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Financial Market Update

Posted on March 12, 2020 in Articles & Frank Taylor & Associates

There has been lots happening in the financial world recently, with coronavirus dominating the headlines and parliaments financial budget being delivered yesterday, our colleagues at FTA Financial & Wealth Management have put together the following short update that we thought might be of interest to you….

Financial Budget 2020

The Financial Budget 2020 has been presented yesterday and the key areas which may relate to your financial planning are summarised below. Changes highlighted blue:

  • The Bank of England has cut the base interest rate from 0.75% to 0.25%
  • Income Tax Rates – to stay the same
  • Corporation Tax Rates – to stay the same at 19%
  • Capital Gains Tax – Entrepreneurs Relief to remain but the lifetime limit to be reduced from £10million to £1million.
  • Inheritance Tax – no changes to plans, the residence nil-rate band increase from £150k to £175k to go ahead from 06/04/20 as already proposed
  • NI threshold – increased from £8,632 to £9,500 per annum before NI is payable
  • Pensions – tax-relief on contributions – remains the same with higher-rate and additional-rate tax-relief still applying to pension contributions
  • Pensions – annual allowance – to remain at £40,000
  • Pensions – Tapering of annual allowance – change to the calculation and the thresholds have been increased by £90,000 before tapering applies
  • Pension – Lifetime allowance – to increase to £1,073,100 from 06/04/20 as planned
  • ISA – allowance remains at £20,000 per annum per person
  • Junior ISA – increase from £4,368 to £9,000 per annum allowance per child
  • Stamp Duty – a 2% surcharge on non-UK residents purchasing residential property to be introduced from 01/04/2021
  • The government have introduced various measures to help businesses in the wake of a coronavirus outbreak. See link below for full details

Please see below for full details of Budget 2020:

https://www.gov.uk/government/publications/budget-2020-documents/budget-2020

Market Movements and Outlook

Global stocks have seen a sharp drop in the past couple of weeks, as has been widely publicised. This global correction was ignited by the coronavirus panic, which saw large falls in the FTSE and other major financial stockmarkets. These market falls were then compounded this week by a disagreement between Russia and Saudi Arabia on oil production, causing oil prices to drop suddenly. The recent falls have been sharp, but we have also witnessed markets recover strongly at certain times during the past couple of weeks, showing a marked increase in market volatility that has seen drops and gains amplified.

Investment portfolios are usually invested across a range of financial assets and sectors, not just in global equities which have seen the largest falls, therefore most are not fully exposed to the larger drops and do have some protection.

The recent correction has come after many years of strong market growth. I have included below the mixed-investment sector performance graphs to show the last 5 years and illustrate the longer term position:

(information gathered today using FE Analytics – 5 year performance graph shown and 10 year performance table shown – prices as of close of yesterday)

UT Mixed Investment 0-35% shares (red) = Cautious to Moderate Risk

UT Mixed Investment 20-60% shares (blue) = Moderate Risk

UT Mixed Investment 40-85% shares (green) = Moderate to Adventurous Risk

As you can see from the table above, all these mixed-investment sector averages are still showing a profit over the past year, having grown very well in 2019.

After a drop such as experienced recently it does also provide opportunity to add new investment at better value, a strategy which we are implementing for a number of clients. Capital can be injected into the markets now at the lower value now or can be drip fed over a period of time.

If you have investments which you would like reviewed, free of charge, or if you would like to use the drop in markets as an opportunity to buy in for better value, please contact us and we can arrange a conversation with one of the FTA Wealth advisers.

 

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