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Brewin Dolphin – Markets in a Minute

Please see the below article from Brewin Dolphin which covers their views on recent events in markets. Received late yesterday.

Stocks in the green as inflation cools

Most markets finished the week in the green as inflation cooled in the US and eurozone. The UK’s FTSE 100 added 0.9% as house prices continued to recover and the manufacturing sector showed signs of improvement in November. Germany’s Dax added 2.7% while pan-European Stoxx 600 gained 1.7% as eurozone inflation cooled in November. In the US, the S&P 500 added 1.0%, the Dow grew 2.6% and Nasdaq rose 0.5% as the Federal Reserve’s preferred inflation gauge showed the rate of inflation slowed in October. Meanwhile in Asia, Hong Kong’s Hang Seng dropped 4.0% while China’s Shanghai Composite ended the week flat amid ongoing concerns about China’s economic recovery.

Rising bond yields affect investor sentiment

US markets closed in the red on Monday (4 December) as investor sentiment was marred by Treasury bond yields rising to 4.29%. The increase raised concerns among investors that Fed rate cuts may be further away than initially thought. The S&P 500 lost 0.5% and the Nasdaq dropped 0.8%, while the Dow fell 0.5%.

European markets were mixed as investors awaited US jobs data, including job openings and non-farms payroll data. The Stoxx 600 lost 0.1% and the FTSE 100 lost 0.2%, while the Dax made a marginal rise.

Eurozone inflation cools

Inflation in the eurozone area cooled more than expected to an annualised 2.4% in November, down from 2.9% in October, according to Eurostat. Economists had predicted a more modest decline to 2.7%.

The main inflation driver – food, alcohol and tobacco – saw price growth weaken from 7.4% in October to 6.9% in November. Services and non-energy and industrial goods also fell to 4.0% and 2.9%, respectively, in November – down from 4.6% and 3.5%, respectively, in October. Energy prices continued to fall to -11.5%, down from -11.2% in October.

The core annual inflation rate, which excludes energy, food, alcohol and tobacco, fell to 3.6% in November, down from 4.2% in October.

Although the headline inflation rate is moving closer to the European Central Bank (ECB)’s target of 2.0%, it’s “too soon to declare victory over inflation”, said Joachim Nagel, president of the Bundesbank and a member of the ECB Governing Council, which sets the central bank’s rates.

UK house price recovery continues

UK house prices rose 0.2% month-on-month in November, the third consecutive monthly increase. The average house price is now £258,557. On an annualised basis, price growth improved from -3.3% in October to -2.0% in November, the strongest result in nine months.

Falling interest rate expectations among investors have led to lower swap rates, which underpin mortgage pricing, said Robert Gardner, Nationwide’s chief economist. “If sustained, this will help to ease the affordability pressures that have been stifling housing market activity in recent quarters, where the number of mortgage approvals for house purchases has been running at c. 30% below pre[1]pandemic levels.”

OPEC+ agrees to voluntary production cuts

Members of the Organization of the Petroleum Exporting Countries (OPEC+) agreed on Thursday to voluntarily cut oil production by around 2.2 million barrels per day (bpd) in the first quarter of 2024. The decision, which aims to bolster the market, will see Saudi Arabia extend its existing voluntary cut of one million bpd until the end of the first quarter. Meanwhile, Russia will see its current voluntary export reduction deepen from 300,000 bpd to 500,000 bpd.

The announcement was followed by a drop in Brent crude oil prices, with the February contract declining 2.4% to $80.86.

Fed’s preferred inflation gauge rises

In the US, the core measure of the personal consumption expenditures (PCE) price index – which excludes food and energy and is the Fed’s preferred inflation gauge – rose 3.5% year-on-year in October, down from 3.7% in September, according to the US Commerce Department. Headline PCE increased by 3.0% in the 12 months to October, the smallest annualised gain since March 2021. It followed a 3.4% increase in September. On a monthly basis, headline PCE rose less than 0.1% in October, while core PCE increased 0.2%.

Consumer spending, which accounts for two thirds of the US economy, increased 0.2% in October after gaining 0.7% in September. Americans spent 0.4% more on services, including healthcare, housing and utilities, as well as international travel. This was partially offset by a 0.2% drop in spending on goods such as new light trucks, which was likely driven by shortages caused by now[1]ended strikes at a number of factories owned by General Motors, Ford, and Chrysler parent company Stellantis.

China PMI falls in November

China’s official manufacturing purchasing managers’ index (PMI) fell to 49.4 in November from 49.5 in October, the second consecutive monthly contraction. A level of 50.0 indicates growth. The non-manufacturing PMI fell short of economists’ expectations, dropping to 50.2 in November from 50.6 the month before.

Meanwhile, the Caixin/S&P Global manufacturing PMI, which focuses on smaller companies, showed Chinese manufacturing activity rose from 49.5 in October to 50.7 in November, exceeding economists’ predictions. New order growth reached the highest level since June.

Please check our blog content for advice, planning issues and the latest investment, market and economic updates from leading investment houses.

Alex Clare


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Brooks Macdonald: Daily Investment Bulletin

Please see below, Brooks Macdonald’s ‘Daily Investment Bulletin’ which provides a brief analysis of the key factors currently affecting global markets. Received this morning – 05/12/2023

What has happened?

