Mar 05

March Market Commentary


“The first month of 2018 was a good one for the major stock markets which we cover in this Bulletin. We report on 12 markets and 11 of them made gains in January – in some cases, spectacular gains, which many investors would regard as more than adequate for a full year.”

Sadly, February was the exact opposite: 10 of the 12 markets on which we report were down in the month, following a global sell-off at the start of February. But that is the nature of savings and investment: stock markets rise and fall. Saving and investing is a long term business: a marathon not a sprint.

The markets were ‘spooked’ in the first week of the month by signs of inflationary pressure in the US: the President has drastically cut corporation tax and many firms have passed the savings on to their employees in higher wages. Fears of inflation prompted worries that the Federal Reserve would tighten monetary policy in the US. As the Dow Jones index suffered its biggest one day points fall in history so – as always happens in today’s inter-connected world – the fears and falls travelled around the world. The Japanese stock market, for example, fell by 4.73% in one day – its biggest fall since 1990.

World stock markets recovered some of the ground through the rest of the month, but – as we will see from the figures – not all of it.

What of the crypto (or virtual) currency, Bitcoin? It finished January hovering around the $11,000 mark (£7,780), down from an all-time high of very nearly $20,000 and with plenty of experts predicting that it would ‘slide, crash or implode’ in 2018. At the beginning of the month it looked like the experts would be right, as the crypto-currency fell 30% in one day and went below $6,000.

This, though, was in the same week as the global stock market sell-off, and Bitcoin gradually recovered through the month. As we write, the price is $10,669 (£7,640) – so a roller-coaster month for Bitcoin but, at the end of it, very little change.

In politics, German Chancellor Angela Merkel finally found a way to stay in power for another four years and Donald Trump saw his popularity rating climb past 50% and announced he would be running for President again in 2020. At home, Brexit rumbled on: let’s plunge into the detail…

The month in the UK started and ended with bad news on the jobs front. At the beginning of February, supermarket group Morrisons announced that they would be making 1,500 middle managers redundant, and Sainsbury’s made similar gloomy noises. The month ended with both Toys-R-Us and Maplins as further victims of the move to online shopping: both chains called in the receivers, with around 5,000 job losses expected. In between these two events, British Gas owner, Centrica, announced that it would cut 4,000 jobs after a “weak year” – so a very poor month for jobs.

While our glass is half empty we should report that growth in the UK service sector for January was the slowest since September 2016. The Purchasing Managers’ Index was down to 53, well below the 54.2 recorded in December and also falling short of economists’ expectations.

Figures from the Office for National Statistics also showed the UK’s trade gap – the difference between what we import and export – had widened in the three months to December 2017 as exports to Europe slowed. The deficit for December was recorded at £4.89bn, up from £3.65bn in the previous month.

Perhaps the worst news, though, was reserved for Tesco’s director of human resources. We have written many times in this Bulletin about Tesco’s problems: the supermarket group seemed to be weathering the challenges, but it is now facing the largest ever claim for equal pay in UK employment history.

Claimants are seeking £4bn from the company, arguing that staff in (male-dominated) distribution are paid significantly more than staff in (female-dominated) retail. We are talking about an average wage of £11 per hour versus one of £8 per hour, which could add up to a disparity of around £5,000 per year.

UK unemployment also rose in the three months to December, inching up to 4.4%. But hand in hand with the rise in unemployment went a rise in wage growth, and there was certainly also plenty of good news for the UK economy in February. UK productivity growth was the strongest since the financial crisis of 2008; manufacturing grew by 0.3% in December and, again, is doing better than at any time since 2008. First time buyers were at their highest level for 11 years and ten years after being bailed out by the taxpayer, Royal Bank of Scotland finally recorded a profit, albeit what its boss called a “symbolic” one of £752m.

So what did the FTSE-100 index of leading shares make of it all? Like all the world’s leading stock markets, it was down in February. Having started the month at 7,534, it closed down 4%, at 7,232. The pound was also down against the dollar in February, falling by 3% to $1.3768.

The Brexit notes available for this month may not ultimately amount to much. Boris Johnson made a speech: Jeremy Corbyn made a speech: Theresa May is due to make a speech at the end of this week. Meanwhile, whatever the British politicians said, the European politicians said it wasn’t possible, while the pundits turned to semantics, arguing over whether we might leave ‘the’ customs union or ‘a’ customs union.

By the end of March, we will be a year away from leaving the EU: it is easy to believe that everything ‘agreed’ so far will be up for re-negotiation before then.

Perhaps the best clue as to what might happen came – ominously – from the Netherlands. The government there has triggered plans for a ‘hard Brexit,’ recruiting 1,000 extra customs officials in the event that no deal is reached and they need extra people power to administer trade barriers.

My apologies: I forgot. Brexit Secretary David Davis also made a speech, saying no one should fear a “Mad Max style dystopia” after Brexit. Well, that’s cleared everything up…

As we mentioned above, Angela Merkel finally stitched-up a coalition with Germany’s Social Democrats, allowing her to remain as Chancellor for another four years. This does, though, mean that the anti-immigration party, Alternative fur Deutschland, becomes the official opposition to the coalition. With anti-immigration sentiment already strong in EU member states like Poland, Slovakia, Hungary and the Czech Republic, there may well be increased tensions in the EU in the months ahead.

In Germany, the month started with thousands of metal and engineering workers in the south-west going on strike, essentially over their ‘work/life balance.’ The strikers wanted the right to reduce their working week from 35 to 28 hours (on full pay) to allow them to care for children or elderly relatives, before returning to full-time work after two years. The concession was duly agreed by the employers, and obviously could have implications for the whole of the German industrial sector. For now though, enough German workers remained on duty to see the country produce its customary trade surplus – €18.2bn in December.

