Uncategorized Archives • Clear Financial Advice

We have some exciting news to share with you all…

Dear *|FNAME|*

I have pleasure in announcing we have accepted an offer to sell a MINORITY stake in our company from Söderberg & Partners who are the largest financial services company based in the Nordic countries.

This partnership is a strategic alliance designed to enhance our service offerings and expand our market presence. We were particularly drawn to Söderberg & Partners innovative approach and strong market position in financial services, technology and their resources running investment funds, which complements our own strengths and client-first ethos.

Why are Söderberg & Partners Investing?

They are looking to expand into the financial services sector in the UK having been very successful in operating in the Nordic countries for many years.
They are particularly keen to assist and support companies to expand services and the customer base using innovative technology resulting in improved efficiencies.

Will the people I deal with change?

No there are no redundancies, we are not moving or merging offices with other companies.
There will be no change to the personnel at Clear.

How will this affect Clear?

From a clients perspective it should be seamless, however Clear will have additional resources to improve customer experience and offer more services.

Who is Söderberg & Partners?

Söderberg & Partners is a significant player in Nordic financial consultancy, offering a range of services like insurance, investment advice, and financial planning. Founded in Sweden in 2004, it has expanded its operations across the Nordic region and beyond. The company helps clients manage risks, plan pensions, handle assets, and navigate employee benefits. Known for its innovative approach, Söderberg & Partners focuses on delivering customized solutions to meet individual client needs.

Will my costs increase?

There will be no change and certainly no increases, however if you are currently invested in the Clear Portfolios we have now gained access to cost effective model portfolios run by Soderberg. We are likely to advise to transfer into these portfolios with a cost saving of at least 30 basis points over the year. On a £100k investment this equates to a £300 saving per annum.

If you require any further information please do not hesitate to contact me on the office number 0208 669 3828

Our mailing address is:
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US rate cuts seem to being kicked down the road this year. The US economy is in very good shape and inflation remains sticky. What has it meant for risk assets and what is more important. Rate cuts are a strong economy?

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Dear *|FNAME

Last week presented further evidence that the US economy shows no signs of slowing down. The US labor market added an impressive 303,000 jobs, significantly surpassing expectations, with the unemployment rate now at a low 3.8%. These developments suggest that there is little immediate pressure to reduce interest rates in the US, as the anticipated rate cut has shifted from June to September. Additionally, there has been a slight uptick in inflation in recent months.

What does this mean for your investments?

There’s no need to panic.

The expectation is that rate cuts will still occur and inflation will stabilize and likely decrease. With the US economy continuing to expand, businesses and consumers are likely to remain prosperous and confident. The impact of artificial intelligence remains significant, with companies investing heavily in AI development and implementation. This trend is expected to continue driving growth in the near term.

The focus on the US economy is warranted because of its pivotal role in global economic dynamics; a robust US economy often signals strength for the global market as well.

This data is net of fund charges but does not include potential platform costs or advisor charges which are likely to alter the overall returns set out above.

Portfolio Performance

Despite recent US data indicating a postponement in rate cuts, investors have still enjoyed positive returns. The portfolios continue to exceed industry averages, and the past year has shown robust performance. We remain optimistic for the rest of the year, but don’t be surprised if we experience some slight bumps along the way!

Any questions or views, please get in touch in the usual way!

Warm Regards

Louis Greening
Investment Specialist

Our mailing address is:
[email protected]

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The Budget – has the chancellor given enough to stop the likelihood of a Labour government? We look at what the budget means for investors…

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We are desperate to raise funds for our Clear Minds charity so we can help vulnerable people providing them with the help they need. Please consider supporting Gary & Charlotte who are running the Brighton Marathon on 7^thApril for the charity. Every little helps, all funds going directly to provide counselling. Thank you for your support.

https://www.justgiving.com/campaign/marathon2024-clearminds

Budget 2024 – Key points at a glance

Winners of the latest budget?

In essence, the ‘winners’ were individuals in the middle-income bracket, parents earning between £50k and £80k, higher rate taxpayers who own second homes, and investors who already maximise their ISAs. Conversely, the ‘losers’ included owners of holiday rental properties, non-domiciled individuals, the extremely wealthy, and retirees. Here’s a breakdown of what you need to know:

Who will benefit?

