Uncategorized Archives • Clear Financial Advice

UK General Elections and their Impact on Stock Markets

The next UK election will take place on 4th July and whilst individuals may have their own preferred outcomes, investors will be wondering what outcome would be best for the markets and investment portfolios. Analysis from trading company IG shows how the FTSE all share performed before, during and after recent elections:

Whilst the results are mixed there are a few key takeaways as follows:

Markets prefer predictable elections rather than close calls. Stock markets like certainty and if the latest polls are to be believed, the outcome of this election is not in doubt which may explain recent positive performance.
Trends tend to continue after an election especially where the result was predictable. This seems to be the case in both falling and rising markets.
Elections often cause short-term volatility but in the long-term only have a minor impact. We believe that for long-term investors it is important not to get distracted by short-term noise. Staying invested and focused on your long-term goals will help you achieve your desired results.
To conclude, markets are driven by much more than short-term political changes. Economic cycles, geopolitical factors, world events and technological change all play a part in current and future market performance. Ongoing monitoring and a disciplined approach are key to long-term success.

Darren Fuller – Clear Senior Paraplanner.

A Mean Drive for Clean & Green

Annoyingly it is an accepted truth that we’re often forced to compromise to solve problems. Transport is as example.
Walking everywhere is exhausting. Humans are resourceful, we started using horses to get from A to B. Unfortunately, that comparative speed meant compromise. In this case with sanitation (imagine the smell of manure in the big cities, and all the insects spreading diseases!). Fast forward. Cars came into circulation more widely – no more manure – but the comfort and cleanliness were favoured to the detriment of the environment (a different kind of emission!).Now riding over the horizon to solve the emission problem are herds of electric cars. The carbon emissions problem is no longer one humans can afford to compromise in favour of. But that comes at a price… the cycle continues.
But what about outside of the easy example of cars? Data is an excellent case study.As artificial intelligence grows meteorically, there is an insatiable thirst for data. The power demand for data centers is estimated to grow 160% by 2030.
But in Europe, increasing demand means the power needs of data centers in the region will equate the current total energy consumption of Portugal, Greece and the Netherlands combined! *

That’s a compromise (data over light and heat) that most residents would sign up to.
However, there is a compromise the data centers can make. Location.
Fortunately, these centers are usually located in the middle of nowhere. Here’s one in Iceland, a country where the number of data centers is quickly growing:

Verne Global. Source: MIT Technology Review

That’s not ideal if you favour a Pret sandwich at lunchtime, but what that does offer is SPACE. Plenty of it. And space is exactly what you need for renewable energy production.

This has noticeably driven demand for energy originating from renewable sources:

Source: Bloomberg.
Amazon thrives on data. It was also by far the largest consumer of renewable energy last year, having bought more solar and wind power than the next three companies combined.
As we and therefore our needs evolve, demand for goods or services impacts the environment around us. Fortunately, data centers don’t make many ‘top 10 places to visit’ lists, so the compromise made in this case feels like one we can live with (…for now).* Source: Goldman Sachs

The Price of Climate Change

British people really are predictable, 9 out of 10 of us have talked about the weather in the past 6 hours.
The following should keep the conversation flowing:Have you noticed how expensive coffee is recently?According to the Telegraph, the price of a medium latte has risen by a third since 2021.
Growing coffee beans requires the right amount of heat, the right amount of rain, the right altitude… see where this is going?
Every few years, the temperature of the sea in the central-east equatorial Pacific goes up. This natural phenomenon, called El Niño, leads to rainfall in southern US and drought in the West Pacific. It affects mostly countries in Africa, Latin America, and South and South East Asia.

Source: NOAA.

Here’s the problem:

The largest producers of coffee beans are Brazil, Vietnam, Colombia, Indonesia… all in areas of potential impact.
Climate change is turning weather phenomena like El Niño much more dramatic. Rainfalls more frequently lead to flooding; droughts more frequently lead to wildfires.

Coffee beans have been severely affected by these conditions and droughts have notably hurt production in Vietnam and Indonesia this year.

As we have found out – painfully – in the past few years, when there is a supply and demand imbalance, it is reflected in the price.
And the price of Robusta coffee beans, which come predominantly from the Vietnam area, are great example of this in reality:

Robusta futures prices (USD). Source: Bloomberg/7IM.

