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Market update Wednesday 18 November 2020

Please find below a link to a video from Tatton Investment’s Chief Investment Officer, covering some topical and very relevant matters to emerge this week.

https://www.tattoninvestments.com/tatton-media/market-update

As always, if you wish to discuss any aspect of your portfolio with your adviser, please do not hesitate to get in touch.

To contact us by telephone, please call:

Ashford office: 01233 646 666 

Hastings office: 01424 457 080 

Kind regards,
Mark Eaton
Director

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Market update Tuesday 3 November 2020

We hope this finds you well. Since the announcement on Saturday, we have been working to make arrangements to ensure the company remains fully open and accessible to you during the new lockdown using our contingency plans. You can continue to get in contact with us in any of the usual ways you would, with the exception of a visit to one of our offices for now – however, we can virtually connect with you to carry out face to face conversations, just as we did during the first national lockdown. We would like to reassure you that we are still here, monitoring your investments and ready to work with you to achieve your goals.

In market news, equities saw a rebound on Monday, as investors sought out bargains following last week’s falls, which had been the weakest weekly performance for global equities since March. Technology stocks rose but lagged the broader market gains. However, despite notching up daily gains on Monday of between 1 to 2% across global indices, this has only partly recouped the circa 5% falls from last week.

US election campaigning draws to a close
The long wait is over. US election day is finally here, but anyone hoping for an early result will be holding their breath. In the final days of the campaign, President Trump has used stark terms to threaten legal action to stop the counting of postal ballots arriving after election day on 3 November, a process that is allowed with earlier post-marks in some US states. Speaking about Pennsylvania, Trump’s claim that “we’re going in with our lawyers” as soon as the polls close later today will do little to sooth investors’ nerves of an orderly political process and transfer of power should it come to that. Meanwhile an update overnight from the US Elections Project has a tally of 99.6m Americans having now already voted before today’s 3 November voting, equal to 72.3% of the total votes counted in the US 2016 election.

What to watch on US election night, but caution on hoping for an early result
There are as many as a dozen or so ‘swing states’ to watch in the US election, which are states that historically have been closely divided politically. These include Florida (which has 29 electoral college votes), Pennsylvania (20), Ohio (18), Georgia (16), Michigan (16), North Carolina (15), Arizona (11), and Wisconsin (10). Some US states, such as Pennsylvania and Wisconsin, cannot start processing and counting early votes until election day, so final results here are less likely on the night. Instead, a lot of focus will be on Florida, a so-called ‘bellwether state’, which has a well-established process for counting early votes. Since 1996, every presidential candidate who has succeeded in Florida has gone on to win the White House. Also worth keeping in mind is caution on reading an early result, as both Florida and North Carolina announce their postal votes at the outset but vote totals can then be skewed as on-the-day ballots are counted. Safe to say, it could be a long night and week ahead.

With economically sensitive stocks seeing some support on Monday, a popular narrative is that a US election Democrat ‘blue wave’ would unleash a wave of infrastructure and broader government spending. So the thinking goes, this would support reflation hopes and drive interest into the more unloved parts of the market, including value and cyclical sectors. However, pushing back against this view, the market’s medium-term inflation expectations remain stubbornly muted. The US Federal Reserve tracks 5y5y forward inflation expectations, which is a measure of expected inflation on average over the five-year period that begins five years from today. Currently this rate is pointing to a medium-term inflation rate of just 1.82% – that’s below the Fed’s 2% target, and also below where it was at the start of 2020. Despite the unprecedented policy support so far this year, the accommodation from governments and central banks has not boosted net inflation expectations, but instead offered more of an inflation ‘bridge’ over deflationary risks. Should Biden take the White House this week, a large fiscal stimulus would likely follow but some of this might simply find itself netted off against a government more willing to curtail economic activity as the Democrats have promised to ‘follow the science’ and make dealing with the pandemic a policy priority.