Workers will see National Insurance cuts. While this may not be as popular as Income Tax reductions in Budget discussions, an additional 2p was trimmed off NI. For someone earning £40,000 annually, this translates to a saving of £549 per year, in addition to cuts implemented in January. Higher rate taxpayers will save £754. Combined with January’s reductions, the average earner stands to save around £1,000 annually. Middle earners will benefit more than lower earners, although for the highest earners, this benefit will be offset by frozen tax thresholds.
Some families will receive a boost in Child Benefit. If any adult in the household earns over £50,000, their child benefit gradually reduces and stops entirely at £60,000. Starting April 6th, this threshold will increase to £60,000, allowing households where the highest earner earns less than this to receive full child benefits. Benefits will decrease progressively up to £80,000 and cease beyond that. It’s crucial for non-working partners to claim child benefits in their name to accrue National Insurance credits toward a future State Pension.
Higher rate taxpayers planning to sell a second home will benefit from a reduction in capital gains tax from 28% to 24% starting April 6th.

Who will be adversely affected?

Pensioners who are not employed will experience no relief in Income Tax, and there were no breaks provided. However, the ‘Triple Lock’ will lead to a weekly increase of £17.35 in the full new State Pension to £221.20 from April.
Non-domiciled individuals will face changes as the tax regime will begin to tax residents on income and gains in trusts after residing for four years starting April 6th, 2025.
Owners of holiday rental properties will no longer receive tax allowances for furniture spending and mortgage payment relief from April 2025. This might lead to a surge in sales for furniture retailers as owners spruce up their properties before the changes take effect.
All taxpayers will be impacted by frozen tax thresholds until 2028. Although this might seem dull, it will significantly affect individuals’ finances as inflation increases income over the next four years while tax thresholds remain stagnant, leading to more income being taxed.

What else is on the horizon?

A NatWest float is expected, allowing individuals to purchase shares in the bank as the government plans to divest its ownership acquired during the 2008 bailout.
There’s talk about a British ISA being developed, which would allow individuals to invest up to £5,000 annually in UK-listed shares (in addition to existing £20,000 allowance).
The Chancellor shared an Office of Budget Responsibility (OBR) view forecasting inflation falling below the 2% target soon, which bodes well for mortgage holders and debtors, leading to lower interest rates this year.

Anna Griffiths – Technical Manager Clear Financial Advice.

U.K. Employment Statistics

There is a definite softening in the U.K. labour market which increases the likelihood of interest rates falling.

Recruitment activity continued to decline in February.
Permanent salary inflation eases to near three-year low.
Demand for staff drops at fastest rate since January 2021.
Availability of workers continues to expand sharply.

Source: S&P Global

88%of millennials celebrate Easter in 2024

Percentage celebrating Easter in 2024 and average spend by generations.

Source: finder.com

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Markets still in recovery mode but as we begin to see how both the US and UK elections might look like, can markets continue on this trajectory?

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Dear *|FNAME|*

Politics has been a prominent topic in recent weeks following the confirmation of the two US candidates for this years election in November. There aren’t any surprises regarding their identities, and it’s anticipated that their campaigns will be both close and unpredictable. Despite the strong and stable economy in the US, this has not yet resulted in higher approval ratings for Biden.

Closer to home, Chancellor of the Exchequer Jeremy Hunt has presented his Spring budget. We’ll dive deeper into the implications of the budget for you in our monthly newsletter, but the general consensus is that it fell short in influencing the polls. A 2p reduction in national insurance is certainly beneficial, but it seems insufficient in making a significant impact.

This data is net of fund charges but does not include potential platform costs or advisor charges which are likely to alter the overall returns set out above.

Portfolio Performance

Our core model portfolios continue to recover those losses experienced in 2022, and some key allocations towards the US, Europe and China have all provided strong returns over the past month, and although interest rate cuts are being pushed out further, investors are now focused on fundamentals rather than the Fed!

Any questions or views, please get in touch in the usual way!

Warm Regards

Louis Greening
Investment Specialist

Our mailing address is:
[email protected]

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We take a look at the importance of retirement planning as well as the end of the bear market….

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The Importance of Retirement Planning

A new study carried out for Aegon UK has revealed that 68% of clients are now planning to work longer and/ or delay accessing their retirement savings. Patterns for clients in retirement have changed as well with 61% seeing clients withdrawing more from their pensions and investments overall.

Higher levels of inflation resulting in higher living costs have contributed to leaving clients unsure about if they can afford to retire when they had originally planned, and for clients in retirement unsure if their funds will be sustainable for the long-term. Overall, this shows the importance of a good adviser to help and guide people and ensure that they have the confidence to know that their goals and objectives remain on track.

