Team No Comments

AJ Bell: Why Chinese stocks are still not partying

Please see below for one of AJ Bell’s latest articles, received by us yesterday afternoon 22/07/2021:

Tomorrow (23 July) heralds the one-hundredth anniversary of the first meeting of the Chinese Communist Party and the country’s leadership continues to mark its birthday with a series of high-profile events, speeches and actions

Whether the centenary is anything that investors can mark with pleasure remains more of a moot point, even if the benchmark Shanghai Composite index trades some 15% above the levels reached just before the news of the pandemic seeped out of the Middle Kingdom in early 2020. These doubts persist for three reasons:

First, the president and general secretary of the Communist Party, Xi Jinping, marked the anniversary of the party’s foundation on 1 July with what many in the West saw as an aggressive speech as he warned any foes would be met with a ‘wall of steel’.

Second, China continues to intervene in financial markets, often in not-so-subtle ways. The crackdown on internet giants such as Alibaba and Meituan, and cybersecurity investigation into ride-hailing app Didi immediately after its stock market flotation in the US looked like expressions of displeasure with a trend toward overseas listings and a reminder to entrepreneurs of who was really boss.

Finally, China’s second-quarter GDP growth figure of 6.7% year-on-year undershot economists’ forecasts. This perhaps serves as a reminder that China is trying to combat the economic fall-out of the pandemic and keep the economy going on one hand, yet seeking to avoid letting financial markets, asset prices and debt get out of hand on the other.

Beijing and president Xi are hardly on their own in this respect – the UK, US, the EU, New Zealand, Australia and Canada are also members of what is a hardly exclusive club – but political legitimacy perhaps rests most fundamentally upon economic progress, employment and increasing prosperity than it does in China than anywhere else, not least because the authorities really have no-one else to blame if anything goes wrong.


The last point is perhaps the easiest to tackle. Granted, China has a relatively low government debt-to-GDP ratio of 67% but that number is rising quickly. Moreover, the opaque structure of Chinese State-Owned Enterprises, let alone the so-called shadow banking system, mean the overall national debt-to-GDP figure is a less healthy 270%, according to China’s own National Institution for Finance and Development.

China may therefore be generating growth, but the quality of that growth looks questionable, given its reliance on fiscal stimulus and cheap debt. This perhaps explains why the Shanghai Composite index is trading well below its 2007 and 2015 highs even as the economy keeps expanding. A timely reminder that investors should never use macroeconomic data alone when it comes to selecting stocks, indices and funds (be they active or passive) to research and follow.

In the interests of balance, it must be noted that China’s currency is trading relatively strongly against to the dollar, after a six-year slide, so markets may not be too worried about the economic foundations (although again the US faces the same challenges).


Geopolitical risk is something which with all investors must live but there is little they can do about it, barring factor it into the risk premiums they demand when buying assets in certain countries – or in plainer English, pay lower valuations to compensate themselves for the potential dangers involved.

Sino-American relations remain strained, to say the least, as Beijing and Washington wrestle for supremacy in key industries, notably mobile telecommunications and semiconductors.

This is prompting talk of a new Cold War, a view perhaps supported by president Xi’s powerful speech on 1 July. Investors will be hoping it does not spill over into a hot war over Taiwan, for example, whose strategic importance is only heightened by the global semiconductor shortage.

But if investors can do little about geopolitics, they can do everything when it comes to corporate governance, either on their own or by paying a fund manager to do the donkey work for them. And perhaps the greatest concerns lie here, at least when it comes to Chinese equities.

Beijing’s indifference to the damage done to Didi Chuxing’s share price in the wake of the security investigation and assertion that US regulators cannot check Chinese audits of firms with listings in America is a big red flag (if you will pardon the expression). No-one, from a private individual to a trained fund manager, can invest in a firm if audited, verifiable and reliable accounts are not available.

This reminder that China has its own agenda – one that is designed to preserve the Communist Party’s hegemony well beyond the first hundred years – affirms that investors’ needs are secondary.

They are welcome to keep buying stakes in Chinese firms, or funds which track Chinese indices or own Chinese equities, if they wish. But they need to be sure they are paying suitably lowly valuations to accommodate the potential risks, which should also be in keeping with their overall tolerance levels.

Please continue to utilise these blogs and expert insights to keep your own holistic view of the market up to date.

Keep safe and well

Paul Green DipFA


Team No Comments

PruFund range of funds – EGR and UPA announcement

Please see below for Prudential’s latest announcement regarding Unit Price Adjustments for the PruFund range of funds, received by us late yesterday 25/05/2021:

At this quarter’s review, we’ve announced no change to the Expected Growth Rates (EGR) and upward Unit Price Adjustments (UPA) to a number of the PruFund range of funds this quarter end.