Sunday March 4th sees Italy go to the polls in an election which is almost certain to produce no clear result. European Commission President Jean-Claude Juncker has already said that the EU is bracing itself for the ‘worst possible result’ – although whether that means months of trying to form a viable government or success for the far-right Northern League or the populist Five Star Movement, no one is quite sure. Some analysts believe that if either the Northern League or the Five Star movement come to power it will affect confidence in the Euro, but with a few days to go until polling, an unclear result and months of indecision looks the most likely outcome.

At least Jean-Claude could console himself with the news that the European Union economy grew at its fastest pace for ten years in 2017, with figures from the EU statistics office Eurostat confirming that the 28 member bloc expanded by 2.5% in 2017. Growth in the final three months of the year was 0.6%, mirroring that of Germany and France.

There are, however, some warning signs for France: it did well in 2017, largely due to the labour reforms of Francois Hollande, but economists warn that the country is continuing to lose export share: it now accounts for less than 13% of the Eurozone’s total exports, compared to more than 17% in 2000.

Like all the world’s leading stock markets, both Germany and France were down in February. Germany fell 6% to close at 12,436 while the French market was down 3% to 5,320.

February began with three of America’s tech giants – Apple, Amazon and Alphabet (the parent company of Google) – in a race to become the world’s first trillion dollar company as they all revealed their latest impressive results. All the runners in the race have their supporters but, as the news from Toys R Us and Maplins showed, their success doesn’t come without a price.

In other company news, US cable TV company Comcast launched a $22bn takeover bid for Sky, rivalling the bid from Rupert Murdoch’s 21st Century Fox.

More generally, figures reported for January showed another good month for the US economy, with 200,000 new jobs created, unemployment holding steady at 4.1% and the average hourly wage for private sector workers up by 2.7% compared to January 2017. As mentioned in the introduction, though, that did add to inflationary worries and the consequent sharp falls in stock markets at the beginning of February.

The Federal Reserve Bank certainly seems to share this optimistic view of the US economy: minutes from its last meeting show that the Fed is preparing for “stronger-than-expected” economic growth this year as corporate America continues to benefit from the President’s decision to slash corporation tax. Legendary investor Warren Buffet said that the move had given his company a $29bn (£20bn) profit boost.

The month ended with good news for supporters of the President. Shortly after seeing his approval rating go above 50% for the first time in eight months, Donald Trump announced that he would be running for re-election in 2020. The news comes 980 days before Election Day – easily eclipsing the 582 days there were before polling when Barack Obama announced his intention to run again in 2012.

There was less good news on Wall Street where the Dow Jones index fell 4% in the month, finishing just above the 25,000 barrier at 25,029.

Far East
We have written several times about Chinese leader Xi Jinping consolidating his grip on power, especially with no obvious successor on view at the recent Communist Party Congress. Now it seems that Xi may well be on his way to a level of power that even Vladimir Putin would envy.

Following the death of Mao Zedong in 1976, the Chinese Communist Party introduced term limits (two consecutive five year terms) to ensure that future leaders could not ‘rule for life’ and enjoy the same cult of personality that had been bestowed upon Chairman Mao. Now all that seems set to change, with the Party last week proposing to remove the term limits, essentially giving Xi the authority to rule indefinitely, having originally been due to step down in 2022. With his ‘thought’ now enshrined in the constitution, Xi is moving towards absolute power in China.

…So crossing him may not be the best idea, which, it appears, the insurance and financial giant Anbang may have done. The ‘grey rhinos’ may sound like a rugby league team having a bad day: it is, in fact, the name given to China’s biggest conglomerates (supposedly because they trample everything in their path) who have been on an overseas buying spree which includes English football clubs.

It has long been rumoured that Beijing wanted to rein in the ‘grey rhinos’ – whether that is to curb excessive borrowing or simply to demonstrate state power is open to debate – and action was duly taken against Anbang as the state took control of the company and brought charges against CEO Wu Xiaohui for ‘economic crimes.’

Wu was supposedly one the best politically-connected bosses in China. Jack Ma, boss of e-commerce giant Alibaba will be hoping to stay on the right side of the authorities as his company saw revenues jump 56% to £9.2bn in the final quarter of 2017, thanks to a record-breaking Singles Day.

Away from China’s version of Game of Thrones, life was much more peaceful across the South China Sea: Japan responded to the problem of its ever-ageing population by raising the state pension age to 70. In company news, banking giant HSBC reported profits for 2017 of $17.2bn – an impressive figure but most analysts were expecting something closer to $20bn. As a result, HSBC’s shares slipped slightly, meaning that they were in step with all the major Far Eastern stock markets in February. All four of the markets on which we report fell, with the markets in China and Hong Kong both down by 6% to 3,259 and 30,845 respectively. The South Korean stock market fell 5% to 2,427 and Japan was down by 4% to finish February at 22,068.

Emerging Markets
HSBC’s profits may have disappointed: India’s second largest state run bank has rather bigger problems to contend with. The Punjabi National Bank has uncovered a $1.8bn (£1.3bn) scam linked to a single Mumbai branch and – apparently – relating to a handful of customers. The fraud amounts to nearly a third of PNB’s market value and is 50 times its profits for the final quarter of 2017. More pertinently, it raises questions about security and confidence for the whole of the Indian banking sector.

The Indian stock market followed the trend by dropping 5% in February to 34,184 but, finally, we come to the two stock markets which didn’t fall. The Russian index was up just 7 points to close the month at 2,297 while the Brazilian stock market rose 1% to 85,354.

And finally
Did anything happen to make the world smile in February? Absolutely – unless you were waiting in the queue at Kentucky Fried Chicken where, sadly, the bargain bucket was replaced by the empty bucket.

Early in February, KFC switched from specialist food distributor Bidvest to DHL for its deliveries but thanks to what were described as ‘operational issues’ (that is ‘we didn’t deliver the chicken’), more than half of KFC’s 900 outlets found themselves without any chicken. DHL’s managing director of retail said, “The reasons for this unforeseen interruption of this complex service are being worked on.” But the Great British Public was knocked sideways by ‘Chickengate’ – so much so that Tower Hamlets police were forced to take to Twitter to ask hungry, distressed diners to stop contacting them.