One way that we can assess and evaluate long-term income sustainability is using cashflow modelling. Cash flow modelling can assist in planning and achieving financial objectives by visualising cash flow now and into the future. It can:

Show if you will have enough money to retire when you would like to.
Show if you could achieve your desired lifestyle in retirement.
Help to utilise tax allowances including Inheritance Tax (IHT) planning.
Help to identify any potential surplus or shortfall in cash flow.
Plan several ‘what if’ scenarios and illustrate how they would impact your goals.
Highlight how seemingly minor changes have the potential to dramatically change your financial future

How Cashflow Modelling Works

As your adviser, we will keep up to date with your goals and objectives and can use cashflow modelling to ensure that you are on track to achieve them. This can show if you need to save more for your retirement, ensure that the level of investment risk is suitable and if funds will be sustainable for the long-term. This will give you peace of mind and ongoing monitoring means that changes can be made as and when necessary.
Darren Fuller – Clear Senior Paraplanner

The (Technical) end of the bear

The rising markets are called bull markets and falling markets are called bear markets, but why is this?
Here are various explanations as with most things in finance! One of the most common ones is that bulls attack by throwing their heads upwards, but bears swipe their claws downwards.
Another explanation includes the bearskin trade, or the Elizabethan tradition of bulls fighting in an arena.

At the end of January, the S&P (Standard & Poor’s) 500 climbed above it’s previous all-time high – a two year round trip.

Equity markets go up over time, so all time highs are completely normal, but while in general all-time highs don’t matter, getting back to an all-time high defines the transition between bear and bull markets.

Here’s how it’s worked out:

Once an index falls 20% from it’s high, it’s in the bear market.
You only count a bear market as over once the previous high is reached Jan24.
Then it’s easy enough to identify where the low point was, you count the new bull market as starting from that day (12^th October).

So the 2022 S&P 500 bear market lasted just over 9 months, and the peak to trough was 25%.

Putting this in historical context:

Source: 7IM, Bloomberg Finance L.P. , Past performance is not a guide to future returns, chart(s)/data for illustration purposes and are not for further distribution. Returns and analysis is based on daily price returns. The chart is for illustrative purposes only.

So the 2022 year was average in length, and slightly better in terms of pain suffered, so, as the chart shows, bear markets are very survivable.

Putting your eggs in different baskets

The saying goes “Don’t put all your eggs in one basket”. The phrase sums up one of the golden rules of investing – diversification.

Diversifying your investment across many different asset classes and geographies is the best way to control risk, smoothing out the ups and downs of the financial markets.

This chart looks back at asset class returns since 2005.There has been differences in returns between the best and the worst performing assets globally, none consistently ranking top or bottom. There really is no way of being sure what will do best or worst from one year to the next, but with diversification you don’t have to guess.

This graph is marketing material and is not intended as a recommendation to invest in any particular asset class.

Time in the Market not Timing the Market

Time is one of the most important weapons in an investor’s armoury. The concept of ‘compounding’ can be thought of as a snowball effect, with the idea that a small investment could grow significantly when reinvesting dividends given time.
It’s tempting to buy assets when the price is low and sell them when they are at their highest,
particularly during volatile times.

This can be a difficult as the markets are so unpredictable, and there is a risk to long term returns.
The chart below shows the historical performance of a hypothetical £10,000 global equities investment versus if the best 10 days were missed. In this scenario the return would be nearly 50% lower, thus demonstrating the importance of time and patience when investing.

Getting into bed with buybacks

When a company is profitable, it can choose to reward their shareholders, but there are other ways that companies can distribute their profits.

A company can also choose to buy back some of their shares from their investors as a reward. Companies buy some shares from investors, then cancel them, deleting the shares from existence. The remaining shareholders then own more of the company, plus there’s usually a bump in the stock price from the buying.

Share buybacks are usually viewed as a one off event when they happen all the time, but dividends are seen differently and a company who stops paying dividends gets punished by the market.

Lots of businesses choose to use buybacks, Wall Street in particular. In the first week of February 2024, US companies announced $105 billion of planned buybacks, and S&P 500 companies are expected to buy $885 billion in stock this year.
The chart below shows just how much CEOs in the US prefer buybacks to dividends.
The jerky pink buybacks line is much more flexible compared to the steady blue dividend line.