Monday saw some reversal in the market’s dovish pivot with the highly rate sensitive 2-year Treasury yield rising by almost 10bps on the day. A softer day for bond markets should be read within the context of the extremely strong rally during November and we have, for context, seen similar reversals as recently as Thursday last week. The US equity market suffered under this bond market move however, with the headline index down just over half a percent while technology underperformed, led by the Magnificent 7 mega cap tech stocks.

Bond market moves

 There was no specific catalyst for the weaker bond market, it likely represents another pause for breath after dizzying recent downward momentum in bond yields. This week sees a series of important data releases which will add or detract from the probability of a soft landing. Next week contains the Federal Reserve meeting which will see the release of the ‘dot plot’ of interest rate expectations. The dot plot will reveal the gap between the market and the Fed in regards to interest rate cuts in 2024. After previous pivots the Fed has delivered a ‘hawkish rebuke’ of the bond market’s pricing, whether the Fed determines the inflation backdrop warrants a similar pushback will govern market sentiment for December.

 Economic data

 Today sees the release of the ISM services index which will be an important barometer of US economic health after the manufacturing equivalent was poorer than expected. The JOLTS report will also be a focus of the market, in part due to the proximity of the US employment report on Friday but also due to the ratio of job openings to layoffs remaining at tight levels. In September there were 1.5 job vacancies for each unemployed person, this compares to 1.2 before the pandemic, so jobs remain plentiful.

 What does Brooks Macdonald think?

 Early this morning, the release of the Tokyo inflation rate surprised to the downside, with headline inflation rising by just 2.6% year-on-year compared to 3% expected. Core CPI also came in one tenth of a percentage point below economist expectations. The Bank of Japan is expected to remove its yield curve control policy, effectively a form of quantitative easing, in coming months however this exit may be pushed back if inflation starts to cool of its own accord.

Please continue to check our blog content for the latest markets and economic updates from leading investment houses.

Alex Kitteringham

5th December 2023

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Tatton Investment Management – Monday Digest

Please see the below Tatton Investment Management Monday Digest article received this morning – 04/12/2023:

Overview: December brings a price shock reversal

Expectations are growing for Eurozone rate cuts in time for Easter. Speculation intensified followed the release of provisional European inflation data for November that surprised on the low side for the third month running. Overall consumer price inflation came in at 2.4% year-on-year in November, less than half the pace as recently as August. In the US, even though inflation is still between 3% and 4%, some central bankers are validating these ‘next move is down – earlier than thought’ expectations. US Federal Reserve (Fed) member Christopher Waller is noted for similar views to those of Fed Chair Jay Powell, so markets reacted quickly when he said diminishing inflation would naturally allow the Fed to cut rates. Clearly, it is no longer too soon to talk of cuts.

Looking at the changing inflation picture, by far the weakest area of pricing power is now in goods and energy. OPEC+ finally met last week via videoconference, and a cut of 900,000 barrels per day (bpd) was announced. An OPEC+ statement said Russia, the United Arab Emirates (UAE), Kuwait and Iraq made a “voluntary” pledge, while Saudi Arabia would continue its unilateral one million bpd cut until April 2024. Most of the OPEC+ problems are driven by potential global oversupply, with US shale gas extraction increasing and new oil fields opening in in Brazil (which has been invited to join OPEC+). Meanwhile, Saudi Arabia is trying to bring Iran back into the fold as well. Iran is talking about production rising to 4 million bpd next year, a level they’ve not approached in 20 years.

The fall back in energy prices might signal growth worries, but lower energy prices are at the same time a growth spur for the wider economy. The right price is one which stabilises the supply/demand balance, and we should be grateful we are in a period where prices are moving gradually and bearably. This suggests that while we may be experiencing weaker growth now, the likelihood is that costs will be cut naturally and we are in the final stages of a welcome return to normality.

UK inflation exceptionalism

The Bank of England (BoE) continues its expectation management programme. Last Tuesday, Jonathan Haskel, an external member of its Monetary Policy Committee (MPC), told a Warwick University crowd that rates will “have to be held higher and longer than many seem to be expecting”. This came after similar warnings in recent weeks from BoE Chief Economist Huw Pill and Governor Andrew Bailey. The BoE’s Deputy Governor Dave Ramsden warned last week that UK inflation is becoming more “home-grown”, and repeated the messaging that wage growth was driving UK-specific price pressures. That is why, despite the fallback in energy and other input prices globally, Britain’s inflation “is going to be really difficult to squeeze out of the system”.

The BoE and other economists worry Britain’s supply side problems may stem from a combination of pandemic hangovers and Brexit frictions that imposed extra costs on goods and labour relative to our largest trading partner just before the global economy entered an unprecedented period of supply bottlenecks. In this light, UK-specific inflation pressures are unsurprising – as is the BoE’s focus on wage growth from a structurally tighter labour market.

Tight labour markets would suggest interest rates indeed need to remain high. But one could actually argue this is a bigger problem for the US, where growth has stayed strong thanks to a seemingly unshakeable American consumer. In the UK, however, sentiment among both consumers and businesses remains dour. Indeed, despite the BoE’s laser focus on wage growth, for most of the last year headline wage growth figures have been below headline inflation – meaning cuts in real terms. The MPC knows the effect of longer-term rates (often tied to mortgages) on the fragile UK economy, and is likely trying to persuade where it cannot directly control. After all, expectation management is as much a part of monetary policy as interest rates.