PruFund UPA announcement 

Today we’ve announced there’s upward UPAs to the following PruFund funds:

FundUPA applied 
Prudential Investment Plan  
PruFund Growth Fund +3.56%
PruFund Risk Managed 4 Fund +5.33%
PruFund Risk Managed 5 Fund 
Trustee Investment Plan 
PruFund Cautious Pension/ISA Fund +2.00%
PruFund Growth Pension/ISA Fund+3.91%
PruFund Risk Managed 2 Pension/ISA Fund +2.09%
 PruFund Risk Managed 3 Pension/ISA Fund +3.22%
 PruFund Risk Managed 4 Pension/ISA Fund  +2.67%
Prudential ISA 
PruFund Cautious Pension/ISA Fund +2.00%
PruFund Growth Pension/ISA Fund +3.91%
PruFund Risk Managed 2 Pension/ISA Fund +2.09%
PruFund Risk Managed 3 Pension/ISA Fund +3.22%
 PruFund Risk Managed 4 Pension/ISA Fund  +2.67%
PruFund Risk Managed 5 Pension/ISA Fund +3.45%
Prudential Retirement Account – Series D 
PruFund Cautious Pension Fund – Series D+2.00%
 PruFund Growth Pension Fund – Series D+3.91%
PruFund Risk Managed 2 Pension Fund – Series D+2.09%
 PruFund Risk Managed 3 Pension Fund – Series D  +3.22%
PruFund Risk Managed 4 Pension Fund – Series D   +2.67%
Flexible Retirement Plan 
PruFund Cautious Pension/ISA Fund+2.00%
PruFund Growth Pension/ISA Fund +3.91%
PruFund Risk Managed 2 Pension/ISA Fund +2.09%
PruFund Risk Managed 3 Pension/ISA Fund +3.22%
PruFund Risk Managed 4 Pension/ISA Fund +2.67%
International Prudence Bond / Prudential International Investment Bond 
PruFund Cautious (Sterling) Fund +2.00%
PruFund Growth (Sterling) Fund+2.88%
PruFund Growth (Dollar) Fund+2.95%
PruFund Growth (Euro) Fund+2.68%

Please note UPAs also apply to the protected versions of the fund where applicable.

On the monthly PruFund Investment Date, a UPA is applied if the unsmoothed price is:

  • 4%, or more, higher than the smoothed price, for our PruFund Cautious, PruFund Risk Managed 1 or PruFund Risk Managed 2 funds, or
  • 5%, or more, higher than the smoothed price for our PruFund Growth, PruFund Risk Managed 3, PruFund Risk Managed 4 or PruFund Risk Managed 5 funds.

Growth rates aren’t guaranteed. The value of an investment can go down as well as up. Your client may get back less than they have paid in.

More information on the EGRs and UPAs for each product is available on PruAdviser.

Prudential have said that they have had a strong 6 month performance since the 25th November last year.  It’s important to note that PruFund funds lag both a rising and a falling market.  The increases or reductions in PruFund via UPAs are formulaic and non-discretionary.  They are based on the maths and the difference in fund value between the underlying assets and the ‘smoothed’ price.

M & G’s Treasury & Investment Office (TIO) who manage PruFund for Prudential are in the middle of a Strategic Asset Allocation review.  Within the next month or two we will find out how they change their assets focusing on long term returns.

The Expected Growth Rates (EGRs) have remained the same.  For example on PruFund Growth 5.70% gross per annum.  EGRs give you an indication of what the TIO think long term returns will be over 15 years plus.

These upwards Unit Price Adjustments are some very positive news and demonstrate the recovery in the markets as a whole. These UPAs combined with previous UPAs over the past 12 months have brought the majority of the PruFund range of funds back to positions similar to those before the drops caused by the Coronavirus Pandemic.

Hopefully this trend of recovery and positive performance continues as we see mass vaccine rollouts worldwide and lockdown restrictions gradually eased. Although we may not be out of the woods yet and there are no guarantees, this increase in the UPAs is a reason for optimism.  

Take care.

Paul Green DipFA


Team No Comments

AJ Bell: Why the FTSE 100 is warming to an economic upturn

Please see below for one of AJ Bell’s latest investment articles, received by us yesterday 18/04/2021:

As the UK starts to emerge from its latest (and hopefully final) lockdown, the FTSE 100 already trades above the levels reached just before the pandemic first made its presence felt in China and Southern Europe in early 2020.

There can be no finer example of how financial markets are forward-looking, discounting mechanisms which seek to price in future events before they happen. Yet they are not right all the time. No-one, but no-one, owns a crystal ball (or at least one that works) and if markets really were that prescient, then there would never be major sell-offs or upward surges, as no-one would ever be surprised by anything.

What the advisers and clients must therefore do, in order, is assess the facts as they are known, determine the current consensus about what will happen and – by looking at valuation – decide whether the risks are to the upside or downside. Therefore, they must look at the broad range of possibilities concerning what may happen, what could be the biggest surprises and their potential impact so they can decide whether the potential upside rewards outweigh the downside risks over their preferred time horizon.