Source:S&P Dow Jones.
Share buybacks have been attracting some bad press over the last few years, this is due to a number of CEOs being paid or rewarded with shares in the businesses they are running, usually in the form of options which don’t pay dividends. This is seen as a misalignment of incentives. A CEO might prefer to do buybacks than pay dividends, so the share price rises in short order. Even worse the CEO might rather do buybacks than invest in the business!

A good example is a US company called Bed Bath & Beyond a homeware seller like Dunelm here. In the three years following Covid the company made losses and racked up debts, but it also bought back $836 million of its own shares. During that period it’s CEO was paid $47 million of which only 7% was basic salary. That CEO left in 2022 and in 2023 Bed Bath & Beyond declared bankruptcy. If done irresponsibly, buybacks can be the source of long-term
disappointment, even though they can be exciting in the short term for shareholders.

The maths – Imagine a company worth £1,000, that has £200 of cash on it’s balance sheet and has 10 shareholders with 1 share each. Their shares are worth £100 each, 10% of the business.

If the company pays £200 in dividends there will still be 10 shareholders with £20 in cash and a 10% stake in a business worth £800.

If the company uses buybacks it will pay two shareholders out completely for £100 each which leaves 8 shareholders with an equal stake in a business worth £800. The share are still worth £100 but each shareholder now owns 12.5% of the business.

BRIGHTON MARATHON 2024

We are grateful to Charlotte McIntyre and Gary Beach who are running the Brighton Marathon on Sunday 7^th April to support Clear Minds Charity.

The charity is currently supporting 14 therapists and 14 clients, with 8 clients having either completed therapy or are self-funding. All costs of the charity are paid by Clear Financial Advice, all monies raised going directly to pay counselling.

Please consider supporting Charlotte and Gary to reach their target by following the link or scanning the QR code:
https://www.justgiving.com/campaign/marathon2024-clearminds

Our mailing address is:
[email protected]

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February has seen a recovery from the lows of early January. Technology continues to power on despite a likely delay in rate cuts across the developed world…

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Dear *|FNAME|*

Over the past few weeks, markets have seen a relatively strong recovery from the beginning of the year, lead by the US. No surprises there! The latest US employment report reaffirmed the resilience of the labour market, with payrolls increasing by 335,000 in January, week ahead of expectations. The US economy is still in very good shape. Falling headline inflation along with a strong labour market has fed the narrative of “higher for just a bit longer” in terms of rates. The technology disruptors continue to lead the recovery, as AI continues to affect spending of all major industries, therefore benefitting the tech giants such as Nvidia and Alphabet.

China has seen a period of relative calm in recent times, and the Lunar New Year, falling when it did, provided a timely respite for investors. The UK officially fell into recession in the latter half of last year, with an overall economic growth of merely 0.1% for 2023. This situation presents a challenging backdrop for the Conservatives facing an election, necessitating the introduction of tax reductions to counter Labour’s increasing momentum. Nonetheless, such efforts are unlikely to reverse the prevailing trend.

This data is net of fund charges but does not include potential platform costs or advisor charges which are likely to alter the overall returns set out above.

Portfolio Performance

It has been a pleasing start to the year, relative to the average. We have continued with the strong outperformance from last year and the past 6 months have been encouraging.

Our perspectives have remained unchanged since the start of the year, even with recent persistently high inflation rates and a likely postponement of interest rate reductions. However, reductions are anticipated. I believe that in the lead-up to the US election, there will be pressure from the Democrats to boost economic growth and reduce borrowing costs for some individuals. Trump has expressed his desire to replace Powell as the Federal Reserve Chair, accusing him of being “political” and suggesting that he would lower interest rates to “assist the Democrats” this year. Speaking to US media, Trump remarked, “it seems to me he’s attempting to reduce interest rates, perhaps to aid in getting people elected”—a strategy Trump himself, of course, would never consider!

Any questions or views, please get in touch in the usual way!

Warm Regards

Louis Greening
Investment Specialist

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We take a look at investing in a Central Bank and why you are more likely to being crushed by a vending machine than winning the lottery!

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Positivity 2024

Despite basic living expenses remaining a primary concern, a recent survey reveals that the majority of individuals in the UK are optimistic about their financial prospects for the upcoming year.

According to Aegon, 52% of UK adults express a positive outlook on their finances for 2024, while 38% report feeling negative. Notably, those in the 50 to 59 age group, navigating the initial phase of their ‘Second 50,’ are less likely to feel positive, and a gender disparity exists, with females displaying less optimism compared to males.