The link below will take you to the latest short video, released last night, from Lothar Mentel, Tatton’s CEO and Chief Investment Officer, in which he discusses the US election, the response to the pandemic and Brexit.

https://www.tattoninvestments.com/tatton-media/market-update

As always, if you wish to discuss any aspect of your portfolio with your adviser, please do not hesitate to get in touch.

To contact us by telephone, please call:

Ashford office: 01233 646 666 

Hastings office: 01424 457 080 

Kind regards,
Mark Eaton
Director

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Market update Monday 19 October 2020

At the link below you can find some interesting thoughts from Lothar Mentel, Chief Investment Officer at Tatton Investment Management.

https://www.tattoninvestments.com/tatton-media/

He is being interviewed by Elizabeth Pfeuti, financial journalist, and discusses both the short and longer term outlooks for markets, recovery opportunities, the US election and chances for a Brexit deal. Each is just a short clip containing some very informative material.

As always, please do get in touch with your financial adviser if you wish to discuss any aspect of your financial plan or any of the content within the videos.

To contact us by telephone, please call:

Ashford office: 01233 646 666 

Hastings office: 01424 457 080 

Kind regards,
Mark Eaton
Director

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Market update Tuesday 6 October 2020

Further to my update last week covering the same topic, please click the link below (or paste it into your browser) to view a short video of Lothar Mentel’s current market thoughts.

Donald Trump’s handling of COVID-19 is making it increasingly likely that he will lose power in November’s US presidential election to his contender Joe Biden from the Democrats. Yet stock markets are proving surprisingly sanguine about the prospect of rising government expenditures and taxes. This update from Tatton’s Investment Team discusses why this potential turning of tables has so far not led to a turning of markets.

https://www.tattoninvestments.com/tatton-media/market-update

As always, please do not hesitate to contact me if you have any concerns.

To contact us by telephone, please call:

Ashford office: 01233 646 666 

Hastings office: 01424 457 080 

Kind regards,
Mark Eaton
Director

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Market update Friday 2 October 2020

We woke up this morning to the news that the President of the USA himself has tested positive for COVID-19. With US markets forecast to open lower today, and much activity going on across the pond the article below asks: What might the US presidential race mean for markets?

Making sense of markets relies foremost on growth and monetary policy – and investors will be watching closely as US voters go to the polls this November. Below we discuss what the possible outcomes of the US election might mean for investors and explain why diversification remains as important as ever.

KEY POINTS

  • The US election is one of many important uncertainties facing global markets over the coming months.
  • The most pressing risk for investors is the prospect of no party gaining overall control. We believe this is potentially the most concerning outcome for markets, creating potential for legislative gridlock.
  • The US election result poses a wide range of potential outcomes for markets. It is therefore important to have an all-weather portfolio which is diversified enough to navigate the uncertainty in the run-up to November and beyond.

ECONOMIC ACTIVITY IS PICKING UP
In terms of economic growth, the worst-case coronavirus scenarios we all contemplated in March have not come to pass – outside the most vulnerable emerging markets, many of which remain in dire straits.

In fact, most economies in the West and Asia are managing to get to within 5% of ‘normal’ in terms of economic activity. Of course, this still equates to a significant depression by any normal standards. However, note the recovery in leaders such as car sales and housing, and the surge in household savings permitted by income support policies. We could stand on the precipice of a genuine, fiscally-driven, boom (‘austerity’ is so 2010). ‘All we need’ is a vaccine, rolled out widely, before too much more economic damage is done. The first half of next year looks like a plausible timeline for this.

‘FLEXIBLE AVERAGE INFLATION TARGETING’
On monetary policy, markets seem to expect incredibly low interest rates, indeed deeply negative real (inflation-adjusted) interest rates, for at least a decade. They may well be justified in doing so.