Earlier this month, Robusta futures prices reached a 45-year high on the back of record-low inventories, based on a few factors, but a huge contributor of which was the worsening drought conditions in Vietnam.
Climate change is creating supply uncertainty for coffee drinkers. What we’re paying for our coffees perhaps serves as a small reminder of the price we’re paying for climate change.

The charity is being supported by a number of serving police officers based in Yorkshire who are undertaking the Three Peaks Challenge to raise funds.

On Sunday 28^th July they will be hiking, overnight, the mountains of Pen-y-gent, Whernside and Ingleborough. This is a gruelling 26 mile route, challenging enough during the day let alone at night!

Clear Minds is very grateful to these participants and wish them luck!

Please consider donating to back these guys using the following link or QR code:

Clear Minds

The charity is now working with 15 therapists and supporting 25 clients. All funds raise go directly to pay for counselling for those in long term therapy who find themselves in financial difficulties.

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A slight pull back in markets over the past month as concerns around political results as well as no sign of a rate cut from the Fed this quarter.

However, despite minor fluctuations in European equities this week, overall risk appetite remains positive, with many indices nearing or reaching record highs. US tech stocks continue to lead the market, with the so-called Magnificent 7 up 34% so far this year. However, performance within this group varies significantly – Nvidia has surged 152% this year, while Tesla has dropped 27%. Nvidia alone accounts for 35% of the S&P 500’s gains in 2024. The current market environment is relatively calm, with inflation gradually moving in the right direction and economic growth remaining steady, if not exceptional. Equity markets have effectively adapted to the shift in rate expectations since the start of 2024; initially, there were expectations of 6-7 rate cuts in the US, UK, and eurozone, but now it seems we might see only two.

This resilience reflects robust economies and central banks’ lack of urgency to cut rates. The absence of major market concerns could be a concern in itself, as we have yet to experience a significant pullback this year, and history suggests that markets eventually correct for various reasons. However for now, markets are anticipating cuts in the final quarter of this year and once received it should provide another leg up to what has been a strong year… so far!

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.

We feel our portfolio positioning is sufficient for the current climate and through to the next quarter. We continue to believe China can recover having posted a posted a positive return, and the US economy can continue to grow and inflation fall.

Any questions or views, please get in touch in the usual way and have a great week!

Warm Regards

Louis Greening
Investment Specialist

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Retirement planning… Why the past two years have provided uncertainty to the next generation of retirement savers…

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The Fear of Retirement Planning

More than half of UK adults fear their retirement standard of living will be lower than that of previous generations, according to new research by SmartSave.

The digital bank found that 54% of UK adults believe their retirement lifestyle will be worse than their parents’ or grandparents’. Additionally, over a third (37%) of employed individuals expect they won’t be able to financially support their children or grandchildren.

The survey also revealed that two-fifths (40%) of respondents feel financially worse off than they were two years ago, with this figure rising to 46% among those aged 35-54.
Moreover, just over a fifth (22%) expressed that if the cost of living continues to rise, they would be forced to reduce or stop their pension contributions. In the light of these concerns, 23% of people are contemplating retiring abroad to escape the high cost of living in the UK.

Andy Mielczarek, CEO of SmartSave, commented that the traditional idea of a “well-earned retirement” is becoming increasingly uncertain for many. He noted, “Savers are more likely to feel that a comfortable retirement is unattainable compared to earlier generations. The drive to save for both one’s own retirement and the future prosperity of one’s family is a significant motivator for success, so the insecurity revealed by these respondents is concerning. Halting pension contributions to manage living costs is unsustainable, and today’s challenges are clearly affecting future prospects.”
Mielczarek emphasised the importance of giving consumers the freedom to achieve their financial goals, particularly in retirement planning. He highlighted that while there are many saving and investing options available today, the financial industry needs to do more to increase public education and awareness. This will help people make informed decisions and secure their desired futures upon retirement.

Anna Griffiths – Technical Manager

Service sector output growth strongest since May 2023.

Activity and new work rise at fastest rates for 11 months
Staff hiring remains subdued
Input cost inflation highest since August 2023.

There was a robust and accelerated upturn in business activity recorded by UK service providers in April, this was endorsed by a renewed strengthening of order books. Respondents to the survey often commented on a boost to sales from improving client confidence along with signs of a turnaround in underlying economic conditions. But there was only a marginal rate of job creation and the lowest in 2024 so far as firms opted to remain focused on limiting margin pressures.