Two years into the cost-of-living crisis, the survey underscores that ‘paying for basic living expenses’ continues to be the foremost priority for the coming year (37%). Additional financial priorities include building emergency savings (32%) and enjoying life (28%), although the latter has seen a decline from 34% in late 2021.

Almost half (49%) of the respondents in the survey believe that a decrease in inflation would boost their optimism, whereas only 6% anticipate increased pessimism, and 26% think their perspective would remain unchanged.

Steven Cameron, the pensions director at Aegon, noted, “As we step into 2024 and anticipate the coming year, our research indicates a resurgence in people’s confidence and optimism regarding their personal finances. Many attribute this to recent declines in inflation and the hope for further reductions.” Cameron also acknowledged the persistence of the cost-of-living crisis, emphasising that meeting basic living expenses remains the top priority for many individuals in managing their personal finances. Aegon pointed out that those on a fixed income, including numerous pensioners, are grappling with uncertain times, despite an 8.5% increase in the state pension from April. The sustainability of the triple lock guarantee, a topic of ongoing debate, adds to the uncertainty.

Cameron also highlighted this pressing issue, stating, “The elephant in the room remains whether the triple lock is sustainable long term. While the state pension serves as a lifeline for millions, it poses a significant cost for today’s workers funding it through their National Insurance. We urge all political parties to clarify their state pension intentions ahead of the General Election, as it could significantly influence voting preferences.”

Clear Financial maintains an optimistic outlook for 2024, anticipating that the upcoming year will bring positive developments.

Don’t count on the calendar

The calendar year still governs much of what we think and do, even though it is a counting system formed roughly two millennia ago (with assistance from Pope Gregory XIII in 1582 to get the leap year calculation right).
Take for example, New Year’s Resolutions. A whole lot of them will be about getting fitter or healthier.
And so, at the start of every year, there are regular online searches for health-related terms (as you can see in the Google Trends chart below). You can also see the impact of COVID lockdowns in 2020 and 2021 – “gym” searches fell, but “exercise” searches shot up!

It is tempting to think that the calendar would be just as important for financial markets. There are, after all, various ‘calendar effects’ to get excited about – The Santa Rally, selling in May to name two.
At this time of year there is of course the January Effect. Allegedly if the market rises in the month of January, the year will be a positive one for markets. But, if the market falls in January, it will be a negative one for markets.So, have we therefore found a fool-proof way to beat the market? Wait until the end of January and then invest if the market is positive?!As you would expect, the answer is a definite NO!
As the following chart shows, the effect isn’t that common. The January Effect has occurred 17 times in the UK FTSE 100 in the past 30 years (the bars with a black outline n the chart below). That s only just over half the time, so might as well toss a coin!

FTSE 100 Total Return

In terms of generating a good investment return there are, at least, two problems with the strategy.

First – some great years would be missed due to a bad January. For example, in 2021 the FTSE lost 1% in January, but then was up 18% over the course of 12 months. 1995,2003,2009,2010,2016 and 2017 were similar.
Second- even if you DO invest, you miss out on January’s return while you wait to see what happens! You only get 11 months of return on the years you are right. An example of this is in 2023. The FTSE rose 4% in January but 8% over the year, so waiting meant missing out on half the return.

So, if you had followed this plan by only investing in the FTSE if January is good, you would have made 281% over the last 30 years, compared to 660% you would have made if you had stayed invested for the whole of the time!
What matters is that the calendar should be used to count off the number of years you have stayed fully invested!

Who’d buy a central bank?

The below chart shows the price of three European shares going back 10 years.

This looks like three different businesses and based on the share performance, what would you think?
The pink/purple one could be a small tech firm which did well then became very volatile.
The blue/green might be a consumer staples company or a supermarket chain.
The orange is clearly a company in decline and has been for a while, then lost their final big company in about 2022.But there is a twist…….they are all in the same business – Central Banking.These are the central banks of Switzerland, Greece and Belgium.
We’re used to thinking of central banks as public institutions, basically arms of the government.
You cant buy shares in The Bank of England, The Federal Reserve, or the European Central Bank, but in a few countries in the word you can – Japan, Turkey and South Africa.
So what would be the reason for the difference in the share price performance?

