Client Blog | Netwealth
Client Blog
UK monetary policy leaves much to be desired – and we should examine the reasons why. The last week has seen both the US Federal Reserve and the Bank of England raise policy rates by 0.75%. There, however, the similarity ends.
Getting the right financial advice can help you stay on track to meet your wider goals in life. But under what circumstances should you seek advice – and how can you tell if you need it on an ongoing basis?
This column is not going to comment on the political problems engulfing the UK. You will be able to draw your own conclusions from that ever-changing environment. But political uncertainty is hanging over the UK outlook, although the risk-premium that was attached by the markets to UK assets in the wake of the mini-Budget has all but gone. Instead, here, the focus is on the economic and policy environment.
It’s been a tumultuous year for investors to say the least. While the reasons are many and varied, it often feels like there is little respite – a shard of good news can be swiftly pared by an alarming day for stock or bond markets. Yet while negative narratives may seem relentless, you should still address the factors that will help you achieve your long-term objectives.
We may be keenly familiar with the impact of inflation on our spending power this year, but we should also scrutinise the rapid negative effect it can have on our savings and investments. It’s crucial to recognise the value of taking action sooner, even if the easiest thing to do is to sit out challenging circumstances.
The prospect of soliciting financial advice can seem daunting and many may question whether they need expert advice, or wonder which aspects of advice might benefit them the most. While a meaningful change of your circumstances is often viewed as a catalyst, certain scenarios can make seeking advice much more pressing.
The first half of the year has been a tough market environment for investors. Much of the tricky start can be attributed to soaring inflation and central banks belatedly tightening monetary policy across much of the developed world. In the emerging world, many central banks sensibly started raising interest rates in 2021. This has led equity markets to sell off and bond yields to rise. There are reasons for optimism, however, which we will come to.
Inflation has figured prominently in our various webinars and comments since early last year. After the global recession and worries about growth in 2020, in the first few months of 2021 inflation became one of our major concerns.
It has been a very difficult first half of the year for most investment markets (some worse than others), with the US S&P 500 Index down 17% and the tech heavy Nasdaq Index down more than 25% in US dollar terms. Stocks in Europe have also fallen sharply, and to a lesser extent, in Asia. Only the energy and resources-laden FTSE 100 has offered resistance, with returns close to 0%, albeit in sterling terms.
Many investors will be impacted by the lifetime allowance, so it’s worth understanding the impact it could have on your pension. You can also get a clear view of your potential tax charge and consider which strategy may be appropriate for you to mitigate its effects.
Team Contributors
Gerard Lyons
Iain Barnes
Simon McConnell
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