In sum, the best fund managers are not necromancers or chancers trying to guess the future. They are experts at judging probabilities and act according to the cold maths of valuation, be that measured by earnings, cash flow or yield. It may not take much good news to boost a market that has fallen sharply to price in negative events (it may even just take the absence of fresh bad news), while it may not take much bad news to jolt a market if it has made big gains.

The FTSE 100 bottomed in late March 2020 at 4,994, long before the worst news about the pandemic and its toll on lives and the economy became known. After a near-40% gain in the UK’s headline index over the past year, advisers and clients must once more assess the balance of probabilities so they can decide whether the index has further to run or not and a good place to start is earnings forecasts.

New highs

At face value, it does seem odd that the FTSE 100 is trading above its pre-pandemic levels, even if the number of daily new COVID-19 cases is back to where it was last March and last September, and the vaccination programme continues apace. The economic outlook is still uncertain: the effects upon the behaviour of corporations and consumers alike are yet to reveal themselves and other parts of the globe are less advanced in their race to inoculate their populations.

But it does make sense if you think that the consensus earnings forecasts for the FTSE 100 are going to be accurate. An aggregate of the estimates made for each member of the index suggests that the FTSE 100’s total pre-tax profit will be £178 billion in 2021 and £205 billion in 2022.

FTSE 100 is forecast to make record pre-tax profit in 2022

Those figures exceed the £166 billion made in 2019, before the pandemic hit home. Moreover, if the 2022 forecast is attained, then that would represent a new all-time high for annual earnings, surpassing the £199 billion made in 2011.

In this context, it is not too hard to see why the FTSE 100 is trading where it is, or even make a case for further gains, since the index trades below its May 2018 zenith of 7,779 even though record profits are expected for 2022.

Advisers and clients must therefore decide whether the forecasts are reliable, too optimistic or too pessimistic and what must happen for analysts to be off-beam (which they usually are, owing to the absence of that crystal ball).

Heavy metal

To do this, advisers and clients need to parse the FTSE 100’s earnings mix. Roughly 60% of forecast profits come from just three sectors: mining (now the single biggest earner), financials, and oil and gas.

Just three sectors are expected to generate around 60% of FTSE 100 earnings in 2021 and 2022

In some ways, this makes it easy for advisers and clients to judge the upside and downside potential: in crude terms, the stronger the economic recovery the better, so far as the FTSE 100 is concerned as the index’s key industries offer huge gearing into GDP growth. The opposite also applies. A weak recovery (or heaven forbid an unexpected double-dip) would be potentially a nasty surprise.

A breakdown of forecast earnings growth makes this picture clearer still. Analysts think that the FTSE 100’s aggregate pre-tax profit will rise by £75.1 billion this year and by a further £27.1 billion in 2022. Miners and oils are expected to generate two thirds of that between them in 2021. Oils, consumer discretionary and financials are forecast to provide four fifths of the expected profit uplift in 2022.

Just three sectors are expected to generate more than 75% of forecast earnings growth in 2021 and 2022

Rising commodity prices and steepening yield curves would therefore be a good sign; falling and flattening ones would not. Those advisers and clients who buy into the narrative that inflation is coming, after being largely dormant for 40 years, will therefore feel right at home in the UK. Those who still fear debt-ridden deflation may be tempted to steer clear and seek their fortunes elsewhere.

Please continue to utilise these blogs and expert insights to keep your own holistic view of the market up to date.

Keep safe and well.

Paul Green DipFA


Team No Comments

The Silicon Valley of Green Tech?

Please see the below article from Invesco:

The health crisis of 2020 created a synchronised economic depression requiring equally radical policy responses.

Europe’s response was the creation of a €750bn European Recovery Fund. However, rather than just deploy the capital, member states chose to focus on a Green Recovery and hence use the funds to address the existential threat of climate change. In practice this means the European Commission spending is being guided by the newly developed sustainable finance taxonomy. Promoting activities supportive of the environmental objectives of climate change mitigation and adaption:

  • Sustainable use and protection of water and marine resources
  • Transition to a circular economy
  • Pollution prevention and protection of biodiversity and ecosystems
  • It also contains criteria that ensure activities ‘do no significant harm’

European environmental legislation is not new. For years Europe has been a first mover in safety standards and best practices that become global standards, however, the European Green Deal marks a more dynamic approach. Taxonomy is the means by which the market will administer the carrot or the stick to companies. Winners will be those seen to solve the environmental crisis and losers will be those thought to be the cause.

This comes at a time of other changes to the investment landscape. Savers now demand their asset managers embed sustainability into allocation decisions. Fund regulation is playing its role too, through the deployment of SFDR this year, funds will be classified dependant on embedding ESG principles thereby making it easier for savers to pick compliant funds and avoid others. Lastly, the pandemic has created the political cover to deploy the significant European Recovery Fund to sustainable companies.

