We had a low inflation and a low interest rate environment at this time which hindered returns on bonds and cash, but there were high rental yields and a strongly performing stock market to call on. You could argue that an IFA’s job during this period is ‘easy’; providing advice and access to equities and alternative assets, both of which comfortably outperformed high street savers and NS&I bond holders.
We’re all conscious of the cyclical nature of the economy and geo-politics, but the string of unique events that has moulded the current position is remarkable. You can point to complacency, excess borrowing and sentiment driven investing of course, but “unprecedented” has become a cliché for a reason. “Getting Brexit done” was ushered into the wings by a global pandemic, and we only stopped reading, writing, and talking about Covid when the Russian’s invaded our European neighbours, Ukraine.
It has left us with ongoing market volatility, wealth eroded by an inflationary spike and soaring interest rates to dampen spending - the use of this blunt object (rate setting) to counter a supply side issue remains contentious. With c. 1.6 million fixed-rate mortgages due to conclude in the next 12mo, discretionary spending is set to be cut significantly, stoking concerns [/guaranteeing] of a recession. Furthermore, real returns (adjusting for inflation) have been heavily effected and the change in the Risk-Free Rate has undermined several assets.
Saving and investment is about future prospects, and risk must be rewarded appropriately for markets to operate efficiently. Conviction in your financial plan and your long-term strategy is therefore key. Roger Aliaga-Diaz (senior economist at Vanguard) argues that “risk environments change so fast that by the time you respond you might be too late. We don’t want to get into the business of trying to time it”. He continues by stating, “abandoning a strategic allocation when the markets are volatile can cause investors to lock in losses and impair their ability to meet their long-term investment goals”.
Recovery is expected over the economic cycle and many assets are attractively priced. Whether you’re seeking to invest new monies or currently holding a portfolio, the prospects over the longer-term are still strong. In fact, had you invested in an index fund (a tracker) this time last year, during a [very] tumultuous 2022, you would have received significant capital growth from any of Europe’s largest indices (including FTSE 100), 20% growth from Japan’s Nikkei 225, and/or an uplift of 15-30% from the USA’s main listings (as at 14/07/23).
It’s been a tough period, but financial advice can significantly add value through ‘correct’ risk exposure and asset diversification.
If you’d like to chat about your investments and/or retirement plan, please get in touch. Initial meetings are free of charge, and we can usually be found in the Watermark Centre on the last Tuesday of each month.
We strongly believe in the benefits of developing long-lasting relationships with our clients.
We aim to be approachable, easily contactable and offer a broad, inter-discipline, assessment of client needs. We are happy to meet via telephone or virtual meeting, but still prioritise face-to-face meetings where possible.
We work closely across our departments to ensure that specialist knowledge and experience is accessed; when queries arise, there will always be someone available who understands and can deal with your concerns.
We are also keen to work alongside other key stakeholders and individuals; land agents, accountants, your existing solicitor or financial adviser, and of course, your family.
As a firm we are keen to promote and involve ourselves in the community, and to support local charities and initiatives, such as Jeremiah’s Journey, St. Lukes, the Plymouth Argyle Community Trust (Project 35), Emotional Logic and the Ivybridge Brewery.
The South West is a beautiful places to live and we are proud to be based here, we’re therefore keen to help where we can.
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