There were problems of an even more pressing kind for Iceland and its small population of just 340,000 people. The country has impressive green credentials, with virtually all of its energy coming from renewable sources: because of this, many firms have set up data centres there, keen to tick the ‘renewable sources’ box in their annual report. Now, it seems, many of these data centres have turned to mining Bitcoin to generate extra revenue. Unfortunately, mining Bitcoin – via computers solving complex mathematical problems – uses a lot of power. So much so that energy expert Johann Snorri Sigurbergsson is warning that Iceland simply will not have enough energy.

So the Law of Unintended Consequences strikes again: Iceland creates green energy for its citizens: the lure of green energy attracts data centres: the data centres use all the energy: ordinary Icelandic citizens wonder why the lights have gone out.

Let’s see what unintended consequences March brings us…


Mar 05

Who owns your bank?

Following the financial crisis of 2008 when a number of big British banks came close to collapsing, the Financial Services Compensation Scheme (FSCS) was strengthened by the government. As such, the FSCS 100% guarantees the first £85,000 of a person’s cash savings per banking licence in total, including interest. This means that a couple with a joint account holding up to £170,000 will have every penny of this covered.

But what does ‘per banking licence’ mean? Simply put, one banking licence can cover a number of different banks, building societies or brands. It’s important therefore to spread your cash across more than one provider, as it could mean some of your hard-earned money isn’t as safe as you think in the event of a future collapse.

With that in mind, below is a list of the biggest banks and building societies in the UK and all the brands which fall under their banking licence. That means if you hold more than £85,000 across different brands but under the same licence, you could be in a position to lose out should the worst happen.

HBOS (Halifax/Bank of Scotland group):

  • AA
  • Bank of Scotland
  • Birmingham Midshires
  • Halifax
  • Intelligent Finance
  • Saga

Lloyds Banking Group*:

  • Cheltenham and Gloucester
  • Lloyds Bank

*HBOS was acquired by Lloyds Bank, but both HBOS and Lloyds Banking Group have continued to operate under separate banking licences.


  • TSB


  • Barclays
  • Barclays Direct (formerly ING Direct)
  • Standard Life
  • Woolwich


  • First Direct
  • HSBC

Royal Bank of Scotland (RBS)**:

  • RBS


  • NatWest

Ulster Bank:

  • Ulster Bank

Coutts & Co:

  • Coutts

**NatWest, Ulster Bank and Coutts are all subsidiaries of RBS, but have their own separate banking licences. As such, someone with accounts in each of these banks would be covered for up to £85,000 in each bank.

Santander UK:

  • Cahoot
  • Santander

The Co-operative Bank:

  • Britannia BS
  • Smile
  • The Co-operative Bank

Bank of Ireland UK:

  • Bank of Ireland UK
  • Post Office

Clydesdale Bank PLC:

  • Clydesdale Bank
  • Yorkshire Bank

Sainsbury’s Bank:

  • Sainsbury’s Bank

Tesco Bank:

  • Tesco Bank

Virgin Money:

  • Virgin Money

Nationwide BS:

  • Cheshire BS
  • Derbyshire BS
  • Dunfermline BS
  • Nationwide BS

Yorkshire BS:

  • Barnsley BS
  • Chelsea BS
  • Egg
  • Norwich and Peterborough BS
  • Yorkshire BS

Coventry BS:

  • Coventry BS
  • Stroud and Swindon BS

Skipton BS:

  • Chesham BS (renamed Skipton BS)
  • Scarborough BS (renamed Skipton BS)
  • Skipton BS

So, what about banks outside the UK? Whilst most banks which accept British savings are not covered by the FSCS, some within the European Economic Area are covered by their home country’s compensation scheme through the ‘savings passport’ scheme. One of the most prominent examples is Triodos Bank in the Netherlands, which is covered by the Dutch equivalent of the FSCS up to €100,000 per person. There are also some international banks which are covered by the FSCS, including:

  • Axis Bank UK
  • ICICI Bank UK
  • State Bank of India UK

Money saved in accounts and products offered by Government-backed National Savings & Investments (NS&I) enjoys 100% security (although these products are not protected by the FSCS). This includes premium bonds.


Mar 05

The topics you need to be talking about with your parents

Talking about money with your parents can be difficult. However, these conversations can also be some of the most important ones you will have with those you love. It doesn’t need to be a full examination of their financial records, as you clearly don’t want to overstep any boundaries or cause offence. But there are also questions you need to ask to ensure your parents have prepared for the next stage of their lives, as well as helping you to know about any areas where you might need to provide support in the future, as early as possible. Here are five important questions you should be asking:

Do you have records of your investments, property and important documents? Not telling their children where all their assets are is often one of the biggest mistakes made by parents when planning their estate. Asking your parents to put everything in one folder, in a safe place that’s easy to locate is a good idea, if they haven’t already done so. This should include bank, investment and pension accounts, including account numbers. Digital and online storage is increasingly popular and can help prevent files from becoming lost or damaged.

When did you last review your financial plan? Assuming that they have a financial plan, your parents should be reviewing this regularly. They may have planned for a certain life expectancy during their working life, which may now be a significant number of years longer. You need to understand the sources of your parents’ income when they retire. It’s also a good idea to know how to contact their solicitor, accountant or financial adviser if applicable.

Have you made a will? Make sure your parents have a will in place and that it is up to date. A will more than five years old should be reviewed to ensure it reflects your parents’ wishes. It’s also a good idea to find out about any unusual or specific requests in their will now, to avoid any unexpected surprises when you least want to experience them. Asking your parents to check the beneficiaries of any life insurance policies or pensions is also worthwhile, as these can override bequests in a will.

Have you considered a lasting power of attorney? A lasting power of attorney, or LPA is a legal document which nominates a trusted friend or relative to look after their affairs if they are unable to do so themselves. It’s a sensitive issue to know when the time is right but it is worth putting an LPA in a place long before you think you may need it, so you can make the right choices on your parents’ behalf.