First, the US central bank (‘the Fed’) recently announced a new framework dubbed ‘Flexible Average Inflation Targeting’. Simply put, compared to the past, for any given level of inflation they will keep interest rates lower than they previously would have. They will certainly not raise rates pre-emptively to cool an economy that looks to be booming. Second, the glut of government-backed borrowing that has been required to keep current and future growth supported during Covid-19 makes it harder to raise interest rates later. The increased burden would slow the economy down too much for policymakers to accept. Finally, no central bank wants to emerge from this crisis the way the European Central Bank did following the Global Financial Crisis – reacting to a temporary pick-up in inflation with even a slight rise in interest rates, before being forced to backtrack and having egg on their collective faces for years.

This cocktail of higher nominal growth and significantly lower US interest rates – the cost of borrowing for highly-rated companies has fallen by nearly 2% – could, in theory, have dramatic asset market implications, providing that it comes to pass.

THE US ELECTIONS
This is why November’s election will be a focus for markets – and investors. While some are focused on the likelihood of incumbent President Donald Trump winning again, some polling data is fuelling increased speculation of a Democratic ‘clean sweep’, where the Democrats could win both the Presidency (under Joe Biden) and control over the Senate. Whilst it’s unwise to rely on polls, and there is still a way to go before the election in November, this type of clean sweep would potentially leave the Democratic Party free to engage in a large fiscal stimulus, likely with a ‘green tinge’ based on some of the messages around the campaign. Such policies could lead to higher growth, inflation, and government debt, and possibly lead the Federal Reserve to raise interest rates. Some commentators speculate that the Democrats could pursue higher taxes and regulations on US companies and multinationals, in a reverse of the Trump administration’s S&P 500-supportive measures. Of course, the details of any potential policy measures – in the event of a Democratic or Republican win – will not become clear until after the election, but investors will be watching closely as the candidates spell out their priorities over the coming weeks.

While it’s interesting to weigh up the potential policies of respective administrations after November, perhaps the most pressing risk for investors is the prospect of ‘no clean outcome’, with no party gaining overall control. We believe this is potentially the most concerning outcome for markets, creating potential for legislative gridlock. Worse, while corporate taxes would not rise, it could nonetheless likely lead to a large ‘fiscal cliff’ in a year or so. The expiry of temporary income support measures, with limited offset, would lead to the exact opposite of a fiscal boom. Given that non-temporary unemployment continues to rise sharply in the US (despite strong economic growth data, it has not all been good news since March), the US economy could struggle to stomach this outcome.

After a decade of secular appreciation, the US Dollar remains very expensive but is showing signs of weakness. If it enters a secular bear market, as happens every other decade or so, it could supercharge a rotation out of highly-valued US assets. Emerging Asia remains a structural underweight in many investors’ portfolios relative to its economic importance. Crucially, it captures many of the growth and technological trends that have buoyed American asset markets, but without the premium valuations, and without the exposure to the uncertainty of the US election.

SUMMARY
Ultimately, the US election is one of many important uncertainties facing global markets over the coming months. Investors have no edge in predicting the outcome, and many have learned tough lessons from recent elections and referenda that speculating based on polling data and news headlines is unwise. Instead, it’s important to weigh up the potential range of outcomes, and position a portfolio accordingly – aiming to balance risks for the longer term, diversifying across asset classes, global regions and sectors to navigate an uncertain environment in the run-up to the election and further into 2021.

Source: Fidelity International 29/09/2020

Recommending well diversified portfolios is our core philosophy at Absolute, and as such, your investment strategy holds a range of asset classes and regional exposures. This is designed to provide you with not only capital growth, but protection during volatile conditions.

As always, if you would like to discuss any aspect of your investment strategy with me, please do not hesitate to get in touch.

To contact us by telephone, please call:

Ashford office: 01233 646 666 

Hastings office: 01424 457 080 

Kind regards,
Mark Eaton
Director

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Market update Wednesday 23 September 2020

Given the recent announcements from the government, and market volatility, we thought you may be interested to hear the views of one of the investment managers we endorse, Lothar Mentel.