With the Swiss National Bank (SNB), pink/purple, it’s speculation. Over the last five years the SNB has accumulated a lot of tasty assets, $9 billion of Apple stock, the 1040 tonnes of gold tucked away in the vaults, the US Treasuries. The hope is that one day shareholders might get a slice of the action, but that probably won’t happen.
What about Greece & Belgium? Even though they share a currency and are part of the ECB (European Central Bank) there is a big difference in their performance. They have a lot of assets like the SNB, however these two are allowed to pay out some of the profits as a dividend, like a normal bank.

But the assets they own are very different. The National Bank of Belgium, orange, owns mainly European government bonds, so when rates started rising over the last two years it started making losses. In 2022 the dividend was cut from 97 euros to 1!!
Meanwhile, following the Eurozone debt crisis in 2011, the Bank of Greece, blue/green, had to bail out a lot of Greek banks that it owned. Slowly these banks are being sold back to the market usually at a profit, hence the dividends.
This is a reminder that economics and monetary policy isn’t set in stone! Here are lots of different ways central banks work, the next decade is likely to demonstrate that as policy moves in different directions across the world.

Playing your (investment cards) right

Ever played “Higher or Lower?”

Take a deck of cards, turn one over, and then predict whether the next card will be higher or lower than the first one.

If the first card is a two its obviously higher, if the first card is an ace it’s lower. In the middle, although it’s a lot harder you can make a pretty good guess, particularly if you know what’s been played already.
When investing, it can be tempting to think that the same principles can apply. When an asset class has performed exceptionally well (higher), it can feel like it’s extremely unlikely to do well again (lower).
In 2022 Commodities were the best performing asset class, and in 2023 the worst! But most of the time, that’s not how the market works.

In 2016, Emerging Market equities were by far and away the top performer, so it was suggested that the next year wouldn’t be so strong – but it turns out they were wrong! Emerging Market equities aced it again in 2017, this trounced all other asset classes in terms of performance.

The same happens on the other side of the scale. Commodities were the worst performer in 2014, (minus 17%) and although it was hoped they would bounce back they performed even more poorly in 2015 (minus 24%)!

The problem with applying the logic of “Higher or Lower” to investing is one of knowledge. In a game of cards, we know what the top and bottom of the pack are and how many cards there are in a deck. The information is there and it’s useful.
But an asset class, even if it’s already at the bottom, can always go lower, or higher if it’s at the top! It doesn’t matter what happened before.

Lottery. – Taken from Days like these by Bill Bilston

11^th January

The first state lottery took place in England on this day in 1569. It was introduced by Elizabeth I to raise money to strengthen coastal defences vulnerable to Spanish invasion. First prize was a huge £5,000 paid in ‘ready money’, plate, tapestries and cloth. It wasn’t a success, however.Tickets were ten shillings each, too expensive for most people, and the whole enterprise was regarded with suspicion. Subsequent lotteries proved more popular, and helped to fund the building of Westminster Bridge in the 1730s and the British Museum in the 1750s. But, as gambling increased across the country, the lottery eventually came to be seen as a great moral evil and was stopped in 1826 never to be introduced again, until it was.

Odds

The chances of winning the lottery are 1 in 45,057,474, or, to express this probability in a non-mathematical way, quite slim.Statically, being crushed to death by a vending machine is a far more likely occurrence – particularly for me, as I use vending machines a lot and I’ve never bought a lottery ticket.

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Markets began January with a recheck, given how markets rallied in the last few months of 2023. We take a look at why predictions are counterproductive and how 2024 will bring nearly half of the world population to the ballot boxes

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Dear *|FNAME|*

A Christmas hangover

After a strong finish to the previous year, the markets began to pull back in the first week of January as optimism about potential U.S. rate cuts started to fade. The anticipation that the Federal Reserve would begin reducing rates as soon as March seems overly optimistic to me. Considering the continued high employment levels in the U.S., I believe rate reductions are more likely to occur around mid-year.

The situation in the UK is somewhat different and the expectation of rate cuts is for the first half of this year as inflation seems to be falling quite quickly. Those of us looking to renew mortgage rates soon (including myself) might experience a slight decrease from the peak rates of 2023. This is a favourable scenario for borrowers, but it may not be as advantageous for savers.

This data is net of fund charges but does not include potential platform costs or advisor charges which are likely to alter the overall returns set out above.

2024 – What we know

As we often state at the start of each year, attempting to forecast short-term market movements is unwise. While we do make minor adjustments to allocations as necessary, predicting which asset or region will yield the highest returns is a risky endeavor.