Combined these elements create the foundations for success. European companies that comply with taxonomy will see their cost of capital fall vs those that don’t.

The EU Recovery Plan is interlocked with the Commissions’ 2019-24 priorities that included the realisation that “Europe needs a new growth strategy that will transform the Union into a modern, resource efficient and competitive economy”. This is an inclusive plan with The Just Transmission Mechanism’s goal that ‘no person or place left behind’. At least E150bn is being made available to address socio-economic effects of the transition out to 2027 – a topic we discuss in greater detail in another piece (link to The Just Transition article). However, the real prize isn’t intra-Europe it’s global.

The goal of climate neutrality requires significant investment and innovation. If the transition is effective through taxonomy rewarding companies in the transition phase, we will grant our existing enterprises a competitive advantage though access to the cheapest capital. This will create more dynamism through more innovation and the creation of products, services and refreshed skilled jobs to achieve all the EU goals. Brown companies can become Green.

This idea of creating a pathway isn’t new. Europe has 2030 targets not just 2050, including transition plans for hybrid ahead of full electric vehicles, coal to gas electricity generation and developing blue hydrogen ahead of green hydrogen being viable. Through this approach we can incentivise European companies to allocate their existing cashflow towards green innovation as opposed to being forced into ever larger dividend yields.

Silicon Valley is perhaps the best example of the prize on offer. The birth of Silicon Valley was a confluence of skilled science-based research, education, venture capital and defence spending, particularly through the creation of NASA and the space race. The success and longevity of which is a function of being the first and with it a sustainable multiplier effect.

We are already starting to see the positive effects from this focus on transition. European oil companies lead the way in reallocating hydrocarbon cashflows towards greener alternatives (Total, Repsol, BP). In renewable energy, Europe is home to the leading wind turbine manufactures (Vestas, Nordex and Siemens Gamesa) and our power generators are world leaders in green production (Enel, EDP, Acciona). In technology, European semiconductor companies have leadership in Auto electrification (Infineon and STMicro). We also have expertise in building materials and renovation focused on reducing energy consumption (SaintGobain, Wienerberger, Kingspan). Europe’s paper companies are transitioning to sustainable packaging and biofuels (UPM) and Europe is home to worldwide leaders in the circular economy (Veolia and Suez). All are stocks that are held in portfolios across the team, to a varying degree.

Europe has grand ambitions and a once in a generational opportunity to steal a march on other continents through early adoption of regulation and technology. Through incentivising companies to innovate and embrace climate change Europe can become a global exporter of Greentech products and services to the rest of the world and enjoy the multiplier effect. Europe has the potential to achieve net zero and in doing so become the Silicon Valley of Green Tech including the vibrancy, jobs and sustainability that comes with it.

Please continue to check back for a range of blog content and regular updates from us.


Andrew Lloyd

Team No Comments

Brewin Dolphin – Markets in a Minute

Please see below this weeks update on markets from Brewin Dolphin. This update was received late yesterday afternoon:

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

Please keep safe and healthy.

Carl Mitchell – Dip PFS

IFA and Paraplanner


Team No Comments

Invesco – Why investors both love and fear the Fed

Please see article below from Invesco received this morning – 31/03/2021

Why investors both love and fear the Fed

Kristina Hooper – Chief Global Market Strategist, Invesco Ltd

Key takeaways

Investors fear the Fed
Stocks have been volatile due to fears about what the Fed would do if inflation rises.

But they also love its policies
While stock market investors fear the Fed, they also love its easy money policies.

If you had to quickly describe the relationship status between investors and the Federal Reserve, your best bet might simply be: “It’s complicated.”

Stocks are moving up and down, and leadership in the stock market is rotating, based on market fears of inflation — or, to put it more accurately, fears about what the Fed will do if inflation does rise. But while stock market investors fear the Fed, they also love all the good things it has done for them. After all, the great stock market rally that began in March 2009 can be largely attributed to the Fed’s extraordinarily accommodative monetary policy — especially its quantitative easing. And the year-long rally that began in March 2020 has the Fed’s easy money fingerprints all over it. In other words, investors have developed a powerful bond — some might say a dependency — with the central bank.

The Fed’s reassurances have fallen flat

Now the good news is that the Fed is trying to be sensitive to investors’ wariness about what it might do next. Fed Chair Jay Powell doesn’t want stock market investors to worry. At every turn, he has tried to reassure them that the Fed will maintain its easy money policies for some time to come and that any rise in inflation will be transitory. Last week, for example, Powell was on Capitol Hill, providing comfort and reassurance. He made it clear that he wasn’t concerned about the rise in long-term bond yields, suggesting that they reflect growing optimism: “It seems that rates have responded to news about vaccination and ultimately about growth.” 1 Powell stressed that it has been orderly and that the Fed would only react if it is disorderly.