Please copy the link into your browser to view a short clip with some pertinent information:

https://www.tattoninvestments.com/tatton-media/market-update

As always, please do get in touch if you wish to discuss any aspect of your financial plan, or any of the above news.

To contact us by telephone, please call:

Ashford office: 01233 646 666 

Hastings office: 01424 457 080 

Kind regards,
Mark Eaton
Director

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Market update Friday 4 September 2020

At the start of the pandemic, I began providing you with regular market news and updates which may have been of interest to you and I will be continuing to do this monthly, and more frequently at times. I will cover a range of subjects which include topical matters, market insights and news about Absolute. If you wish to discuss any aspect of the information provided, or if you would like an update on your own investment portfolio, then I would encourage you to get in touch with your financial adviser directly.

This week markets have seen some volatility, yesterday with US stocks suffering their biggest one-day fall for three months, although that still only took them back to where they were trading at the beginning of last week. Since the US markets opened today, the majority have bounced as data showed the US unemployment rate dropped more than expected in August, and European markets followed suit. European shares have now overcome their early losses, with bank stocks leading gains on merger talks between two major Spanish lenders, while markets anticipate the European Central Bank maintaining easy monetary policy at a meeting next week. Similarly, here in the UK, the FTSE 100 reversed its early losses as gains in mining and financial stocks gained.

As always, we would encourage you not to be concerned by short term market movements, and instead focus upon the longer term. The market falls we experienced in the early part of this year were undoubtedly unnerving. However, an investor who pulled out of their US shares due to the economic toll of the coronavirus pandemic and increasing unemployment would have paid a price; the S&P 500 is near record highs and up 7% year to date, including an 11.5% gain since the start of July.

Tax matters The IFS and Government ministers have cautioned against tax increases now that would blow the recovery off course and put the economy at risk. Near term increases to income tax, national insurance (NICs) and VAT therefore would seem to be unlikely. Nothing is impossible of course, but changes to these taxes seem to be unlikely. Despite the sense of all this the Chancellor will also have in mind (well, one would expect he would) his commitment to sustainable public finances. And, remember, he did hint at a rise in NICs for the self-employed when he introduced the Self-Employed Income Support Scheme (SEISS): “…I must be honest and point out that in devising this scheme – in response to many calls for support – it is now much harder to justify the inconsistent contributions between people of different employment statuses”.

Much of the latest conjecture has been about capital taxes and corporation tax though.

So, what has been talked about and what are the chances of changes being made ‘any time soon’?

Corporation tax first. One of the rumours is that the tax could be pushed up from 19% to 24%. Of course, it could happen. The last few months have taught us that anything can indeed happen. But will it, given the need for the UK to be seen as a ‘destination’ for businesses? This is especially so given the expected, at the very least short to medium term, negative connotations of Brexit. Of course, this will all depend on the ‘deal’ done between the EU and the UK, but regardless of your sentiment in relation to said Brexit, it’s hard to see how terms of trade with the EU are going to improve.

There has also been some talk over the 2% digital services tax (DST) introduced from April this year. Will it be increased – the projected yield is not massive – or will it be ditched? Both possibilities have been mentioned in the press. However, the DST was always intended by Government to ultimately be a temporary tax, to be replaced by a comprehensive global solution.

Capital taxes next. Well, the Office of Tax Simplification (OTS) are right in the middle of this. They have made their recommendations in relation to inheritance tax (IHT) and one of those was to remove re-basing for capital gains tax (CGT) if the asset passing on death is also free of IHT. There are also the more radical APPGIIF (All Party Parliamentary Group for Intergenerational and Inheritance Fairness) proposals. Some IHT change at some point is likely, but as a tax raiser (if that’s the supposed prime driver for change) IHT increases are unlikely to ‘shoot the lights out’. IHT raises around £5bn a year so even if the yield were doubled it would only reach the level that CGT currently generates – at the top end of estimates.