Wind of change for renewables?

It has been a miserable year for investors in the renewable energy sector. Tighter oil supplies have pushed up the price of fossil fuels, increasing the short-term returns on oil and gas stocks. When you add in the tightest global monetary conditions in decades – which have hammered valuations for all long-duration assets – it is a recipe for disaster, since clean energy stocks are seen as longer-term investments. The S&P Global Clean Energy Index has fallen over 30% year-to-date. In fact, S&P’s Clean Energy Index achieved dizzying heights at the start of 2021, thanks to sharply rising energy costs and an expected political drive for the global green transition. But shifting macroeconomic factors pushed fossil fuel companies ahead, with clean stocks losing nearly 60% from the January 2021 peak.

Such a prolonged downturn has starved renewables of much-needed investment – particularly damaging for capital-intensive projects like building wind and solar farms. Project cancellations or modifications are happening everywhere you look across the industry (Vattenfall, Siemens Energy AG and Li-Cycle, to name three), with profitability and balance sheet concerns at the root of all of their announcements.

The solution – as energy analysts have argued for years – would be to properly align incentives so that short-term cyclical forces do not outweigh longer-term transitional needs. We have seen at least some progress on this front recently, and the green shoots of a cyclical recovery are also helping to shift the mood. These factors have helped change investor perceptions with the S&P Clean Index rising more than 7% in November. But cyclical moves can only do so much, particularly with markets and the underlying global economy in such a delicate position. For sentiment to swing back around fully, markets need to feel drive to longer-term structural change. The results of the UN COP28 summit will therefore be vital, but rumours that host nation United Arab Emirates plans to use the venue to promote deals for its national oil and gas companies are less than encouraging. Even if investors buy into the renewables story, it will make little difference if politicians are not willing to stand up and join in.

Please continue to check our Blog content for advice and planning issues and the latest investment, markets and economic updates from leading investment houses.

Carl Mitchell – Dip PFS

Independent Financial Adviser


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The Daily Update | Yellen’s Soft Landing / UK House Prices Defy Gravity

Please see below article received from EPIC Investment Partners this morning, which provides an update on both US and UK markets.

Yesterday, Janet Yellen expressed confidence that the US economy will not require significant hikes from the current level to curb inflation, believing the economy is on a path towards achieving the Fed’s desired soft landing with the unemployment rate averting a sharp increase. 

“Signs are very good that we’ll achieve a soft landing, with unemployment stabilising more or less where it is, or in the general vicinity,” Yellen stated, speaking to reporters following a speech at a lithium processing plant in North Carolina. 

Yellen added she doesn’t believe the Federal Reserve will need to push as harshly in lowering inflation as it has done in past instances when price rises ran out of control. “Those recessions you’ve talked about were times when the Fed, similar to now, was tightening policy to bring down inflation, but found it necessary to tighten so much that they flipped the economy into a recession,” Yellen said. Adding: “Perhaps it was necessary in order to reduce inflation and expectations of inflation that became ingrained, but we don’t need that now.” 

Helping cement that view were the PCE deflator figures, released yesterday. The Fed’s preferred metric for assessing progress on its inflation mandate showed core softening to 0.2%mom, in-line with expectations and below last month’s 0.3% print. Moreover, the measure eased from 3.7%yoy, in October, to 3.5%yoy last month, again in-line with the market consensus.  

Here in the UK, we also see the housing market continuing to defy forecasts by some of a sharp correction. House prices climbed for a third straight month according to Nationwide, as a lack of properties and lower borrowing costs underpinned the market. House prices rose by 0.2% in November, against an expectation for a drop of 0.4%.  

Following the release, Robert Gardner, the Nationwide’s Chief Economist, said: “There has been a significant change in market expectations for the future path of Bank Rate in recent months which, if sustained, could provide much needed support for housing market activity”. 

House prices are roughly 5.5% lower from where they peaked in August 2022. Many had predicted a 10% fall this year with some outliers going for 20%, even 25% lower. The average cost of a house in the UK is now just over £258,500.  

Please check in again with us shortly for further relevant content and news.



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EPIC Investment Partners – The Daily Update

Please see today’s daily update from EPIC Investment Partners below:

From Beige Books to Beige Bots  

The Fed’s November Beige Book, released yesterday, noted that economic activity had slowed since the last update, with businesses reporting that high inflation and rising interest rates dragged down their economic outlook.  Four Districts reported modest growth, two indicated conditions were flat to slightly down, and six noted marginal declines in activity.

Retail sales, including autos, remained mixed, with sales of discretionary items and durable goods, like furniture and appliances, declining with consumers showing more price sensitivity. Travel and tourism activity was generally healthy. Demand for transportation services was sluggish. Demand for labour continued to ease, however, skilled workers were still in short supply, leading to continued wage pressures in some sectors.

Manufacturing activity was mixed, however, again their outlook deteriorated. Demand for business loans decreased slightly, particularly real estate loans. Consumer credit remained largely flat, but some banks noted a slight uptick in consumer delinquencies. Commercial real estate activity continued to slow. Several Districts noted a slight decrease in residential sales and higher inventories of available homes.

