Our Views on the Markets and the Economy
Articles, investment updates and economic analysis
Assessing how to fund our retirement should be an ongoing consideration. We could be retired for up to 30 years or more and the regulatory and wider environment require close attention. Property is increasingly difficult to rely on to solely fund retirement, so we need to be able to adapt and consider alternatives to ensure we meet our future goals.
Last week, I looked at the Autumn Statement and fiscal policy. As I noted, it would be no surprise if in the subsequent days there was to be greater scrutiny on the effect of inflation eroding the real spending power of government departmental spending, as well as on the impact it has had on boosting tax revenues. This indeed was the case.
The Autumn Statement may or may not have an impact on your finances, yet you may find it an appropriate time to consider your overall situation – and to assess whether you could be doing more to make the most of your money, and on the right path to achieve your goals.
The last few weeks have seen dramatic developments in financial markets. After a prolonged period of monetary policy tightening in the US, UK and euro area there has been a marked shift in both sentiment and market pricing. The markets now think the next moves in policy rates will be down. While we expect policy rates to fall next year, we believe that markets may be premature in expecting immediate interest rate cuts; after all the Federal Reserve, Bank of England and the European Central Bank all remain cautious about easing when inflation is still above target. Nonetheless, it is fair to say that this is an inflexion point for financial markets.
This is an immediate assessment of the Autumn Statement. In my view, there are a number of key takeaways:
UK inflation has decelerated sharply and looks set to fall significantly further. It has fallen from a peak of 11.1% in October 2022 to 4.6% in October 2023. We expect inflation to undershoot its 2% target by the middle of next year. While that is good news, falling inflation is not the same as falling prices. The level of prices is now settling at a high level as they have risen sharply in recent years. Indeed, consumer prices are 22% above what they were in January 2020.
Our CEO Charlotte Ransom answers a weekly question for readers of the i paper – helping them to better understand their investments and how to effectively plan their finances to achieve their long-term goals. Many of these questions are also highly relevant for Netwealth readers.
The Chancellor will deliver his Autumn Statement on November 22nd. This is the second major fiscal event of the year following the March 2023 Budget.
We have introduced the Liquid Reserves portfolio to offer a higher yield and lower risk option to investors who wish to take advantage of the current high interest environment. The portfolio offers compelling returns now, but you should also think about how to make the most of your money in the long term to achieve your future goals.
This week saw both the US Federal Reserve and the Bank of England leave interest rates on hold. While this may suggest that policy rates have peaked, it is not yet certain. Both central banks still retain a bias to tighten.
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