So, how about CGT? Well the OTS are currently reviewing it and the Chancellor only recently asked them to. Most of the recent talk in the press was about charging capital gains to income tax. This could be a strong runner – perhaps with even little strong political resistance from the right wing of the Conservative Party. We had 20 years of charging capital gains to income tax from 1988, though we also had indexation (inflationary) relief. So, a return to that might not be impossible. That would pretty much double the rate of CGT for most people. But, here’s the thing, over 50% of the total CGT paid is paid by around 5,000 people – not a huge group to annoy by such an increase!

If it’s believed that this is a strong likelihood for a Budget change then what should you do, if anything?

Any re-basing (focussed on ‘starting afresh’ under a new higher tax regime) that can be done without triggering a CGT liability, i.e. within the annual exemption, should certainly be considered – please discuss this with me first as there are certain conditions.

But triggering a liability (even at today’s lower rates) to potentially save tax in the future would take a little more thought – especially since nothing is certain and no one will know for sure until any change is announced. A ‘cost/benefit’ and ‘risk/return’ analysis will definitely be necessary.

CGT rates were aligned to income tax rates in the past, for almost 20 years. It is not quite as straightforward as it seems as there was back in the day indexation relief and taper relief, which could reduce the overall level of tax but alignment to income tax rates in some way is not beyond the realm of possibility.

As always, please do get in touch if you wish to discuss any aspect of your financial plan, or any of the above news.

To contact us by telephone, please call:

Ashford office: 01233 646 666 

Hastings office: 01424 457 080 

Kind regards,
Mark Eaton
Director

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Market update – Monday 13 July 2020

The full reopening of our offices for staff and client meetings alike has been a success. We are able to hold face-to-face meetings with you as our offices have all been reorganised, with new features added to allow socially distant meetings to review your financial affairs. Please do get in touch if you have anything you wish to discuss with your financial adviser, otherwise we shall be in contact with you regarding your annual review in due course. We have hand sanitiser on entry to the premises and the offices are regularly and thoroughly deep cleaned.

In case you did not see the information I provided back in May related to investing for positive change, I have reiterated some of the salient points below. There is much news coming out continually about a ‘green’ recovery and response from the pandemic and we believe that this provides an excellent investment opportunity. Market research carried out recently has again shown that funds investing in companies seeking to improve their Environmental Impact and Corporate Governance who are also acting in socially responsible (ESG) ways have outperformed their sister non-ESG funds. This has been shown to be the case for the year to date, and even more so over the long term. Companies using more ethical practices have been shown time and time again, to be less prone to external shocks.  Examples of such shocks we have seen very recently include oil spills and poor treatment of staff; society is less prepared to tolerate bad corporate behaviour and damage to the environment. These companies are also solving society’s challenges and we believe these companies of the future will prosper over the long term, due to rising demand for their products and services, motivated employees and loyal customers; they are helping to build a more stable, resilient and prosperous economy.

Finally, please copy and paste the link below to hear Lothar Mentel’s round up of the first half of 2020. As you will be aware from my previous emails, Lothar is the Chief Investment Officer at Tatton Investment Management, whose investment strategies we fully endorse and regularly use. Tatton also offers access to ethical investment strategies, should this be of interest to you.

https://www.tattoninvestments.com/tatton-media/

As always, please do get in touch if you wish to discuss any aspect of your financial plan, or any of the above news.

To contact us by telephone, please call:

Ashford office: 01233 646 666 

Hastings office: 01424 457 080 

Kind regards,
Mark Eaton
Director

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Market update – Friday 19 June 2020

As we receive news that the United Kingdom’s chief medical officers have agreed that the COVID-19 threat level should be lowered one notch to ‘epidemic is in general circulation’ from ‘transmission is high or rising exponentially’, I have provided a round-up below of financial news for you.