Clearly, the Fed’s rating cycle is having the desired effect, whether the Fed manages to pull off a “soft landing” remains to be seen. With the Fed now at, or close to, peak rates, the market awaits the pivot.

Also, have you ever had one of those days when you really can’t be bothered to update your followers on social media, telling them what a wonderful life you are living? Well, it seems Facebook has a solution. Meta has announced it is bringing “AI post creation tools” to its platform, effectively enabling you to outsource to the social media giant the task of saying something pointless to your gullible (or uninterested) audience.

It gets better. Coders believe that Instagram will soon let users of its site create their own AI bots modelled on their own individual image, thus enabling them to create custom AI characters able to respond in their own distinct voice. In time, this could lead to bots speaking to other bots, forever, at which point we can hopefully just leave them to it and get back to the real world.

Please check our blog content for advice, planning issues and the latest investment, market and economic updates from leading investment houses.

Andrew Lloyd DipPFS


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Markets in a Minute – Markets respond to mixed economic data

Please see below article received from Brewin Dolphin yesterday afternoon, which provides a global market update as we approach the festive season.

Markets were mixed in a week that saw the release of differing economic data.

The UK’s FTSE 100 dropped 0.1% despite growing consumer confidence and the autumn statement containing a number of measures to stimulate business investment and economic growth.

Over in the US, markets saw a shorter trading week due to the Thanksgiving holiday. The S&P 500 and Dow added 0.3% and 0.7%, respectively, rallying against disappointing economic data – including a drop in durable goods and weak purchasing managers’ index (PMI) data. In contrast, the tech-heavy Nasdaq fell 0.2%.

In Asia, Japan’s Nikkei 225 added 0.7%. Meanwhile, China’s Shanghai Composite lost 0.9% due to continuing worries about the country’s economic recovery. Hong Kong’s Hang Seng lost 1.2%.

Chinese economy dents investor sentiment

Markets fell marginally on Monday (27 November) as investors reacted to news that industrial profit growth in China fell sharply to 2.7% year-on-year in October, down from 11.9% in September and 17.2% in August.

In the US, the Dow and S&P 500 fell 0.2%, respectively, after closing at their highest levels since early August on Friday. The Nasdaq dropped 0.1%.

In the UK, the FTSE 100 declined 0.4% as figures from the Confederation of British Industry (CBI) showed that the decline in retail sales eased in November. The CBI’s monthly retail sales balance rose to -11 in November from -36 in October. Although an improvement, this still marked the seventh consecutive monthly decrease. Despite the upcoming Christmas season, sales growth was expected to be marginally negative next month.

US durable goods fall more than predicted

The value of new orders for US durable goods (items meant to last three years or longer) fell by 5.4% to $279.4bn monthon-month in October, according to the Census Bureau.

The result fell short of economists’ predicted -3.4%. It was primarily driven by a decline in orders for transportation equipment (-14.8%), likely due to strikes at a number of factories owned by General Motors, Ford, and Chrystler parent company Stellantis. Civilian aircrafts also fell 49.6% while motor vehicle and parts declined 14.8% in October after increasing 11.6% in September. Data for September was revised down from 4.6% to 4.0%.

On an annualised basis, new orders increased 4.0% in October.

Eurozone PMI contracts

Eurozone business activity continued to contract in November, according to the HCOB flash eurozone PMI. While the index rose to 47.1 in November, the highest level in two months and an increase from 46.5 in October, it still fell below the 50.0 level that indicates growth. The main driver of the overall reduction in business activity was a decline in new orders. Both manufacturing and service sectors saw a decline in business activity.

US PMI remains flat

There was a further marginal expansion in US business activity in November, with the rate of growth in line with that seen in October. The S&P Global flash composite PMI remained at 50.7. While manufacturers saw a slower pace of expansion, this was offset by the service industry, which recorded a small uptick. The manufacturing PMI fell to 49.4 in November, down from 50.0 in October and the lowest level for three months. Meanwhile, the flash services sector PMI rose to 50.8 in November, up from 50.6 the month before.

UK consumer confidence grows

The GfK consumer confidence index, which measures how people in the UK view their personal finances and the broader economy, rose six points to -24 in November. Consumer confidence came in at -44 in November 2022.

The personal financial situation index rose three points to -16, an increase of eight points compared to November 2022. The forecast for personal finances over the next 12 months increased five points to -3, 26 points higher year-on-year.

Autumn statement measures to stimulate growth

Chancellor Jeremy Hunt delivered the autumn statement on Wednesday, with the key announcements including reductions to National Insurance and a permanent extension of the ‘full expensing’ regime for businesses. Other measures included raising the National Living Wage from £10.42 to £11.44 per hour, freezing alcohol duty, and reforms to ISAs.

There were also pledges to speed up planning applications, extend financial incentives for investment zones, and invest an additional £500m in artificial intelligence. To encourage investment in UK high-growth companies, new investment vehicles will be introduced, including a ‘growth fund’ within the British Business Bank.

The autumn statement was accompanied by the Office for Budget Responsibility’s (OBR) economic and fiscal outlook, which gave a mixed review of the UK economy.