Higher wages, partly driven up by a considerable rise in the National Living Wage in April, meant a sharp overall increase in input costs since August 2023, Meanwhile, prices charged by service sector firms rose at the slowest pace for three years.

In April the seasonally adjusted S&P Global UK Services PMI Activity index stood at 55.0 which was up from 53.1 in March and above the crucial 50.0 no-change value for the sixth consecutive month. Plus the latest reading indicated the fastest rate of business activity growth since May 2023.
Also new order volumes increased at a fair pace in April and to the largest extent for 11 months. Service providers noted that sales pipelines had improved with stronger business and consumer spending, in part linked to greater optimism towards the broader economic outlook.
Higher levels of new work from abroad also boosted total order books in April, with growth the fastest since March 2023 amid ongoing reports of strengthening sales to clients in the US and Asia.

The (false) geography of listed companies

There’s been a lot of buzz around the FTSE 100 hitting new highs in the past few weeks.
This index contains the 100-largest constituents of the London Stock Exchange, and this has been boosted by optimism around interest rate cuts and an easing of geopolitical tensions.
This has been noticed by UK papers. A group of London-listed companies doing well is something worth reporting, and “a win for the UK!”
But looking at the businesses that make up the index, Is it really a win for the UK?
The likes of Shell and AstraZeneca have been the source of such growth recently and because they are so big the wider index benefits.But what is the revenue exposure that these companies have to the UK? Very little:

The fact that many companies operate with a more global outreach has removed much of the importance of their listing country. When companies think about growth, they’re less worried about the domestic economy and more interested in sector consolidation and industry-specific needs. It’s much less a matter of geography.

Looking at London-listed mining company Anglo American last week, for example. ASX-listed (Australia) metals and mining company BHP made an £31bn offer to acquire Anglo American. Is it an investment in the UK? No. It’s more to do with some of AA’s major copper mines that BHP wants a piece of, based on how aggressively this metal is in demand for the production of renewable technology.

Whilst a map offers familiarity and comfort, if we had to set our investment compass, we’d be more inclined to measure where we are by sectors and factors rather than borders.

An old holiday spoiler

The Monetary Policy Committee assembled on Threadneedle St last week, to update the market on where interest rates are going. As ever, the event was less about the headline decision – rates held at 5.25%, shock – but the commentary that surrounded it.

The Bank is forecasting inflation to come down to 1.9% in two years and to 1.6% in three years. A key takeaway was governor Andrew Bailey expressing optimism, and even suggesting:
”Rates could come down faster than market expectations.”

But the question this leads to is:
“If inflation is falling and is forecast to drop to below the 2% target, why ‘hold’….what are they waiting for?!”
Good question!

If, like us, you’ve found yourself scanning the internet for a place in the world that has more than 48 hours of nice weather, you’ll have part of the answer…

There are reasons to feel optimistic about the economy, and with prices slowly going down, it’s easy to forget that some pockets of the inflation basket have been more stubborn than anticipated.
Despite being a distant memory, the pandemic squeezed a large number of businesses, many of which sit within in the services sector (including travel!).With this sector trying to meet its needs, prices have gone up by almost 30% since Covid-19 and the Bank said there are still some signs of inflation persistence, with services inflation standing at 5% in March.

As the Monetary Policy Committee grapples with when to stick or twist, it’s worth keeping in mind your summer holidays. Even though travel restrictions are no longer a problem, we can only do so (literally) at the expense of a four-year-old foe!

Interesting Financial summer facts.

Percentage of Brits going on holiday by annual income (%)

We are very fortunate to have a friend of Clear Minds, Jeremy Rushworth fundraising on behalf of the charity by undertaking the Handsling Bike Coast to Coast challenge on 22^nd June.

This 150 mile cycle challenge begins at Seascale and ends at Whitby, travelling through the Lake District, across the Yorkshire Dales, the Vale of York and the North York Moors. This is a popular cycling route normally undertaken over four to five days, but this event will take place over ONE DAY!!

Please consider supporting Jeremy on his quest by donating through the following link or QR code.

All funds go directly to pay for counselling sessions for those in long term therapy who are in financial difficulties. The charity is currently working with 15 therapists supporting 25 clients.

Click here to donate

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We believe the Eurozone should cut rates next month, but as for the rest of us who knows!?

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Rate Cuts?

US = not yet
Eurozone = next month
UK = who knows!

This is the general consensus. The Federal Reserve is grappling with a strong economy as well as stickier inflation, which gives a stronger argument to keep rates steady for now, but the easing inflation story in the Eurozone leaves the door wide open for rate cuts in June.