London shares rose on Friday as a sharp rebound in retail sales in May bolstered hopes of a swift economic recovery from the pandemic-driven slump, while energy shares tracked a gain as oil prices rose on a pledge by OPEC and allies to meet their supply cut commitments.

The FTSE 100 was up 0.5% and on course to rise for the fourth week in five as optimism continued around the revival in business activity.

Data today showed retail sales volumes surged by a record 12% in May amid an easing in the nationwide shutdown imposed to contain the spread of the novel coronavirus. This confirmed that British shoppers bought much more than expected in May as the country gradually relaxed its coronavirus lockdown and online retailers boomed, adding to signs that the economy is moving away from its historic crash in March and April.

But official data also showed public borrowing hit a record high as the government opened the spending taps and public debt passed 100% of economic output.

The Bank of England on Thursday expanded its bond-buying plan, as expected, but slowed the pace of the programme, saying it saw some signs of an economic recovery. A separate survey on Friday showed consumer sentiment recorded its biggest improvement in nearly four years in June. The Bank of England (BoE) Governor Andrew Bailey said that the economy appeared to be shrinking a bit less severely in the first half of 2020 than the BoE had feared. But there was no guarantee of a strong rebound and unemployment would rise.

European shares rose with a focus on EU recovery fund talks which are high on the agenda at the European Council meeting today.

Wall Street was also set to open higher on Friday with the tech-heavy Nasdaq inching closer to a fresh record high on hopes of a bounce back in post-pandemic economic activity, as investors shrugged off rising new COVID-19 cases in several U.S. states.

As always, please do get in touch if you wish to discuss any aspect of your financial plan, or any of the above news.

To contact us by telephone, please call:

Ashford office: 01233 646 666 

Hastings office: 01424 457 080 

Kind regards,
Mark Eaton
Director

AFM No Comments

Market update – Friday 5 June 2020

As the lockdown rules continue to evolve, we wanted to get in touch to provide you with some updates which, as well as our usual market commentary include information we thought would interest you on Absolute and investment matters.

Working with Absolute Financial Management

The safety of our clients and staff is our biggest priority, both from a physical and digital perspective.

We are closely following government guidance the quarantine and as you are already aware, we temporarily closed our offices at the end of March to protect our team, after putting into place our contingency office closure plan and ensuring we were all set up to be able to work at home effectively and securely. These arrangements have enabled us to remain fully engaged with our clients, team members and the service providers we use for your investments while protecting your data to the highest standards which comply with General Data Protection Regulation.

Mark and Spencer have been busy, at a distance, preparing the offices in our multiple locations for when we are able to return from our remote working arrangements. A full deep clean of premises has been carried out to the highest standard and regular, thorough surface cleansing will continue to be of utmost importance. COVID-19 risk assessments have been completed, which have led to several implementations which include amongst other things changes to the lay-out of each office, phased return of staff to office and emphasis on technology to reduce post and ensure we can communicate with you in a way that suits you best as we move into a new era.

We plan to begin the phased return of staff on Monday 6 July as long as guidance permits.

Exciting technological developments

We are focused upon working more efficiently and sustainably using technology.

Please be assured that regardless of any new technology we put into place, we will continue to work with you in the way that you feel most comfortable and are here for you.

New capabilities within our back office system will allow us to engage better with you; this includes, amongst many other things, a very simple secure messaging service and the ability for you to view your overall financial position in one place; a wealth dashboard if you will. You can expect future information on this shortly; we are working behind the scenes on putting it into place.

With offices temporarily shut around the country (ours and investment service providers we use), the need to reduce physical contact of any sort with you and our paperless office goals, we have reduced the post we send to you using technology. As well as the use of email, we have recently introduced DocuSign for paperwork, and electronic risk profiling as part of our exciting developments.

We are committed to assisting you in using any technology we use, to better enable us to work effectively with you while keeping a distance. If you should find anything difficult to use we are able to provide coaching and full support but of course we will continue to use more traditional methods of staying in contact as well.