What is certain, though, is that 2024 stands as a record-breaking year for elections. More than 40% of the global population will head to the polls during the year, aspiring to enact significant changes in their lives.
Expect unexpected results that could introduce volatility, not only in local markets but also, in certain instances, these election outcomes could impact the worldwide economic landscape. This is particularly true for the recent election in Taiwan. Taiwanese voters have elected Lai Ching-te from the Democratic Progressive Party (DPP) as president on Saturday, challenging China’s influence efforts. Despite China’s ongoing objective of “reunification” with Taiwan, the DPP, which advocates for Taiwan’s independence and opposes Chinese territorial claims, aimed for an unprecedented third consecutive term in Taiwan’s current electoral system.

From China’s perspective, this election result is likely viewed with concern. The election of a DPP candidate, especially one advocating for Taiwan’s separate identity, could be seen as a setback to China’s reunification goals. China might interpret the DPP’s loss of parliamentary majority as a sign of internal division and potential opportunity, but Lai’s presidency still poses a challenge to China’s strategic interests in the region. The election outcome may prompt China to reassess its approach towards Taiwan and its strategies in the broader geopolitical landscape.

This election outcome is expected to heighten tensions between China and the US, serving as a prime illustration of how elections can impact confidence. However, for investors, such developments are often considered mere “noise.” We will likely hear plenty of rhetoric from both the US and China regarding this weekend’s results, but given the significant challenges each country faces this year, neither is expected to escalate matters further.

Our views

Stay invested!

The past 2 years have seen an increase in conflict in every corner of the globe and the sharpest rise in interest rates in the western world since the 70’s. Although 2022 was disappointing, 2023 offered some hope!

I have spoken before about an environment this year which we believe is likely to be favourable for fixed income and equities as we move to more stability with inflation and rates. We will remain selective, but most importantly well diversified!

We hope you’ve had a great start to the year and as always we are here to answer any of your questions.

Warm Regards

Louis Greening
Investment Specialist

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Happy New Year to all! We take a look back at 2023, as well as some financial new years resolutions you may want to take up…

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What’s next in 2024?

That’s 2023 done….

It felt like a lot happened last year:

Bank failures.
Submersible implosions.
Artificial Intelligence (AI) mania.
Middle East conflict.
Earthquakes & storms.
U.S. debt ceiling.

There is a rough and ready way of working out how much went on in markets, by simply looking at how many days have moves bigger than 1% up and down. Big Market Days (BMDs).
The tally for last year was as follows:

2023 saw 61 BMDs , exactly half the number seen in 2022 and not far away from the average of 53.
There was none of the really big days of 2% or more, which tells you that the market is really struggling to work out what’s going on! With the Standard & Poors (S&P) 500 up around 20% over the course of the year, the calmness makes sense, although it wasn’t predicted at the end of 2022.

What does 2024 have in store? Answers on a postcard……!

Retirement Planning

Given the choice, it’s safe to assume that most of us would like to be retired by state pension age if possible. New research from Just Group however has identified that only one third of people between the ages of 43 and 58 believe that they will be retired by the time they reach state pension age.
A third (35%) of those surveyed by Just Group said they are confident they will be able to retire by State Pension age but 38% believe they will have to work later and the remaining 27% are unsure. Factors for this include the majority of people no longer being able to rely on defined benefit pensions, helping children or ageing parents and automatic enrolment into workplace pensions starting too late in life to make a significant difference.

Whatever the reasons it’s clear that if no action is taken many people will not be able to enjoy the retirement that they would like and may have to continue working far longer than they would have previously envisaged, especially given that the increases to state pension age have already happened and are likely to continue happening in the future.

It is not too late to make a difference to your retirement planning. Even relatively small regular pension contributions can build up over time to large sums thanks to the effect of compounding. Please see graph below for an illustration of this:

*Based on 5% per annum returns.

The message from this is clear – if you can afford to pay more into your pension each month, you should. Even a small monthly increase can make a big difference over several decades. These actions could ensure that you are not one of the people who will not be able to enjoy the retirement that they want and deserve. Please contact the office if you would like to start/increase your regular pension contribution or make a lump sum contribution.

The Humanity of Financial Markets

Although the finance world seems like it is dominated by technology, with high frequency trading, crypto-currencies and now AI (Artificial Intelligence), it’s helpful to remember that markets will always be weird enough to need people.