Borrowing was £19.8bn lower than expected in the first half of the current financial year, and gross domestic product (GDP) is now forecast to expand by 0.6% this year, rather than contracting by 0.2%. The next two years are expected to be more muted, with GDP growing by 0.7% in 2024 and 1.4% in 2025, down from previous estimates of 1.8% and 2.5%, respectively. Inflation isn’t expected to return to the Bank of England’s 2% target until the second quarter of 2025.

Japanese inflation rises year-on-year

Over in Japan, the core consumer price index (CPI), which excludes fresh food, rose 2.9% year-on-year in October, according to data from the Bank of Japan (BoJ). It’s a slight increase from October’s 2.8%, but below economists’ predicted 3.0%.

The so-called core-core index, which strips away fresh food and fuel costs, rose 4.0% year-on-year in October, slowing from 4.2% in September. It is the seventh consecutive month the index has stayed above 4.0%.

Please check in again with us shortly for further relevant content and news.



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EPIC Investment Partners – The Daily Update

Please see the below article from EPIC Investment Partners received this morning 28/11/2023.

The Daily Update | UK Shop Inflation Falls, However Wider Inflation Becoming More Home Grown  

Inflation in UK shops has fallen to its lowest level since June 2022 as retailers fight to attract shoppers ahead of the crucial Christmas period.  

Figures out this morning from the British Retail Consortium showed inflation fell 0.9% in November to 4.3%, a 17-month low, versus the previous reading of 5.2%.  It’s the sixth-straight month that the trade association has recorded declines. Clearly the BoE’s tightening cycle is working, with inflation now less than half May 2023’s reading, of 9%.  

We maintain, however, that the hardest part is the journey from ~4% to 2% target. To this effect, the lobby group said there was no guarantee that inflation would keep falling, with higher taxes and an increase in the minimum wage pushing up costs. 

The lower shop inflation comes as the Old Lady’s Deputy Governor Dave Ramsden warned that UK inflation is becoming more “homegrown” and will be “challenging to squeeze out of the system”. Speaking to Bloomberg TV, Ramsden believes that monetary policy will need to stay “restrictive for an extended period of time” to bring inflation down from 4.6% to the BoE’s target.  

Although headline inflation is now less than half of what it was 12-months ago, this was mainly “driven down by a bigger fall in the energy component than we were expecting”. Services inflation, which makes up 45% of the consumer basket used to calculate the CPI inflation number, was “actually much stickier and higher than we were expecting at 6.6%.” 

“That’s really a sign that UK inflation is becoming much more home-grown,” Ramsden said. He added: “We think that inflation is going to be really challenging to squeeze out of the system. It’s driven by wages, where wage growth remains above 7%. The service sector in the UK is very labour-intensive. So, these factors are what’s leading us to think that inflation is going to stay stubbornly high through next year.” 

Please check our blog content for advice, planning issues and the latest investment, market and economic updates from leading investment houses.

Charlotte Clarke


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Tatton Investment Management: Monday Digest

Please see below, the ‘Monday Digest’ from Tatton Investment Management which briefly analyses all the key factors currently affecting global markets. Received this morning – 27/11/2023

Activity (and growth) slows down as December beckons

The US-centric nature of global markets means Thanksgiving week tends to be quiet. Things should pick up this week, but markets will likely be decreasingly busy over the next four weeks. However a decline in trading activity doesn’t necessarily mean quiet markets, particularly if a group of investors decides to move things around. If they want to buy, we can end up with a ‘Santa rally’, but if they are stressed and need to raise cash levels, we can get a nasty sell-off, such as in 2018. It can be driven by investors’ perceptions risks and opportunities shaping up for the next year, but more often December’s moves are about protecting the past year’s returns.

In the run up to year end, November remains a positive month in capital markets, although equities had a neutral week and longer bond prices fell back. Right now there are few signs of market stress. Price volatility has declined across the board, and option volatilities (a measure of expected volatility) have come down to low levels. The risk of owning market-traded assets has declined and that slow process tends to lead to a gentle rise in risk asset prices. But, as we mentioned last week, there is a potential problem with an environment where rising low-risk bond prices (and falling bond yields) are the only driver of higher risk asset prices. Falling bond yields are mostly associated with some sense of a slowing economy and it appears that, on balance, the global economy may indeed have eased back. The good news is that although growth may be slowing somewhat, this phase may prove to be better balanced. 

The AI governance dilemma

OpenAI shocked the world by firing superstar CEO Sam Altman for not being “consistently candid in his communications”. But just days later, Altman was back in charge at OpenAI and the board that had sacked him was gone. Some have cast the story as one of a daring geek entrepreneur coming up against overly cautious non-scientists, others have highlighted the “Terminator” films’ aspect. It’s all of these things but the widest ramifications concern how individual companies are not the place to balance public interest and profits. 

OpenAI began as a non-profit organisation in 2015 and, initially at least, its stated sole aim was to develop artificial intelligence (AI) “safely” for the benefit of humanity. However, the costs of developing and running cutting-edge technologies were so substantial it needed much more investment. That required extensive private capital that ultimately demanded commercialisation – and Altman was the ideal person for the job, having overseen a Silicon Valley tech incubator for years. Regardless of whether Altman’s sacking was ultimately down to those clashing incentives, there was certainly plenty of tension between revenue and promoting safe artificial intelligence (AI). 