Investing for positive change

Absolute is an avid supporter of investing in a sustainable way. That includes embedding sustainability practices into our own business and lifestyles.

This topic has come even more to the forefront given recent calls to action including not only social, environmental and financial issues highlighted by the coronavirus (decrease in demand for oil, cut of dividends, future demand issues with air travel decline and home working) but also the many fires experienced in Australia recently, the increasingly extreme weather globally, the plastics damaging our oceans. We are not alone in our belief that big changes to the world have been already set in motion and will continue to be seen in the immediate future due to these events.

One way we can make a contribution is to use positive change or sustainable investment strategies which have undergone our stringent due diligence and which we thoroughly endorse. These provide an extremely compelling investment solution designed to deliver strong returns while benefitting society through identifying long-term transformative developments, such as technological and medical advances and investing in companies that have a positive impact on society and the environment and can make for attractive and sustainable investments, using investments that are less prone to external shocks associated with such problems as obesity, pollution and environmental damage, and I will be very happy to provide you with more information on some options. These companies are solving society’s challenges and we believe these companies of the future will prosper over the long term, due to rising demand for their products and services, motivated employees and loyal customers; they are helping to build a more stable, resilient and prosperous economy.

The strategies we recommend have all performed extremely well compared to traditional solutions within their peer groups investing within their comparable risk profile.  This situation has been shown to be the case in a rising market, as well as during the recent market falls. We believe sustainable business practices offer resilience in a crisis and they have certainly demonstrated this.

Consider use of tax allowances now rather than later!

As we know, the cost of Covid-19 to our economy is already vast and needs to be paid for somehow.

With this in mind we urge you to take advantage of allowances such as ISA and pension annual allowances (including any carry forward annual allowance you may be able to use) now if you are able to.

In future reliefs and allowances are expected to be less generous or even cease to exist.

Some POSSIBILITIES which we could help you plan for now include:

Income tax

  • Increase to tax rates
  • Reduction or removal of personal allowance
  • Decrease to the level at which the personal allowance starts to be restricted below current level of £100,000

 Pensions

  •  Reduction of higher and additional rate relief on individual pension contributions
  • Merge of pension and ISA regimes into ONE single savings regime with a flat rate of tax (25%?)
  • Removal of the triple lock on the annual increase to state pensions

Please get in touch with us now so that we can do our job in helping you maximise your assets for your future.

Market news

Yesterday, the European Central Bank (ECB) increased both the size and duration of the Pandemic quantitative easing programme, but markets initially took a pause for breath before continuing their rally today. This programme will provide a structural support to European debt markets for several years.

We also heard yesterday that the US may deliver another $1tn fiscal stimulus package which would only intensify the level of liquidity supporting financial markets at the moment. Due to the timing of Congress’s two-week recess this is very unlikely to come together until the start of July, but the prospect of further fiscal stimulus provides a pillar of support for the economy and the market rally.

US Trade Representative Robert Lighthizer took a constructive tone when discussing the Phase One trade deal between the US and China. He cited the purchase of more than $100m of soybeans by China as evidence that the Chinese were holding up their end of the deal. These comments stand in stark contrast to the recent escalation in words by the White House and helps support the market narrative that electoral politics are supporting the tougher words rather than a desire by the Trump administration to tear up January’s deal. Lighthizer also commented that he did not favour the US pulling out of the WTO; another more conciliatory message.

The huge rally we have seen in risk assets over the last fortnight deserved a breather and this is what yesterday’s pause amounts to. The ECB largely delivered on what the market wanted and this will help liquidity in financial assets as well as provide some confidence that the ECB is not looking to exit the programme in the near term.

As always, please do get in touch if you wish to discuss any aspect of your financial plan, or any of the above news.

To contact us by telephone, please call:

Ashford office: 01233 646 666 

Hastings office: 01424 457 080 

Kind regards,
Mark Eaton
Director