When and where would you consider moving if you can no longer stay in your current home? Perhaps the most difficult question, but one of the most important. If your parents can no longer manage in, or maintain, their home due to age, illness or worse, you need to know what their plans are and what they would be happy to do. Neither you nor your parents is likely to want to think about growing old and frail, but if you have the discussion sooner rather than later, it can make both the financial and emotional sides of dealing with matters surrounding care when the time comes that much easier.


Mar 05

Help to Buy ISA – how have they done?

Recent government statistics have revealed that the Help to Buy ISA scheme is helping first-time buyers to get on the property ladder three years earlier than they otherwise would. The result has been calculated by looking at the average age of first-time buyers both with and without the ISAs. On average, those who use the ISA to buy their first home are three years younger than those who do not, with the median age of those using the Help to Buy ISA being 27.

Launched in December 2015, the scheme offers a maximum bonus of £3,000 from the government to those buying a home. It allows first time buyers to boost up to £12,000 of their savings by 25% when they buy a property for £250,000 or less, raised to a limit of £450,000 for those buying in London. The scheme remains open to new savers until the end of November 2019, with contributions able to be made until the end of November 2029. The government bonus has to be claimed by 1st December 2030.

So far, more than 1.1 million Help to Buy ISAs have been opened, with over 350,000 completing a purchase using the scheme. This amounts to 106,612 property completions and 143,894 bonuses paid by the government. The average bonus is currently £725, with the mean value of homes purchased through the scheme being £171,648. This is somewhat lower than the average house price for first-time buyers, which comes in at £190,679.

However, the Help to Buy ISA will for the most part be replaced by the Lifetime ISA (LISA), which offers a similar bonus but can also be used to save for retirement, as well as purchasing a home. LISAs are only available to people aged 40 and under; those with Help to Buy ISAs are able to transfer their savings into a LISA which will enable them to save more each year.

Additionally, those transferring from a Help to Buy ISA to a LISA during the current tax year will potentially benefit from a greater government bonus. The value of a Help to Buy ISA, as it stood on 5th April 2017 plus interest earned, can be made as a single transfer and won’t count towards your LISA allowance for 2017/18, but will qualify for the government bonus, giving savers able to take advantage of this situation an added boost.

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Feb 05

Where did house prices increase and decrease the fastest in the UK in 2017?

Research into the housing market throughout 2017 has revealed the areas of the UK where property prices increased and decreased the most last year. Cheltenham in Gloucestershire was the place where prices grew at the fastest pace, with the average price of £313,150 marking a 13% rise – nearly five times the UK average increase of 2.7%. At the other end of the scale was the Scottish town of Perth, where prices dropped by 5.3% to make the average property price tag £180,687.

The places which saw the biggest growth were in southern England, with Bournemouth and Brighton coming in second and third place with rises of 11.7% and 11.4% respectively. At the other end of the scale, Scotland, Yorkshire and the Humber were the areas where the biggest falls were seen. The second-biggest fall in house prices was seen in Stoke-on-Trent (4%), with Paisley in third position (3.6%).

Fifteen out of the top twenty areas for house price increases are located in London and southern England. This is in spite of the capital overall seeing its average house price fall by 0.5%, thanks to the economy slowing down and consumers continuing to feel the effects following the Brexit vote of 2016.

The outlook for the year ahead offers little reprieve: many in the property sector, including the Royal Institution of Chartered Surveyors, predict that the market in 2018 will, for the most part, remain flat, with some expecting property price growth to slow even further. Whilst this would be good news for those looking to take their first steps onto the property ladder, it’s more worrying news for people hoping to invest in the market.

It’s expected that the story will differ geographically, but property portal Rightmove has also predicted that different property types are likely to grow at different rates. They have forecast prices for homes with two bedrooms or fewer will rise by 3%, whilst three and four bedroom homes will see growth of only 2%.


Feb 05

5 key financial changes to watch out for in 2018

As with any new year, there are a number of financial changes coming up in 2018 which are likely to impact on your monthly budget and long-term saving goals. Let’s have a look at five of the most significant and what they’re likely to mean for you over the next twelve months.

  1. Automatic enrolment contributions are set to increase – If you’re enrolled in a workplace pension scheme and making the minimum contribution, that will currently be 0.8% of your salary. However, from April 2018 the figure will treble to 2.4%. To avoid the increase you would have to opt out of the pension scheme, but it’s important not to put your future financial security at stake for a little extra spending money now.
  2. The State Pension will rise – The triple lock means that the State Pension increases in line with either earnings, inflation or 2.5%, whichever is highest. As inflation is currently at around 3%, pensioners will see their State Pension reach this level in order to help meet the cost of living. However, if you don’t need your State Pension because you’re still working or you have another pension, it pays not to claim it. Those on the basic State Pension receive an extra 1% for every five weeks they don’t claim it, giving a 10.4% boost for each year it’s left unclaimed. Those on the new State Pension will get 1% for every nine weeks, or 5.8% for every year they don’t claim.
  3. The Lifetime Allowance rises – The Lifetime Allowance limits how big your pension pot can become without facing severe taxation on your savings. It’s currently at £1 million, but will go up to £1,030,000 in April this year – the first rise since 2010 – giving those who are near the current limit a little extra scope to save.
  4. The Dividend Allowance falls – A significant cut in the dividend allowance means the amount of dividend income that can be earned tax-free will be reduced from the current limit of £5,000 to just £2,000. A basic rate taxpayer receiving £5,000 in dividends will now pay £225 in tax, a higher rate taxpayer will pay £975 and an additional rate taxpayer will receive a tax bill of £1,143. The best way to avoid incurring this additional tax is by placing your investments into a tax-efficient wrapper such as an ISA or SIPP.
  5. Inherited ISA Allowance goes up – Currently, a spouse can inherit the ISA holdings from a deceased partner tax-free, but this doesn’t extend to any interest generated, which can cause problems when the administration of an estate takes a long time. From April 2018, however, the deceased person’s ISA will become a ‘continuing ISA’, which means that no further deposits can be made but any holdings, including growth, will not incur any tax when the estate is closed formally.