OpenAI’s conflicting priorities were obvious and make it seem like a one-off. But they have become more common thanks to understandable wish to have the perceived need for socially conscious corporates, most commonly expressed  as ESG investing. OpenAI has shown the dilemma in a case of “reductio ad absurdum”.

The extremity of this case has further implications. One does not have to be a doomsayer to realise the risks of the unfettered proliferation of a technology that one insider described to us thus: “this isn’t just better technology – we’ve made a new kind of nuclear weapon”. If the potential consequences to society are so big, it will not be possible for competing private groups to self-regulate or govern in the public interest. 

Even with clearer and tighter regulation, we can’t be sure of a socially acceptable outcome when first-mover advantage means untold riches and near-untouchability,  and when this might be achieved in months, not years. Centralised research bodies are currently promised by various governments, and are sorely needed.

Can radical Milei bring stability to Argentina?

Economist, TV personality and self-proclaimed “anarcho-capitalist” Javier Milei won Argentina’s run-off election by a surprisingly large margin last week, beating centre-left Sergio Massa – the current economy minister – by 56% to 44%. Milei believes in unfettered market freedom and advocates substantial cuts to public spending. More radical ideas floated on the campaign trail have included loosening gun control and allowing a private market for human organs. His fierce criticisms have extended beyond the Argentine political establishment to foreign governments, and he has promised to cut all ties with China and Brazil – Argentina’s two largest trading partners. His populist leanings and maverick personality have earned him comparisons to Trump and Bolsonaro, but his message has always been more market oriented and less protectionist than either. The president-elect was defiant after the result: “the model of decadence has come to an end, there’s no going back”.

Where Argentina is going to is another matter. Milei promises swift and dramatic reforms to the economy, but he lacks legislative support after his party fell well short of a congressional majority in October’s elections. His toughest task will be quelling 143% annual inflation, while dealing with extremely high public debt and practically zero fiscal leeway. His election has been cast as a ‘roll of the dice’ by Argentines fed up with years of punishing inflation and worsening living standards, but many are predicting a difficult transition.

One of Milei’s most consequential proposals is to scrap the Argentine peso, replace it with the US dollar and close the country’s central bank (at least as a printer of money). This is designed to limit price rises and anchor people’s inflation expectations by running the economy on a more trustworthy currency. Full dollarisation has never been tried for an economy as large as Argentina though – the continent’s second biggest and a member of the G20. Economists are almost unanimous that dollarisation, if possible, would require further devaluation of the peso, but if such devaluation came suddenly, it would likely be seen as a betrayal by Milei voters. The other option is to return to the International Monetary Fund (IMF) (or possibly the US directly) with hands out.  But, if the IMF were to agree, it would amount to a doubling of Argentina’s already substantial debt pile. On its part, the IMF has expressed serious reservations about the feasibility of dollarisation.

The unfortunate truth Argentines might well discover is that, while reforms are needed and dollarisation may indeed be possible, a populist firebrand might not be the person to deliver them. It is early days, but Milei’s campaign gave little reason to think that his regime would bring stability, and he might struggle to get the results he promises.

Please continue to check our blog content for advice, planning issues and the latest investment, markets and economic updates from leading investment houses.

Alex Kitteringham

27th November 2023

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FSB – Autumn Statement 2023 – Key points for small businesses

Please see below an article published by the Federation of Small Businesses (FSB), which was published and received late yesterday (23/11/2023) afternoon and provides their take on the Chancellor’s recent Autumn budget and the impact this will have for small businesses:

Round-up of how the Government’s Autumn Statement affects small businesses.

The Government’s Autumn Statement on 22 November 2023 included a number of measures affecting small businesses and the self-employed. Here is a round-up of the key points you need to know:

  • National Insurance Contributions (NICs) for employees will be cut by 2p, from 12% to 10%, from 6 January 2024, and Class IV NICs for the self-employed are to fall from 9% to 8% from 6 April 2024. Class II NICs for the self-employed will reduced to zero and then abolished from 6 April 2024. This is UK-wide. The announcements on Class IV and Class II NICs were as a result of FSB campaigning.
  • The small business multiplier for business rates in England will be frozen for next year’s bills, removing the scheduled CPI inflation increase, and the 75% discount for retail, leisure and hospitality SMEs in England has been extended until March 2025, after it had been due to run out in March 2024.
    Both of these England-wide measures on business rates followed successful campaigning by FSB with the Government in Westminster. FSB teams in Scotland, Wales and Northern Ireland will be able to leverage this win and any consequential funding generated for devolved administrations to extend similar support to these hard-pressed sectors in their own economies.
  • New measures to tackle late payments. From April next year, companies with a turnover of £5 million or more will be banned from bidding for public contracts if they have a record of paying their suppliers after 55 days or more. After a year, this will decrease to banning those who pay over 45 days, reducing to 30 days the year after, in line with the Prompt Payment Code. This is UK-wide, and is the result of extensive campaigning by FSB. We will continue to campaign to build upon this.
  • HMRC to rewrite guidance around the tax deductibility of training costs for sole traders and the self-employed. This will provide more clarity to business on what costs are deductible, and ensure that sole traders and the self-employed can be confident that updating existing skills, or maintaining pace with technological advances or changes in industry practices, are allowable costs for tax purposes. FSB welcomed this, having campaigned for it.
  • The income tax cash basis for the self-employed and partnerships is being expanded and simplified from 6 April 2024. Currently, only those with turnover under £150,000 may calculate profits based on when they get income or make payments, known as the cash basis. The new measures will remove the £150,000 threshold, with an option to choose the accruals basis, which records revenues and expenses before payments are received or issued, if preferred.
  • The Making Tax Digital for Income Tax Self-Assessment threshold will be maintained at £30,000, and changes will be made to simplify and improve the system from April 2026.
  • Alcohol duty has been frozen until 1 August 2024.
  • The two current R&D tax relief schemes have been merged, and a new scheme for R&D-intensive firms has been created. These schemes will be implemented from April 2024. For small businesses to qualify for the R&D intensive scheme, 30% of their total expenditure will need to be spent on R&D; this was previously set at 40%.
  • The Employers National Insurance holiday for small employers who take on veterans, a measure secured by FSB in partnership with X-Forces Enterprise, will be extended by a year.
  • Full expensing, which grants businesses 100% capital allowances on qualifying new plant and machinery investments, will be made permanent from March 2026. Most small businesses, however, are already covered by the Annual Investment Allowance set at £1m.
  • New Investment Zones have been announced in Greater Manchester, the West Midlands, the East Midlands, and Wrexham and Flintshire. The financial incentives for Investment Zones and tax reliefs for Freeports have been extended from five to ten years.
  • Extension of the Growth Duty to Ofcom, Ofgem, and Ofwat, meaning that these important regulators will be required to have regard for economic growth and ensure that regulatory action is only taken when needed, and that it is proportionate to those that they regulate, including SMEs.
  • £50 million will be spent on a two-year apprenticeships pilot in England, to look at how starts can be encouraged in growth sectors, and to address barriers to entry in high-value apprenticeships.
  • Legislation will be introduced next year to encourage the uptake of Open Banking-enabled payments.
  • The National Living Wage will increase. From 1 April 2024, the National Living Wage (NLW) will increase by 9.8% to £11.44, with the age threshold lowered from 23 to 21 years old.  
    • 21 and over, £11.44, up by £1.02, 9.8% 
    • 18-20 year old rate, £8.60, up by £1.11, 14.8% 
    • 16-17 year old rate, £6.40, up by £1.12, 21.2% 
    • Apprentice rate, £6.40, up by £1.12, 21.2% 
    • Accommodation offset, £9.99, up by £0.89, 9.8% FSB will campaign for further measures in the Spring Budget to make the NLW increase more affordable for small employers

Please check our blog content for advice, planning issues and the latest investment, market and economic updates from leading investment houses.

Carl Mitchell – DipPFS

Independent Financial Adviser


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Brewin Dolphin – The Autumn Statement

Please see the below article from Brewin Dolphin detailing the key takeaways from the Chancellors Autumn Statement. Received 22/11/2023.

Chancellor Jeremy Hunt has delivered his autumn statement, in which he announced measures that aim to help grow the economy and reduce some tax rates for businesses and households.

Whereas Hunt’s previous autumn statement a year ago was very much about reassuring the markets and demonstrating fiscal responsibility, the focus this time around was on promoting growth while reducing taxes in a “responsible” way. Compared with a year ago – when his predecessor’s mini-budget had triggered turmoil in financial markets and a spike in borrowing costs – the economic backdrop has become more stable. Inflation has more than halved yet remains well above the Bank of England’s target and is expected to remain higher for longer than previously anticipated.  

The key announcements included reductions to National Insurance and a permanent extension of the ‘full expensing’ regime for businesses. Other measures included raising the National Living Wage from £10.42 to £11.44 per hour, freezing alcohol duty, increasing the state pension to £221.20 a week in 2024/25, and reforms to ISAs.

There were also pledges to speed up planning applications, extend financial incentives for investment zones, and invest an additional £500m in artificial intelligence. To encourage investment in UK high-growth companies, new investment vehicles will be introduced, including a ‘growth fund’ within the British Business Bank.

Here, we highlight the key announcements, before giving the views of Guy Foster, our Chief Strategist, on the implications for the UK economy and investors.

National Insurance reduced

Hunt announced that the employee National Insurance (NI) rate will fall by two percentage points from 6 January 2024. This follows a topsy-turvy couple of years for NI. In April 2022, prime minister Rishi Sunak (then chancellor) raised NI by 1.25 percentage points, but this decision was reversed by Kwasi Kwarteng in the mini-budget of September 2022. Currently, employees pay NI at 12% on earnings over £12,570 and at 2% on earnings over £50,270. Today’s announcement will see the headline rate lowered to 10%, resulting in employees saving up to £754 in NI contributions each year.

For self-employed people, flat-rate Class 2 NI contributions will be abolished, while the Class 4 NI rate will fall from 9% to 8% from April 2024. Hunt said these changes would save the average self-employed person £350 per year.

ISAs simplified

From April 2024, individuals will be allowed to open and pay into multiple ISAs of the same type in a single tax year. Someone could, for example, open two investment (stocks and shares) ISAs or two cash ISAs. This could enable them to try out different providers or open a new cash ISA as soon as a new deal becomes available. It will also be possible to make partial transfers between ISA providers, even if the money was paid into an ISA in the current tax year.

The ISA allowance will remain at £20,000 for 2024/25 and the Junior ISA allowance will remain at £9,000.00.