Powell reiterated that he doesn’t believe long-term price trends will be changed by the most recent fiscal stimulus package, supply-chain bottlenecks, or a surge in consumer demand, which is widely expected to come later this year as the economy re-opens. Powell said that while the Fed expects upward pressure on prices, he expects it will be transitory. He was emphatic: “Long term, we think that the inflation dynamics that we’ve seen around the world for a quarter of a century are essentially intact. We’ve got a world that’s short of demand with very low inflation … and we think that those dynamics haven’t gone away overnight and won’t.” 1. But investors didn’t believe him, based on the stock market reaction that day — they’re still wary that inflation will go up and the Fed will be forced to tighten.

It seems that market participants want to believe the worst of the Fed. They don’t believe Powell when he utters dovish words, but they latch onto any comments that can be perceived as hawkish. On Thursday, Powell gave an interview to NPR. He reiterated many of the reassurances he provided on Capitol Hill earlier in the week. He also shared his optimistic economic outlook for 2021. However, he also tried to be honest and transparent by stating the obvious: “… as we make substantial further progress toward our goals, we will gradually roll back the amount of Treasuries and mortgage-backed securities we’re buying.”2 He talked about raising interest rates in the longer run, but said that such tightening would be very gradual and transparent. However, that sent stock market investors into a panic. The NASDAQ Composite Index, S&P 500 Index, and Dow Jones Industrial Average all dropped significantly in just a few hours before investors regained their senses and started buying.

Investors have to wait and see how the Fed would respond to inflation

My best advice is that investors shouldn’t let the Fed — or any central bank — overly influence their long-term investment strategy. I believe the Fed will honor Powell’s pledges, but many market participants are clearly skeptical. These participants must come to terms with the fact that they won’t know if Powell will follow through on his assurances until inflation actually spikes and the Fed has the opportunity to insist it is transitory and sit on its hands. They won’t know if the Fed has really abandoned pre-emptive tightening until it proves to us that it has.

The silver lining of this environment — in which so many investors have allowed themselves to be dependent on the Fed — is that other investors can take advantage of “Fedspeak”-related sell-offs, which can create tactical buying opportunities for investors with a longer time horizon. And if markets actually become disorderly, I believe Powell will likely step in.

Is the Fed the only source of concern for investors? No, there are others. But the lesson is the same: Instead of parsing — and panicking about — every utterance from Powell and others, I believe investors’ time would be better spent focusing on fundamentals and long-term goals.

Looking ahead

In the coming week, I’ll be paying close attention to COVID-19 infections in Europe. The region is in the throes of a third wave of infections, which threatens to be the worst of the waves. This is not dissimilar to the third wave that the US experienced several months ago, which was its worst wave. Unfortunately, Europe’s vaccine rollout has been disappointing to say the least, and more infectious strains of the virus are spreading quickly. Lockdowns are being extended and could become more stringent as government officials warn that hospitals are being overwhelmed. This could further delay the eurozone’s economic recovery, which has already been delayed by the slow vaccine rollout. The ability to control infections in the eurozone is critical.

I’ll also be paying attention to China’s economy, with the government’s manufacturing and non-manufacturing Purchasing Managers’ Indexes (PMI) and the Caixin manufacturing PMI being released this week. China’s economic recovery has been strong thus far this year, and I want to make sure there are no negative surprises in the offing.

I’ll also be following the volatility in stocks created by the fallout from the Archegos hedge fund unwinding. I think this is not dissimilar to the volatility created by Reddit-related stocks such as GameStop that we experienced earlier this year: I don’t see this as a source of widespread contagion, although it will likely weigh down some specific stocks over the shorter term. 

And finally, I will be paying attention to Friday’s US jobs report. I suspect non-farm payrolls will be very strong for the month of March, beating expectations, but could trigger a rise in the 10-year yield and concerns about inflation — and therefore stock market jitters — as investors are likely to worry again about whether the Fed will really sit on its hands …  

Please continue to check back for our regular blog posts including market updates and insights like this article.

Charlotte Ennis


Team No Comments

Small caps can tell us a lot about the market mood

Please see below for one of AJ Bell’s latest Investment Insight articles, received by us yesterday 28/03/2021:

Small cap stocks are perceived to be riskier than their large cap counterparts and with good reason. As such, they can be used to judge wider market risk appetite – if small caps are rolling higher, we are likely to be in a bull market. If they are falling, we could be shifting to a bear market.

In general, small caps tend to be younger firms that are still developing. They are potentially more dependent upon certain key products or services, a narrower range of clients and even key executives.

Their finances might not be as robust as large caps and they are more exposed to an economic downturn, especially as they are less likely to have a global presence and be more reliant on domestic markets.

The UK’s FTSE Small Cap index currently trades at record highs, while the FTSE AIM All-Share stands near 20-year peaks. The latter is still well below its technology-crazed highs of 1999-2000. Equally, they are more geared into any local economic upturn.