Feb 05

Millennials on target to enjoy inheritance boom but not until they’re 61

A recent report has revealed that millennials are set to benefit from an ‘inheritance boom’ bigger than that experienced by any other generation in the post-war period. The Resolution Foundation, the think-tank which carried out the research, defined millennials as people currently aged between 17 and 35, and found that those within this age bracket will be left record amounts of wealth by their ‘baby boomer’ parents and grandparents.

The report found that inheritances will double in size over the next twenty years, peaking in 2035, as baby boomers who generally have high levels of wealth move through old age. Additionally, nearly two thirds of millennials have parents who are property owners, of which they may receive a share in the future. This is a stark difference to adults born in the 1930s, of whom only 38% received an inheritance.

However, the Resolution Foundation also stressed that the inheritance boom will not be a ‘silver bullet’ which allows millennials to get on the property ladder or address the wealth gaps which are currently growing in society, as most will only benefit from their inheritance when they themselves are nearing pension age. The average age at which people lose both parents is getting later; people who are currently between 25 and 35 are expected to be 61 years old when this happens.

Another key finding of the report was the strong correlation between the property wealth of millennials and the amount they are set to inherit from their parents, with those who were able to get on the property ladder during their early 20s, destined to benefit the most from the inheritance boom. The new inheritance tax housing allowance will also be fully implemented in 2020, meaning that as much as £500,000 per person will be able to be passed on without incurring tax, allowing millennials whose parents own valuable homes to cut their average tax burden in half.

In comparison, those millennials who do not own their own home by their mid thirties are much less likely to receive a large inheritance from their parents. Additionally, if they inherit this when in their 60s, they’ll then be much less likely to be able to secure a mortgage, meaning that some may struggle to climb onto the property ladder throughout both their working and retired lives.


Feb 05

February Market Commentary

The first month of 2018 was a good one for the major stock markets which we cover in this Bulletin. We report on 12 markets and 11 of them made gains in January – in some cases, spectacular gains, which many investors would regard as more than adequate for a full year. But sitting alone on the naughty step was the UK: as we shall see below there was plenty of good news for the UK in the month but, dogged by uncertainties over Brexit, continuing doubts about Theresa May and the collapse of Carillion, the FTSE fell 2% in the month.

Why did global stock markets do so well? As we will see below, there was good news from China and, in addition, the World Bank issued a bullish forecast as it looked ahead to 2018. Reporting that global economic growth had been stronger than expected in 2017, the Bank forecast growth of 3.1% for the coming year. The Bank’s president, Jim Yong Kim said, “The broad-based recovery in global growth is encouraging”.

Add in the continued expansion in China, low interest rates and easy monetary policy around the world and it is no wonder that stock markets are doing well.

There was certainly plenty of self-congratulation at the World Economic Forum, the annual meeting of business and political leaders in the Swiss resort of Davos. Donald Trump flew in by helicopter – the first US President to attend since Bill Clinton in 2000 – and made a tub-thumping speech highlighting American growth and making no apologies for acting as his country’s “cheerleader.”

Theresa May made a somewhat lacklustre speech – which prompted both the Times and the Telegraph to question her continued leadership – and John McDonnell was also in attendance. The UK’s Shadow Chancellor railed against the evils of capitalism whilst staying in an €800 per night hotel.

The big business story in the UK in the first month of the year was the collapse of the government’s ‘go-to’ contractor Carillion. The company went under with debts of £1.5bn and a hole in the pension fund of at least £600m as Government ministers continued to dole out contracts even after three profit warnings. Up to 30,000 small businesses are owed money by Carillion and the receivers have told them to expect less than 1p in the pound on the money owed. There are bound to be redundancies and companies going out of business: equally worrying is the total lack of business acumen shown by Her Majesty’s Government.

Despite this, there was plenty of good news around in January. The month started with all the retailers reporting on their Christmas trading figures: Next, Aldi and Lidl did well but Debenhams reported disappointing figures and – having feasted on Carillion – the vultures are now circling the high street chain.

UK manufacturing, though, was at its highest for ten years and growth for the final quarter of 2017 was revised upwards to 0.5%. Ford picked the UK to build its new diesel engines, and there was also a welcome boost for the Chancellor. Both Philip Hammond and George Osborne before him have bemoaned the UK’s productivity, but figures from the Office for National Statistics showed that UK productivity had enjoyed its biggest increase since 2011, up by 0.9% in the third quarter of 2017.

Inflation also dipped slightly to 3%, but if you are looking for clouds on the horizon then the oil price hit a four year high of $70 a barrel – so petrol will not be coming down in price any time soon – and mortgage approvals slipped to their lowest level for five years.

…And inevitably, there was further bad news for the retail sector. We have already mentioned Debenhams and – once they had digested the Christmas trading figures – Marks & Spencer announced the closure of 14 stores. At the same time Sainsbury’s and Tesco were warning of job cuts: as we comment below, retail is changing inexorably and it will not result in more jobs.

This sombre mood was reflected on the stock market, with the FTSE 100 index of leading shares falling from December’s high and dropping 2% in January to 7,534. It was, however, a good month for the pound which strengthened appreciably against the dollar, rising by 5% to $1.4171.

It is difficult to know where to start on Brexit. At the end of last year progress appeared to have been made with agreement reached over the UK’s ‘divorce bill.’ Attention has now shifted to the transition arrangements after the UK leaves, but whether that will be one year, two years or five years is anyone’s guess. Conservative MPs are once again at each other’s throats after Chancellor Philip Hammond made a speech in Davos saying he wanted only “very modest” changes to the status quo after Brexit – the so called BINO option (Brexit in Name Only).

US Treasury Secretary Steve Mnuchin has spoken of a ‘special’ free trade deal with the UK after Brexit, while International Trade Secretary Liam Fox has talked of up to 40 trade deals being in place by March 2019. Meanwhile, Theresa May has visited China, making trade deals but seemingly intimating that continuing membership of the EU customs union would still be a possibility.