The UK on the other hand is still feeling the pressure of wage growth. Wages in the UK have grown faster than expected, putting at risk the prospect of a rate cut next month. However, these figures (announced earlier this week) do include bonuses, which is a one off, so we should see some moderation in growth over the next few months. Unemployment does seem to be on the rise, so it really is an unknown as to whether the rate cut will come in June. We shall see…

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.

China

We finally have the response needed to help stimulate a flagging economy. The Chinese government is at last trying to spur lending and investment with the purchase of government bonds. This move has been anticipated by investors since March and confidence is back when it comes to the second largest economy in the world:

As you know it has been a big position in the portfolios for over 2 years, and although we haven’t recouped all of the losses since we invested, the past few months have certainly helped!

We believe a strong US economy and a resurgent China supports our view that we should remain confident, despite a lack of rate cuts.

Any questions or views, please get in touch in the usual way and have a great week!

Warm Regards

Louis Greening
Investment Specialist

Our mailing address is:
[email protected]

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A real issue in society today is long term care and an ageing population…we explore the importance of saving for care in your old age….

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Long-Term Care Costs and Ageing Populations

According to a recent study by Just Group the price of the average home could cover just seven years of care in a residential home. For most relatively young people thinking about potential long-term care costs would probably be fairly low on their list of priorities. As people age, they inevitably start to think more about these issues and if they would like to leave their home to their children consideration needs to be given as to how one may fund any potential long-term care costs.

This issue is only likely to become more pertinent in the future due to increased longevity and changing demographics as shown in the graph below from research conducted by the Centre for Ageing Better:

Even if you do not plan to leave your home to relatives, another issue to consider is the fact that since 2020/21 house prices have risen by 12% whereas care fees have risen by 20% and this trend is expected to continue.

Engaging in open discussions with family members about long-term care preferences and expectations can also be very useful and collaboration with your financial adviser can ensure that your wishes and objectives are taken into account.

In conclusion, saving for long-term care is not just a prudent financial decision; it’s an investment in one’s future well-being and security. Should you wish to discuss long-term care planning for either yourself or a relative please contact the office and we will be happy to assist.

Darren Fuller – Clear Senior Paraplanner

AI – Healthcare needs you

If you have recently been writing a wedding speech or tried to answer a difficult Excel question or maybe summarizing a large chunk of text, chances are you’ve engaged with ChatGPT in some form. There’s a lot AI is great at, and helping with admin is one of them!

Leveraging AI to make ‘industry’ more efficient is a growing theme. In fact, it was referenced specifically in the Spring Budget. The Chancellor committed £3.4bn to the healthcare sector.

What was of interest wasn’t the figure, it was where it was being directed. This money is to be spent on digital transformation – including the expansion of AI capabilities for diagnosis, and lots of digitization of tasks.According to the UK government, “this funding will significantly reduce the 13 million hours of time doctors spend on poor IT, freeing up significant capacity (…)”. Informed people will run the rule over the accuracy of these numbers, but the theme is an interesting one.

If we look to data away from our shores to make this more objective – then it would appear that there are some striking changes that have occurred over the past few decades.

In the U.S. the number of doctors has doubled since the 1970s, but interestingly the number of admin staff has grown 30 times!

Reports of unreadable, disjointed medical records, and lots of complex, labour-intensive insurance processes mean more people are needed to deal with admin than treat patients. And it’s expensive! But the positive is that technology is already having a tremendous impact elsewhere in the world of healthcare:

If AI can help in the less glamourous area of reducing the admin burden, the posiives could be material. For an ageing population, for workers within the sector… and for investors in it!
Intel co-founder Gordon Moore predicted a doubling of transistors every year for the next 10 years in his original paper published in 1965. Moore’s Law is the observation that the number of transistors on an integrated circuit will double every two years with minimal rise in cost.

Come on Down!

There really isn’t enough good game shows these days, in our humble opinion.
So, let’s take a trip down memory lane in our inaugural – and possibly last, who knows – GUESS THE CHARRRRT!Clue #1 The below happened during November, eight years ago:

Clue #2 This rollercoaster covered just an 18-hour period.Clue #3 This holding plunged by over 5% initially. Sure, these things happen. But the rally came almost immediately after…. and nothing had changed.

Guess what the holding was?

The S&P 500 on November 8^th & 9^th 2016!