Workplace pension ‘pot for life’

The government will consult on allowing employees to nominate the pension scheme that their employer pays into – similar to the approach taken by countries such as Australia. Hunt said this would enable employees to have one “pension pot for life”. Currently, employers automatically enrol new staff into a pension scheme chosen by the company, which can result in people accumulating multiple different pension pots throughout their career. Having one pot may make it easier to keep track of pension savings.

Business tax rates cut

In a welcome move for businesses, Hunt announced that the three-year tax break known as ‘full expensing’, which was due to expire in March 2026, will be made permanent. Full expensing allows companies to deduct the full cost of qualifying plant or machinery from their taxable profits in the year of purchase. It is equivalent to a tax saving of up to 25p for every £1 spent.

Meanwhile, the small business multiplier will be frozen for another year, as will business rates relief for retail, hospitality and leisure businesses.

Income tax thresholds still frozen

As expected, Hunt did not make any changes to income tax thresholds. The personal allowance (the amount you can earn each year before you start paying income tax) and the higher-rate income tax threshold for those in England, Wales and Northern Ireland will therefore remain at £12,570 and £50,270, respectively. The additional-rate income tax threshold will remain at £125,140 after it was cut from £150,000 in April 2023.

The personal allowance and higher-rate income tax threshold haven’t been increased since April 20213 and are due to remain frozen until 2028. This could see more people drifting into higher tax bands because of inflation and paying a much bigger tax bill as a result. Our analysis shows that an individual who earned £50,000 in 2021, and whose income rises in line with actual and forecast consumer price index (CPI) inflation4 , could see their income tax bill rise from £7,486 to £15,094 by 2028.

One way to potentially reduce your income tax bill is to save into a pension. If your salary and/or bonus means you cross into a higher tax band, making a personal pension contribution could mean your adjusted net income falls below the threshold, potentially avoiding higher or additional-rate tax.

Inheritance tax unchanged

There was speculation that Hunt might reduce the rate of inheritance tax (IHT), increase the IHT nil-rate band, or even scrap IHT altogether. In the end, however, these rumours did not come to fruition. The rate of IHT will remain at 40%, while the IHT nil-rate band and residence nil-rate band will remain at £325,000 and £175,000, respectively. This is in line with Hunt’s previous decision to freeze IHT allowances until 2028.

The ongoing freeze means individuals can continue to pass on up to £325,000 free from IHT when they die, plus up to £175,000 if they pass on their main residence to their direct descendants (and therefore qualify for the residence nil-rate band).

The IHT nil-rate band has been set at £325,000 since 2009, which means families will have missed out on almost 20 years of inflation-linked increases by 2028. The residence nil-rate band was last increased in April 2020. Frozen allowances and rising house prices have resulted in IHT receipts more than doubling over the past decade, from just over £3bn in 2012/13 to £7.1bn in 2022/235 . This underscores the importance of planning ahead and getting financial advice.

Economic growth forecasts cut

The autumn statement was accompanied by the Office for Budget Responsibility’s (OBR) economic and fiscal outlook6 , which gave a mixed review of the UK economy.

Borrowing was £19.8bn lower than expected in the first half of the current financial year, and gross domestic product (GDP) is now forecast to expand by 0.6% this year, rather than contracting by 0.2%. The next two years are expected to be more muted, with GDP growing by 0.7% in 2024 and 1.4% in 2025, down from previous estimates of 1.8% and 2.5%, respectively. Inflation isn’t expected to return to the Bank of England’s 2% target until the second quarter of 2025 – more than a year later than previously forecast. House prices could fall by 4.7% next year as interest rates remain higher for longer.

High inflation means real household disposable income per person is forecast to be 3.5% lower in 2024/25 than their pre-pandemic level. This is half the peak-to-trough fall expected in March, but still represents the largest reduction in real living standards since comparable records began in the 1950s.

Guy Foster, our Chief Strategist, shares his views on how the announcements could affect the economy and investors

From beers to benefits, borrowing and Barbie, the chancellor’s autumn statement covered a lot – 110 measures in fact. With an election on the horizon, Hunt faced the difficult task of trying to balance the government’s objectives of stimulating the economy and cutting taxes, while keeping inflation under control.

There are two reasons to think that the cuts to National Insurance will provide a relatively small boost to consumer spending. The first is that they come against a background of ‘fiscal drag’ – the freezing of tax thresholds at a time when prices and wages are rising. The second is that people are feeling the impact of high interest rates.

Stimulating the economy over the long term requires a boost to its supply capacity and there were plenty of policies aiming to do this. The most notable was the full expensing of capital expenditure. This incentive will increase investment, although having been in place on a temporary basis and in differing forms since the pandemic, some businesses will have brought forward investment to take advantage of the tax break. There will be further increases to investment from this permanent measure, but they will accrue over many years and the benefits derived from increased investment take even longer to crystalise.

Despite falling inflation, borrowing and debt, the public finances remain in poor shape. Markets were a little disappointed that borrowing hadn’t fallen more, but compared with the high volatility caused by former prime minister Liz Truss’ policies, this is perhaps a cause for celebration this time around.

Please check our blog content for advice, planning issues and the latest investment, market and economic updates from leading investment houses.

Alex Clare – Trainee Paraplanner