With 14 months to go until the UK is supposed to leave the EU, many commentators are now making the point that the UK cannot go on trying to be ‘all things to all men’. Sooner or later it must declare a preferred position, as business increasingly calls for clarity.

Europe came back from its Christmas holidays to find Germany still without a government – although it appears that Angela Merkel is gradually drawing closer to a deal with the Social Democrats, which will allow her to remain as German Chancellor and de facto leader of Europe. With or without a government, the German economy ploughed on remorselessly, with the figures released for November confirming a trade surplus for the month of €23.7bn (£20.7bn).

However, it appears that Europe could be set for more problems, with the re-election of the anti-mass immigration, Eurosceptic Milos Zeman, to the Czech presidency, raising the prospect of a referendum on the country’s continued membership of the EU. Commentators will presumably have a hard time deciding between ‘Czechxit’ and ‘Czech out…’

But there is a solid block of countries in Central Europe – the Czech Republic, Hungary, Poland and Slovakia – who all appear to feel the same way. It may be that 2018 will present Angela Merkel with far greater problems than simply forming a coalition.

For now though, there seems to be little to worry about on Europe’s stock markets. The German DAX index rose by 2% in January, ending the month at 13,195. The French index did slightly better, rising by 3% to 5,482. But it was our old friend Greece that stole the show: with the country having survived for another year, the Athens stock market celebrated by rising 10% in January to reach 879.

It was a happy new year in the US as the Dow Jones index went through the 25,000 barrier in the first week of the year, despite figures showing that the US boom in job creation had run out of steam in December. ‘Non-farm payroll’, as it is known, added only 148,000 jobs in the month, largely due to job losses in the retail sector. Despite this, the US unemployment rate held steady at 4.1%, the lowest it has been since the year 2000.

The good news/bad news scenario in the US was neatly captured by retail giant Walmart, which announced that it would start paying its US staff at least $11 (£7.70) an hour, thanks to the US tax overhaul which has seen corporation tax fall to a flat rate of 21%. But then in the next breath it announced the closure of 63 of its 600 Sam’s Club stores and redundancies for thousands of workers. Amazon’s opening of the first ‘Amazon Go’ supermarket in Seattle only added to the perception that retail is changing rapidly and irreversibly, and there will be far more job losses to come.

There was equal confusion in Washington as the US Government ran out of money for a few days, with Congress failing to agree on the bill to fund the federal government until 16th February. This impasse is now a regular occurrence in the US, with the last government shutdown happening in 2013 and lasting for 16 days.

The month ended with a bullish President back from Davos and delivering his first State of the Union address. Whatever you think of Donald Trump, in the first year of his Presidency the US economy has grown, unemployment has fallen and the stock market has had a record run. The Dow Jones index eventually closed January at 26,149 – 6% up on the 24,719 at which it finished 2017.

Far East
There is one key question in the Far East and – despite South Korea seizing a second ship suspected of supplying oil to the North – it is not ‘has North Korea just launched another rocket?’

The question is simple: can China continue its remarkable growth rate and continue to be the economic powerhouse of the region? Figures for 2017 confirmed that the Chinese economy had grown by 6.9% – the first time in seven years that the pace of growth had picked up and ahead of the official target of 6.5%. Those who say, ‘yes, the growth can continue’ point to the fact that China only really became a key global economic power 15 years ago, to the ever-expanding middle class with ever-expanding consumer needs, and to initiatives like the One Belt, One Road project.

Those who say it must all end in tears argue that the growth is not real – several provincial governments have already admitted to faking figures to meet targets. They also argue that growth must slow down as China’s economy matures, and that it cannot be based on the current high levels of debt for ever. You pays your money and you takes your choice…

Away from China, South Korea’s Samsung – the world’s biggest memory chip maker – forecast record profits for the year of £10.4bn, although these were slightly below analysts’ expectations. Staying in South Korea, the government made trading in the crypto-currency Bitcoin illegal, amid fears it was increasingly being used by organised crime.

All four major Far Eastern stock markets were up during the first month of the year, with the Hong Kong market powering through the 30,000 barrier to close at 32,887 for a gain of 10% in the month. South Korea was up 4% to 2,566 and China up 5% to 3,481. Puffing along behind came the Japanese index, struggling up by just 1% to close January at 23,098.

Emerging Markets
For Emerging Markets, January’s big story was Canada’s decision to join the Trans-Pacific Partnership (TPP) which Donald Trump so spectacularly pulled out of last year. Canada had initially been reluctant to sign up because of concerns about the environment and labour protection, but will now join 10 other countries in Chile in March to sign the agreement. The TPP has been championed by Japan, which sees it as a way to counter China’s economic dominance in the region: Economy Minister Toshimitsu Motegi said the agreement would be an “engine to overcome protectionism”.

January was an excellent month for the three major stock markets we cover in this section. The Indian stock market rose 6% to finish the month at 35,965: Russia was up 9% to 2,290 and the Brazilian index shot up by 11% in January to close at 84,913.

And finally…
Football fans will know that January is the mid-season month when the ‘transfer window’ is open and Premiership leaders Manchester City continued their spending spree as they casually handed Athletic Bilbao £57m for defender Aymeric Laporte. Incredibly, this takes City’s spending on their defence since last summer to just under £150m – which is bigger than the more conventional defence budget of 52 countries.

Bottom of the list for defence spending are the Cape Verde Islands, who spend just $10m (£7.1m) last year. But City also outspent countries like Guatemala, Ghana and Afghanistan. Who said there was too much money in football?

No doubt Mr Laporte is well worth the £57m, but the real hero of January was Devon butcher Chris McCabe.

2017 was a fine year for the ‘And finally’ section of the Bulletin. 2018 will have to work hard to beat it – but Devon butcher Mr McCabe got the year off to the best possible start. The unlucky Mr McCabe found himself trapped in his own walk-in freezer after the door blew shut behind him. With the temperature as low as -20C, our hero feared the worst: he needed something to hammer the door release button, which (not surprisingly) had frozen shut. What could he do? The beef was too slippery and the lamb was too big. Fortunately, the shop had one giant black pudding left in the freezer – which saved Mr McCabe’s life. “I used it like a police battering ram,” he said. “I owe my life to a black pudding.”

