3.5% last year, according to the latest figures from the Independent Schools Council (ISC) released in May. Boarding fees rose by 4.1%, while day fees increased by 3.5%. While the ISC reports that this is the lowest increase since 1994, fees hikes continue to outstrip earnings growth and inflation.

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The first message is that global economic news has been positive over the summer months. Across the major economies, recent data has pointed to growth being solid and inflation low or well behaved. The International Monetary Fund provided a positive tone in early July when their update of the state of the world economy reiterated the positive message they had previously made in April. They foresaw a solid pace to global growth this year and next and a strong recovery in global trade. This latter point is particularly important, as in recent years there has been a downbeat view among economists about the prospects for global trade. There has also been good news across many regions.

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Stay the Course to Meet Your Goals

Every generation thinks that they live through unprecedented times. There certainly seem to be enough extraordinary issues to worry about currently, from political gyrations to the longstanding economic worries dating from the start of the global financial crisis 10 years ago. It’s true for many investors too: the belief that ‘this time it’s different’, as recent experience dominates attention and the lessons of earlier history fade from our collective memory. Financial markets have been unusually subdued in recent months, but this benign market environment too will pass at some point. And despite all the popular concerns, the catalyst for disruption of this collective mood will probably be something about which the financial world is not currently troubling itself.

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Let's begin with a question. What key economic word was not mentioned in the Bank of England's recent 44-page Inflation Report?

Don't worry, it is not a trick question. The same word was not in the previous Report in May either.

The answer is not "Brexit". The missing word was "money”. Pause. Digest. Think. Yes, money. I do not describe myself as a monetarist, but monetary developments are like an indicator on a dashboard, essential to keep an eye on. One would have thought a central bank, above all, would appreciate this.

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Geo-Politics Knocks the Markets

When we take a long-term view we are always conscious of the need to be aware of cyclical developments. Short-run economic cycles are superimposed upon long-run structural trends, sometimes coming powerfully together at times to drive markets.

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On Thursday, the Bank of England decided by a vote of 6-2 to leave interest rates unchanged at 0.25 per cent. They also opted to leave unchanged their other existing policy measures of £435 billion of government bond purchases and £10 billion of corporate bond buying. Changes to either of those, like any rate hike, would have marked a significant shift in the direction of policy and have had a market impact.

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The New Normal for the UK Economy

Two key phrases help describe the current economic challenge facing politicians and policy makers in the UK and across the western world. These are "hyper normalisation" and "policy normalisation". How they are resolved will have a big impact on economies and markets in the year ahead.

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