S&P 500 futures on 9-10 November 2016. Source: The New York Times

After pricing in a Clinton White House, chaos then reigned overnight as markets digested a higher-than-anticipated probability of a Trump victory.But upon confirmation of this win – and President Elect Donald J Trump not causing any issues on day one of the news – the index rallied materially, finishing the day up.

We use pictures all the time in the investment industry to illustrate points. Some are more useful than others, but this is the most apt one, for the data above.

Over the same period – 18 hours – if you were to pick the start and the end of the fluctuations, this is what you’d see:

Just another day………….

Ahead of election mania this is a timely reminder that companies, currencies and indexes fluctuate by the minute. It’s a brilliant example of how important it is to ignore the noise and stick to the plan.

The bright light of innovation

Even though the price of energy contributed to the tightening of belts over the past couple of years, we still have it pretty good compared to our ancestors. Back in the 1600s, something that we now for granted – artificial light – would have cost you £16,000! imagine having to account for lighting as a percentage of expenditure in your budget? A lot has changed since then, your home is now probably devoid of candles, unless you are going for the atmosphere. Not only has the price of lighting changed, but also the technology that produces it.
Indeed, by 2006, the price for lighting in the UK had fallen to just £2.89:

Source: Fouquet and Pearson (2012), taken from ourworldindata.org. The price per million lumen-hours in £. 1 lumen-hour is equal to the luminous energy emitted in 1hr by a light source emitting 1 lumen. For comparison, a 100w light bulb emits around 1700 lumen.

Demand, efficiency, and innovation! When there is a desire for something, humans have an amazing ability to solve it. In this case, town gas allowed cheaper lighting in the 1800s, as gas lamps were twice as efficient as tallow candles. When the efficiency of the technology improves, the price of the service falls; gas lamps improved so much that during 1800 and 1900, the price of lighting reduced 30-fold! * You can really see this drop in the purple line above.
Electric lighting only became cheaper than gas lighting in the 1920s, (over 40 years after the introduction of the incandescent bulb). Consumption then kicked on and the rest is history. This is a nice way of looking at the evolution in lighting sources over time:

Commodities are attractive investments to many. You can touch them, they’re easily understood, and some of the short-term fluctuations do offer interesting investment opportunities. But over the long term?
As the lighting example proves, backing a commodity is effectively betting against human ingenuity. We prefer, over the long term, to back humankind’s proven track record of innovation. Will it shock you that a well-diversified portfolio is a good way to do that on aggregate….?

What is good Environmental Social and Governance (ESG) investing?

There is one fundamental problem with trying to solve the problems with ESG investing – what is good or bad.We are victims of it every day. Whether it’s at work, in the pub, at the dinner table… how often do you have to convince someone else that your idea of what is good (behaviours, outcomes, motives…) is the right one?

That’s because other people have different notions of what is good.

In the financial markets, if two investors disagree on the price of an asset (what is a good price for them), one investor can simply sell to the other, and eventually the market decides who was right. In ‘ESG’ situations the market doesn’t get to decide, so things get much trickier. Over to you…

Tesla is increasing the roll out of EVs, but is its CEO a shining example of corporate governance?
Genetically modified foods: messing with mother nature, or are they ending world hunger?
Are mining companies bad for the planet, or are they providing the metals for the energy transition?

Are banks corrupt, or are they the conduit to spur on renewable tech investments?

Not easy, is it…?
The EU has been trying to tackle this problem. Regulation now in force requires EU companies to provide ESG disclosures, covering a broad spectrum of sustainability topics.
EU businesses, including multinational companies with operations in Europe, have to report on ESG issues impacting their business, but they also have to report on how the business impacts a number of sustainability factors.

This is part of the efforts from regulators to create an international uniform standard of reporting, meant to fill the huge gap created by fragmented and inconsistent reporting. *
This doesn’t put philosophers out of their jobs – the fundamental problem of what is good or bad still exists. But when investing responsibly, looking at the same ESG metrics for all businesses through the same lens should give a clearer idea of who’s doing better or worse in the same playing field.

Congratulations and many thanks to Gary Beach and Charlotte McIntrye who ran the Brighton Marathon to fundraise for the charity in a very respectable time of just over 5 hours despite Charlotte picking up an injury!

They have raised £1250 so far with donations still coming in.

You are still able to donate through the following link or QR code.

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

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We have some exciting news to share with you all…

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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:
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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

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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

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