Sadly, there are no reports of who subsequently bought the delicacy…


Jan 04

January Market Commentary

Another year seems to have flown by in the space of about five months. December, in particular, seemed to go past in a blur.

It was, however, the month when some progress was – finally – made in the Brexit negotiations. It was also the month when Scotland used its tax-raising powers to increase income tax, when Germany worried about Chinese spies using fake LinkedIn profiles and when yet more sanctions were heaped on the North Korean regime – which were predictably condemned as an ‘act of war’.

Half of the major stock markets we cover in this commentary rose in the month and overall 2017 was a good year for world markets: the Hong Kong market led the way with a rise of 36% and only the Russian index fell significantly during the year.

The month didn’t get off to the best of starts in the UK as once again UK retail was facing problems. RBS announced that it would close one in four of its branches – totalling 259 and inevitably having an effect on the national high street – and Toys R Us narrowly avoided having to close its UK branches as it reached an 11th hour agreement with creditors and the Pension Protection Fund.

There was, however, plenty of good news for the UK in December, although wages continue to lag behind inflation, a situation which looks set to continue throughout 2018.

UK factory activity grew at its fastest pace for more than four years in November, with the Purchasing Managers’ Index hitting 58.2 – its best level for 51 months. Separate official data for 2016 showed that inward investment into the UK had also hit a record $145bn, although this was boosted by some large takeover deals. UK manufacturing also expanded for the sixth month in a row, helped by record car production.

Unemployment was down again, falling by 26,000 to 1.43m, with the jobless rate remaining unchanged at 4.3%. In addition, the UK economy was shown to have grown at a faster rate than had previously been thought. Revised figures from the Office for National Statistics showed that the economy had grown by 1.7% in the third quarter, compared to the original estimate of 1.5%.

To cap a good month for those whose glass is half full, the UK was named the best place in the world for business by the US media group Forbes. In the annual ranking the UK leapt from fifth to first, scoring especially well on technological readiness and the education of its workforce.

How did all this translate onto the stock market? The FTSE-100 index of leading shares started the year at 7,143 and ended it up 8% at a new record high of 7,688. The market was up 5% in December, fuelled by the now-traditional ‘Santa rally.’ The pound also enjoyed a good year: it was largely unchanged against the dollar in December but rose 9% over the course of the year to $1.3504.

As we noted in the introduction, December was the month when some progress finally appeared to have been made on the Brexit negotiations as the UK’s ‘divorce bill’ seemed to have been agreed. You don’t have to look far to find a high ranking official (on both sides) who will ominously mutter, ‘Nothing is agreed until everything is agreed,’ but – to use Churchill’s phrase – while this may not be the beginning of the end, it may just be the end of the beginning.

By the end of this year the UK will – in theory – be just 88 days away from leaving the EU. But over the course of the next 12 months there will unquestionably be plenty of twists, turns and bumps in the road for this section of the commentary to report on.

As we mentioned in the introduction, December was the month when Germany voiced its concerns over possible Chinese spying using the social/business network LinkedIn. The German intelligence agency BfV is worried about the Chinese using fake profiles to target up to 10,000 German politicians, business leaders and officials. China – which has denied similar accusations in the past – did not respond to the German allegations.

But there was better news of other EU/Far East relationships as a trade deal was tied up between the EU and Japan which will – subject to ratification by EU members – create the world’s largest open economic area. The agreement is seen as a challenge to the protectionism of Donald Trump, with a joint statement saying that the EU and Japan are “committed to keeping the world economy working on the basis of free, open and fair markets … fighting the temptation of protectionism”.

…And in a bid to track down those people who have been protecting their money from the taxman, the EU published its first blacklist of tax havens, naming 17 territories including St. Lucia, Barbados and South Korea.

What of European stock markets in December and 2017 as a whole? Both the German and French indices drifted down 1% in the month, but overall they enjoyed a good year. The German DAX index was up 13% in 2017 to end the year at 12,918 while the French stock market rose 9% to 5,313. An honourable mention also goes to Greece: the debt-ridden country staggered through another year and the Athens stock market duly rose 25% in 2017 to close at 802.

There were two major pieces of news in the United States, with the Federal Reserve once again raising interest rates and a programme of major tax cuts being passed by Congress.

The Fed raised rates by a further 0.25% – the third rise in 2017 – as it projected growth of 2.5% for 2017 and 2018, expecting the US economy to be stimulated by the President’s tax cuts. At the moment the Fed is targeting a range of 1.25% to 1.5% for US interest rates, but further rises are expected next year, with most forecasters expecting a base rate of around 2%.

The tax cuts – agreed by both houses of Congress – have been described as the biggest overhaul of the US tax system for 30 years, with corporation tax falling from 35% to 21% and the highest rate of individual income tax coming down from 39.6% to 37%. Democrats have argued that the cuts will only favour the rich, while the Joint Committee on Taxation has suggested they will add $1.4tn to the $20tn US national debt over the next 10 years. But right now what the President wants the President gets, and he wanted swingeing tax cuts…

There was also good news for the US economy, with the November jobs figures showing 228,000 jobs created against expectations of 200,000. The unemployment rate held steady at 4.1% as firms appeared to hire seasonal workers earlier than usual.

On Wall Street, 2017 was a good year for the Dow Jones index. Having started the year at 19,763, it finished up 25% at 24,719 having risen 2% in December.

Far East
For once, the month in the Far East wasn’t dominated by stories of North Korean rockets. That is not to say that tension in the area will disappear in 2018: North Korea may be sending a team to the Winter Olympics in South Korea, but in his Christmas message Kim Jong-un stressed the fact that the nuclear button “is always on my desk”.