Finance is full of weirdness – because humans are full of weirdness, biases, habits, emotions etc.
Trying to plug all this weirdness into an algorithm is almost impossible to do, because it’s psychology at work.

Here’s some of the weirder things a computer might miss:

No onions please.

In the U.S. you can buy and sell a lot of commodities using futures. These are financial contracts which ultimately result in the delivery of a real-world product.

If you buy corn or live cattle you need to have a large barn for when your cows or corn arrive. Or if you sell nickel or wood pulp futures, you are going to need a lot of metal or trees in your back garden to meet your contract.

Now this would be hard for a machine to figure out -you can’t ever buy or sell a future on onions. Because in 1955 a farmer called Vincent W Kosuga used the onion futures market to buy more than 98% of the onions available in Chicago, driving other onion farmers out of business and making millions of dollars. The public backlash was so extreme that President Eisenhower banned any trading in onion futures. This law still stands today.

Touch the seat to trade

Try explaining to a computer why it has to be touching the red sofa in order to make a trade on the London Metal exchange, then try to find an algorithm with a leg!!

Source: London Metal Exchange

Unknown currency conventions

Then, try to explain how the convention of currency quoting works on the global market, e.g. do you say “pounds per US dollar” or US dollars per pound” The market that trades $7.5 trillion a day must all be saying the same thing.
There is a hierarchy of which currency is the “base”, which is good news.

1. EUR
2. GBP
3. AUD
4. NZD
5. USD
6. CAD
7. CHF
8. JPY

You’ll note that even though it is the most important currency globally, the US dollar comes 5^th. Is there an explanation for this? Absolutely not – there’s no rules written down; it’s just passed from one currency to another when trading has started!

So, even the smartest computer would have difficulty capturing the human element of markets, or life!!

Popular Financial New Year’s Resolutions.

Create a budget.
Pay off any debt.
Stay on track with your goals.
Prepare for the unexpected.
Plan for retirement.

Happy New Year from all at Clear

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A positive year despite uncertainties. What can 2024 bring? We are not in the area of predictions, but some significant signs that the worst can be left behind us…

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Dear *|FNAME|*

As we wrap up another year and step into the festive season, I want to extend my warmest wishes for a Merry Christmas and a prosperous New Year to you and your loved ones.

As the festive season brings its cheerful and cosy charm, it’s a wonderful opportunity for us to pause and reflect on the journey we’ve embarked on together in the world of investing. Just like a well-loved Christmas tale, our story this year has been a blend of anticipation and resilience.

Throughout 2023, resilience has been a crucial factor. Staying steadfast in our strategies has enabled our portfolios to start yielding positive returns, thanks to the anticipated halt in rate hikes and the decrease in inflation, which has reintroduced a sense of confidence.

It’s significant to highlight that amidst the challenges of 2023, our portfolios have managed to achieve returns that surpass inflation for the year. With UK inflation currently below 4%, there’s a sense of optimism that inflation will remain manageable as we move into a phase of subdued growth and potential recessions in developed economies.

This data is net of fund charges but does not include potential platform costs or advisor charges which are likely to alter the overall returns set out above.

Over the past two years, many have understandably raised questions about the viability of long-term investing, given the heightened uncertainty brought about by COVID, international conflicts, global supply chain disruptions, and soaring inflation.

However, 2023 has offered several key insights:

Economic news doesn’t instantly impact markets; much of the information we come across is often already factored into market prices.
Maintaining cash reserves typically fails to yield returns that surpass inflation over an extended period.
And importantly, no situation is permanent!

We don’t foresee the markets maintaining their current path in the long term, but it’s clear that they stand in a different position compared to where we were last year at this time. While inflation remains a factor that cannot be overlooked going forward, we do not anticipate a continuation of the double-digit inflation rates that have been prevalent since 2021.

What can 2024 bring?

Unless unforeseen geopolitical events arise, it seems likely that we’ll witness a resurgence of stability in risk assets. As is customary, there will be a mix of successes and challenges within the equity markets, reflecting the diverse economic landscapes where some economies may face recessions while others experience higher-than-anticipated growth.

Falling rates (as we expect) in 2024 has historically been good for equities, as people seek better returns from cash or fixed income. We are well positioned for such an environment.

May this festive season bring you joy, peace, and prosperity. Here’s to a bright and successful 2024, filled with health, happiness, and continued financial success.

Merry Christmas and a Happy New Year!

Warm Regards

Louis Greening
Investment Specialist

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