America’s Russell 2000 index, the main small cap benchmark in the US, is up 16% this year and by 116% over the past 12 months. That beats the Dow Jones Industrials, S&P 500 and NASDAQ Composite hands down on both counts.

In fact, the Russell 2000 now trades near its all-time highs, having gone bananas since last March’s low. Such a strong performance suggests that investors are in ‘risk-on’ mode and pricing in a strong economic recovery for good measure.

Rising Prices

One data point which does not sit so easily with the US small cap surge is the slight pullback in America’s monthly NFIB smaller businesses sentiment survey, which still stands 12 percentage points below its peak of summer 2018.

This indicator must be watched in case it does not pick up speed as America’s vaccination programme continues and lockdowns are eased. Further weakness could suggest the recovery might not be everything markets currently expect.

Equally, inflation-watchers will be intrigued by the NFIB’s sub-indices on prices. In particular, the balance between firms that are reporting higher rather than lower prices for their goods and services, and especially the shift in mix towards smaller companies that are planning price rises rather than price cuts.

If both trends continue, then bond markets could just be right in fearing that an inflationary boom is upon us.

Interest rates on the move

The number of interest rate rises continues to gather pace on a global basis. Last month there had already been five hikes this year in borrowing costs, in Zambia, Venezuela, Mozambique, Tajikistan and Armenia. There have now been six more – Kyrgyzstan, Georgia, Ukraine, Brazil, Russia and Turkey.

The 11 rate increases we’ve seen year to date is already two more than in the whole of 2020.

In contrast, the US Federal Reserve is content to sit on its hands despite what is happening elsewhere. Chair Jerome Powell continues to reaffirm the American central bank’s commitment to running its quantitative easing scheme at $120 billion a month, while any plans to increase interest rates from their record lows seem to be on hold until 2024.

Powell does not seem concerned about inflation and is seemingly willing to risk its resurgence to ensure that the economy gets back on track in the wake of the pandemic.

Yet financial markets are still taking the view that a strong upturn is coming, because US government bond prices are currently going down, and yields are going up, regardless of what the Fed says. That is a huge change from the last decade or so, when bond and stock markets have been happy to slavishly take their lead from central bank policy announcements.

Please continue to utilise these blogs and expert insights to keep your own holistic view of the market up to date.

Keep safe and well.

Paul Green DipFA


Team No Comments

Why it’s a good idea to have an emergency fund

Please see the below article published by Royal London, then our closing comments in blue:

Setting aside money for a rainy day can help tide you over in difficult times and provide some financial security when you need it most.

What is an emergency fund?

This is money you save to pay for the unexpected, whether that’s a bill you hadn’t planned for or a change in your circumstances such as if you lose your job or are unable to work due to illness. This cash is often called rainy day money.

Why you should have an emergency fund

If you have money set aside for emergencies, you’re far less likely to experience financial difficulties or have to borrow at a high interest rate if things go wrong or your circumstances change. Knowing you’ve got some money tucked away might help you sleep better at night too.

Deciding how much you need

This depends on several things such as your circumstances, the sorts of emergencies you might face and how much insurance protection you already have.

For example, someone with a family, mortgage and loans is likely to need a larger emergency fund than a single person with no children who lives in rented accommodation and has no debts. This is because they have more financial responsibilities and dependants to look after. That’s not to say that if you’re single with no dependants you don’t need an emergency fund. Everyone should keep some spare money available – it’s just a question of how much.

If you have insurance to cover certain losses or expenses, this might affect how much you need in your emergency fund. For example, you may have house, car or dental insurance which would cover you for some emergencies and expensive bills. Or you may have insurance which would provide you with an income or pay some of your bills if you lost your job or were unable to work due to illness. In these cases you might only need enough in your emergency fund to tide you over until these payments kicked in.

But the general advice is to have enough money in your emergency fund to cover your expenses for at least three months. So, if your monthly expenses are £2,000 you might want an emergency fund of £6,000. If this seems like a daunting amount to aim for, don’t be put off. Remember that having some savings, however small, is better than having nothing. Why not try setting your own goal to save a set amount by the end of year? Aim for a challenging but achievable amount.

How to build an emergency fund

Saving regularly is a good way to build up an emergency fund. You’ll find that if you get into the habit of saving each month your savings will soon mount up. See our tips below to help you save.

Some people like to have more than one emergency fund. For example, one fund might be to replace income if you’re unable to work and another to cover any unexpected one-off or larger-than-expected bills. There’s no right or wrong way of doing this, just choose the method that suits you best.

Tips to help you save

Make it simple: Set up a monthly transfer so that money is automatically taken from your current account and put into a savings account.

Time it right: Set the transfer so it goes out of your bank account straight after you get paid or get your pension or benefits.

