Issue 28
Dear All,
As we approach the end of a turbulent and difficult 2022 it is definitely a year to forget in many respects. The problems accumulated during the, once in a lifetime pandemic, really came home to roost. One of the most damaging incidents has been the Chinese zero Covid policy putting pressure on supply lines and subsequently global inflation. There is however signs of hope this is being relaxed as we end the year, providing this continues it will be a major boost to global markets and economies in 2023 and indeed ease the pressure on inflation which in turn will reduce the need for further interest rate rises. However, UK interest rates are likely to rise further to peak at 4% before any likely reversal occurs. The same situation applies in the US where the federal reserve has already announced they do not expect to raise interest rates as much as expected.
The Asian and global emerging markets have been negative for over 2 years which has badly affected portfolio values. The change in the Chinese strategy should be the catalyst for a change in this sector, in fact a number of fund managers have recently increased exposure to China on this basis. This is a good sign that some hope for 2023 is on the horizon. One concern that remains is the change in sentiment towards China where a number of Chinese ownership of UK companies has been thwarted by the government in 2022. In addition, the Chinese investment in the Suffolk nuclear plant has been terminated and repaid which is a clear sign the UK do not want exposure in our companies, the US have a similar stance which in fact was instigated during the Trump regime. This is a concern for Chinese recovery however their markets are worldwide and far spread in addition to domestic sales, so a recovery is still on the horizon.
Naturally the other major issue of 2022 is the Russian invasion of Ukraine which simply added to the already growing supply chain issues. Notwithstanding the terrible human tragedy that has occurred the unnecessary destruction of property, the impact on global warming and the terrible cost of a war it has simply been a situation that should not be happening in the 21st century. It is difficult to predict a conclusion to this, but a number of unknown outcomes are possible. Whatever the conclusion the Russia/west relations are damaged for decades. Alternative energy supplies have already been sourced in most cases. The US of course is almost self sufficient. The short term problem is Russia is still selling to India and China thus retaining income to fund the war. Russia as an economy will suffer for years once the China/India sales subside, again it is difficult to predict timings but there is no doubt a major shift in long term relations and trade has occurred. The west will adjust.
In addition to equities falling the bond and gilt markets have also crashed in 2022 mainly due to interest rate rises. This has resulted in even further pain for portfolios with all sectors falling except possibly commercial property. This has made investing incredibly difficult no matter how large or small the business because collective portfolios always have asset allocations on similar lines.
All in all head winds remain but 2023 looks more hopeful once we have been through the winter of discontent and the pending house price falls. It is important to remember the markets are always ahead of the economy, and thus by the time the good news has arrived markets have already reacted which is why most investors miss the first phases of recovery.
We have not made significant changes to portfolios in 2022 due to the volatility because sometimes it is better to let things unfold before making changes. It is easy to react too quickly. The growth funds will bounce once the recovery starts and value funds will almost certainly stagnate, the question is when this will happen.
Thank you for your continued support and a happy Christmas and New Year from all the team at Padstone Financial Management Ltd.
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Mini Budget 2022
Hunt's mini-budget changes 2022: how the U-turn affects your tax and finances
Here's what you need to know about the mini-budget announcement and the U-turn from Jeremy Hunt that followed. With a new budget expected by the end of this month, find out what this means for the tax and National Insurance you pay, and how it affects your pension and savings.
On 23 September 2022, Kwasi Kwarteng set out a number of changes in his mini-budget, including some major tax cuts. However, the negative market response to this has caused the government to rethink many of these plans. Just three weeks later, the new Chancellor, Jeremy Hunt, announced the reversal of almost all of them in a bid to stabilise markets. Here’s a recap of what you need to know when it comes to your tax and finances.
Key changes from the U-turn announcement:
How have income tax rates and tax-free personal allowances changed?
What are the changes to National Insurance?
What are the main changes to stamp duty?
What are the changes to the energy support package?
What are the changes to Universal Credit?
How do the announcements affect my personal or workplace pension?
What is the pension annual allowance for 2022-23?
Lifetime allowance frozen until 2026
The State Pension rose
Were there any changes to the triple lock?
How much are ISA allowances for 2022-23?
Pensions and Stocks & Shares ISAs are investments. They can go down as well as up in value and may be worth less than what was paid in.
Tax rules and legislation may change and your individual circumstances and where you live in the UK will have an impact on the tax you pay.
The information here is based on our understanding in October 2022 and should not be taken as financial advice. If you’re unsure please speak to a financial adviser. There is likely to be a charge for this.
China bought out of Sizewell C as UK confirms £700m stake in nuclear project
Rishi Sunak states 'golden era' of UK and China relations is over
Insulation: Households could save £300 in new insulation scheme - BBC News
Chinese protests spread over government’s Covid restrictions - The Wall Street Journal
Egg prices increase by 20pc in two weeks as supply crisis worsens - The Telegraph
Net migration at record levels as 1.1 million arrive in Britain
Average five-year fixed rate mortgage falls to below 6pc - The Telegraph
Govt’s IHT intake up to £4.1bn since April
Amazon uncovered: behind the scenes at one of its biggest UK warehouses - Which?
Goldman Sachs Strategists Say Bear Market Will Last in 2023
'Not enough for people and planet': Critics denounce COP27 deal - Al Jazeera
What Does the G20 Do?
Investing better with Vietnam Holding
Are Lifetime Isas still worth it? - MoneyWeek
Rishi Sunak to strike gas deal with US to ease energy crisis - The Telegraph
From Teslas to BMWs, cars are piling up on land and sea at German port - CNBC
FTSE 100 surges on China hopes and strong US jobs - UK Investor Magazine
Rishi Sunak’s stealth tax to cost middle earners £3,500 a year - The Times and The Sunday Times
Lula beats Bolsonaro to Brazil presidency by a hair’s breadth after bitterly contested election - The Times and The Sunday Times
Industry anticipates BoE to slow rate hikes and adopt cautious approach
Ukraine pleads for urgent help as Russia blitz on infrastructure grows - The Independent
What we just learned about China’s economy - BBC News
Inflation Outlook | Will it Kill Or Cure? | Canaccord Genuity UK
Better times ahead for China equities? - UK Investor Magazine
Ruffer profits up 31% as investors flock to total return fund
UK banking rules in biggest shake-up in more than 30 years
Invesco Asia returns to China overweight in bullish contrarian bet
Why I'm Bullish on China
We cannot be held responsible for the accuracy of the information contained herein. This newsletter is designed to provide information on topical events which have an impact on financial services. You should seek advice before taking any action relating to the content of this document. This letter is not a recommendation to invest.