In China, there was a small rise in bank base rates following the rise in the US, but for once it was Japan that was really making the news in the region. The country is enjoying its longest period of sustained economic growth since 1994 – admittedly, thanks to four years of economic stimulus from Prime Minister Shinzo Abe – and growth for the three months to September was revised upwards to 2.5%, well ahead of initial estimates of 1.4%.

In another sign of what we can look forward to in the near future, Nissan announced that it would start trialling driverless taxis from March next year. The plan is that passengers will be able to summon the cars using an app, with free trials due to take place in Yokohama.

There was more turbulence for crypto-currency Bitcoin as the South Korean authorities – worried about Bitcoin being used for money laundering – announced a crackdown on anonymous trading accounts and said they would close exchanges if necessary.

On exchanges that were very much open, 2017 was an excellent year for all the major Far Eastern stock markets. China was virtually unchanged in December but ended the year up 7% at 3,307. Similarly both the Japanese and South Korean markets were quiet in December, but closed 2017 up 19% and 22% respectively, with the Japanese Nikkei Dow closing at 22,765 and the South Korean market at 2,467. Pride of place though, went to Hong Kong, the best performing market of those we cover in this commentary. The stock market there rose 3% in December to end the month at 29,919 – up 36% for the year as a whole.

Emerging Markets
As we have already seen, December was a volatile month for Bitcoin, but this didn’t stop crisis-hit Venezuela from grasping at a virtual straw as President Nicolas Maduro announced the creation of a new currency in a bid to ease the country’s economic crisis. A new virtual currency – the Petro – will apparently be backed by Venezuela’s oil, gas and diamond reserves. Opposition leaders poured scorn on the plan, pointing out that the President had already mortgaged the reserves several times over. It seems a fairly safe prediction that the country with the largest oil reserves in the world will continue to lurch from crisis to crisis in the coming year.

A country emphatically not lurching from crisis to crisis is India, with forecasts suggesting that it will overtake the UK and France to become the 5th largest economy in the world in 2018. According to World Bank data for 2016 India’s GDP, at $2.26tn (£1.69tn) was the 7th largest in dollar terms: the forecasts are that 2018 will see it overtake the UK (with GDP of $2.65tn) and France ($2.47tn).

This was reflected on the Indian stock market, up 3% in December (and 28% for the year as a whole) to finish 2017 at 34,057. The Brazilian market also enjoyed an excellent year, rising by 27%: in December it rose 6% to close the month at 76,402. The Russian market was virtually unchanged in December and ended the month at 2,109: this meant that it fell by 6% for 2017 as a whole, with the damage really being done in the first six months of the year.

And finally
2017 was, by any standards, a vintage year for the ‘And Finally’ section of this commentary. In March, we had the ‘Temple of Heaven’ – the public park in Beijing which installed facial recognition software to dispense loo roll because visitors were taking it home with them.

July brought us the Texan maintenance engineer, who on a bright and sunny day set out to change the lock on a Bank of America ATM. Unfortunately, while performing this routine task our hero (understandably he preferred not to be named) trapped himself inside the ATM. He was only rescued when a customer tried to withdraw $100 and instead received a note saying, ‘Please help, I’m stuck in here.’ The customer naturally thought it was a joke, but on failing to spot any TV cameras and hearing a faint voice coming from the hole in the wall, decided to call the police…

So what of December? The month did not let us down…

Counterfeit goods now account for perhaps 4% of the world economy. So there was good news at the beginning of the month for HM Border Force and the Intellectual Property Office as they seized 82,320 pairs of fake Calvin Klein underpants worth a reputed £1.5m.

Along with the fake boxers, they also grabbed Gillette Mach 3 razor blades, Nike Vapormax trainers and 379 Barcelona and Borussia Dortmund football shirts. If that sounds suspiciously like your Christmas presents you may want to have a word with your relatives.

There was also good and bad news for the Royal Navy in December as it took delivery of its new £3.1bn aircraft carrier ‘HMS Queen Elizabeth.’ But the bad news was that she (the boat, not Her Majesty) was leaking and taking in the small matter of 200 litres of sea water every hour. BBC Defence Correspondent Jonathan Beale said the leak was “highly embarrassing” for the Royal Navy, but dismissed rumours that the aircraft carrier would be renamed Leaky McLeakface…


Jan 04

5 Financial Goals for the New Year

Whether or not you’re the kind of person who sees the start of January as the time to set yourself resolutions and stick to them, the period after the excesses of Christmas and New Year is arguably one of the best times to actively get your finances into shape. Here are five great money-related resolutions it’s definitely worth committing to in order to make 2018 the year you take control of your money.

  1. Start a budget – The secret to financial security isn’t making lots of money, but sensibly managing the money you have. A budget is the best way to start doing this, ensuring you know where your money is going and sticking to the plan you lay out for yourself. It can feel intimidating at first if you’ve never budgeted before, but it will undoubtedly help you to cut out overspending and reduce your money worries.
  2. Manage your debt – Getting out of debt can seem a long way off if you don’t make plans for how you’re going to become debt-free. There are no shortcuts – it takes both time and sacrifice – but once you do manage to clear your debts completely, it’s a liberating feeling and opens up many more opportunities to help you grow some savings.
  3. Start saving regularly – Once you’ve got your debts and spending under control, building your savings is essential. You should aim to save at least 10% of what you earn every month. Again, you may have to make a couple of sacrifices here and there in order to do this, but when you have those savings earning you money in your nest egg, missing the occasional night out or frivolous treat will feel completely worthwhile.
  4. Increase your financial knowledge – This can be as simple as finding a book, magazine or reputable website and dedicating a little time each week to increasing your money know-how. Anyone who has financial security hasn’t done it through luck, but through understanding what to do with their money, so the more you learn the more secure your finances are likely to be.
  5. Start investing – Making some sound investments is often the crucial step from financial security to prosperity and success. However, you should only invest when you’re ready (i.e. once you’ve achieved the previous four goals). It’s worth getting good independent financial advice as well to ensure you make the right investments for your personal circumstances.


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