Keep your savings separate: By keeping your savings in a separate account from your everyday spending you’ll be less tempted to spend them.

Check your spending: If you don’t think you can afford to save, try closely monitoring your spending for a month or two. You may find areas you can cut back on. If you haven’t reviewed your bills like your house and car insurance or your energy or mobile phone deal recently, you may be able to free-up money by switching to a cheaper deal.

Save first: If you get a pay rise, think about saving some of it before you get used to having the extra cash.

Where to keep your rainy day money

Regardless of how many emergency funds you choose to have, the money should always be easily accessible such as in an easy access savings account or instant-access cash ISA. Avoid accounts where you have to give a long period of notice to take your money out.

If you are on certain benefits, you will qualify for the government’s Help to Save account which pays a generous tax-free bonus to help boost your savings. You’ll get 50p for each £1 you save over four years, although there are limits on the maximum bonus you can get. For example, you can only save up to £50 a month into the account. To find out if you’re eligible and for details of the bonus, go to

What if I’ve got debts, should I still save?

It depends on what kind of debts you have. If your debts are manageable and low cost, this shouldn’t hold you back from starting a rainy day fund. Having some savings set aside will mean you won’t have to fall back on expensive borrowing if you do have an unexpected expense.

If you’ve got expensive debts such as credit card or overdraft debt, arrears on your mortgage or a payday loan, you might want to think about using any spare money you have to pay off these first. The Money and Pensions Service has some useful guidance on whether to save or pay off debts first.

This is a really good article from Royal London and highlights the importance of a rainy day fund.

Last year was the ultimate rainy day for some people who perhaps lost their jobs, were furloughed or the self employed whose income may have dropped.

Having money set aside in easily accessible accounts is key for emergencies and unforeseen circumstances.

Royal London suggest in this article having at least 3 months expenditure set aside however this should be your starting point, we would recommend aiming to have a years expenditure as your emergency fund, especially in the run up to retirement for example.

Look at what the past year taught us, nobody expected it and nobody was prepared so if you haven’t already got an emergency fund, start building one now, that rainy day could be just around the corner!

Andrew Lloyd


Team No Comments

Are Cash ISA savers holding too much cash?

Please see below for one of AJ Bell Youinvest’s latest Investment Insight articles, received by us yesterday 21/03/2021:

New consumer research* by Opinium for AJ Bell shows Cash ISA savers are holding high levels of cash, and aren’t switching accounts looking for better rates, partly because they think they’re getting more interest than they probably are.

We know that since the start of the pandemic, many savers have been all cashed up with nowhere to go. But our research shows that cash hoarding isn’t just a recent phenomenon, it’s been happening for some time, and reflects a natural aversion to taking risk with money that has been hard-earned.

It’s definitely prudent to build up a cash buffer to deal with any unexpected costs, particularly in uncertain times. But Cash ISA savers may well be doing themselves a disservice by holding too much money in cash, opening themselves up to inflation risk, and missing out on the potentially higher returns available from investments. As stock market investors need to avoid irrational exuberance, so cash savers should be wary of excessive prudence.

Over the last ten years, the average Cash ISA has turned £10,000 into £9,770 after factoring in inflation, while in contrast, an investment in the global stock market has turned £10,000 into £20,760 in real terms.** Looking at returns from 1899, Barclays found that over ten years, UK equities have beaten cash 91% of the time. Given that today cash interest rates are at record lows, it would have to be an extremely anomalous decade for the next ten years to buck that trend.

Cash ISA savers aren’t shopping around for the best rate a great deal either. Much of their apathy can be attributed to ultra-low interest rates, but part of it may simply be that they haven’t checked the rate they’re getting. Our survey found that on average Cash ISA holders hadn’t reviewed their rate for two and a half years, over which time the average Cash ISA interest rate has more than halved, from 0.9% to 0.4%.

Not all rates move in step though, and individual savers can suffer as a result of their provider slashing rates more aggressively than the rest of the market, hence why it continues to make sense to shop around. For instance, last November, savers in NS&I’s Direct ISA saw their interest rate cut from 0.9% to 0.1%, while the best rates on the market are around 0.5%.

Even the top rates on offer aren’t exactly going to set pulses racing, but switching can mean hundreds of pounds extra for those with large amounts held in Cash ISAs. At the very least Cash ISA savers should find out what rate they’re getting right now, to make an informed decision on whether it’s worth moving on.

All cashed up and nowhere to go

Our survey shows Cash ISA savers reported holding on average £27,727 in their accounts. That’s enough to pay for 11 months of household expenses, which come in at £2,538 on average according to the ONS.*** When you consider that many households will contain two Cash ISA holders, and may also own other cash products like savings accounts and Premium Bonds, that suggests that savers have enough built up to deal with any emergency spending, and then some. On top of that, 6 out of 10 (59%) or respondents said they intended to add more to their Cash ISA in this tax year or next, no doubt in part thanks to the pandemic savings turbo-charging cash balances, as spending options have dried up.

While this is encouraging from the point of view of short term financial security, it does mean savers are sitting on cash for the long run, missing out on potential returns from other assets, and seeing the buying power of their cash eroded by inflation. Clearly there is a balance to be struck here between having a robust safety net, and seeking higher returns by investing in the stock market, which can lead to a loss of capital in the short term. Typically, savers should seek to have 3 to 6 months of expenses in cash to deal with any emergencies, beyond that they should seek to tilt the balance between security and return more towards the latter.

Three to six months of expenses equates to £7,613 to £15,226 for the average household, which may well have two Cash ISA savers in it. This broadly ties in with the view expressed by the FCA in December, that those with more than £10,000 held solely in cash were missing out on the historically higher returns from investing their money, and opening themselves up to inflation risk.****

There are some reasons why you might want to hold more than six months of expenses in an ISA, namely if you are saving for a specific goal, for instance a house deposit. This probably explains a surprising kink in the data, which shows that younger savers actually have more held in Cash ISAs than older generations.

Broadly speaking, if you think you may need access to your money within five years, then cash might be the best option. If you’re putting money away for five to ten years, then you should start to think about putting at least some of it in the stock market. If you’re putting cash away for more than ten years, then an approach that invests more heavily in the stock market is likely to yield significantly better results.

Cash ISA inertia

Cash ISA savers aren’t paying a great deal of attention to the rate they’re getting, and who can blame them, seeing as picking cash products right now is about selecting the least worst option. Our survey found that on average Cash ISA holders hadn’t reviewed their rate for two and a half years, over which time the average Cash ISA interest rate has more than halved, from 0.9% to 0.4%, according to Bank of England data. Worryingly, almost a quarter of Cash ISA savers (23%) said they hadn’t reviewed their cash ISA rate for 5 years or more. This goes some way to explaining why 25% of Cash ISA savers reported getting over 1% interest, which looks unrealistically high in today’s market.

Despite holding a Cash ISA for an average of 8.5 years, 45% of Cash ISA savers said they have never switched provider. Half of these savers said it was because rates were so low, it didn’t seem worth it. That’s perfectly understandable, though for those with large sums in Cash ISAs offering poor rates, the difference can still be significant.

20% of Cash ISA savers said they held £50,000 or more in their Cash ISA. If they were picking up a high street rate of 0.1% (see table below) on £50,000, simply by moving to an account providing the average rate of 0.4% they could make an extra £150 a year. Not a king’s ransom, but worth having in your pocket rather than the bank’s. Particularly when you consider that at a rate of 0.1%, the total interest you are receiving is £50, and by moving to an account paying 0.4%, you would be quadrupling that amount to £200.

Selected high street instant access Cash ISA rates

Switching to a Stocks & Shares ISA

Half of Cash ISA savers surveyed (51%) said they had considered switching to a Stocks & Shares ISA. It used to be the case that you couldn’t cross the streams, but since 2014 you have been allowed transfer money from a Stocks and Shares ISA to a Cash ISA, and vice versa.

Doing so may be worthwhile if you feel you’ve got too much sitting in cash, earning next to nothing, and you’re willing to keep your money invested for the long term. You must be willing to tolerate falls in the value of your capital however, but the reward should be higher returns in the long run.

It’s important to always maintain a cash buffer for emergencies, three to six months of expenditure is the rough rule of thumb, but beyond this, you can start to think about investing in the market. Instead of transferring you might consider funnelling some of your new savings into a Stocks and Shares ISA, thereby gradually reducing your reliance on cash. Investing in the stock market bit by bit also helps to take the edge off the inevitable bumps in the road.

Please continue to utilise these blogs and expert insights to keep your own holistic view of the market up to date and for advice and planning tips.

Keep safe and well.

Paul Green DipFA


Team No Comments

Brewin Dolphin – Markets in a Minute

Please see below for this week’s Markets in a Minute update from Brewin Dolphin:

Equities mixed as inflation offsets vaccine optimism

Global stock markets gave a mixed performance last week, as encouraging quarterly earnings and vaccine optimism were offset by concerns about rising inflation.

Most major US indices ended the week lower, with the Nasdaq down 1.57% amid an increase in longer-term interest rates. The S&P 500 also fell by 0.71%, as inflation fears returned and the yield on the benchmark ten-year Treasury note increased to its highest level in almost a year.

In Europe, the benchmark STOXX 600 ended the week up 0.21%, following news that the UK and Switzerland are set to ease lockdowns and the European Commission has signed a deal for a further 200 million vaccine doses. Gains were held back by concerns that higher inflation could result in central banks tightening monetary policy. The FTSE 100 added 0.52%, whereas Germany’s Dax declined by 0.4%.

In Asia, Japan’s Nikkei 225 topped the 30,000 milestone for the first time in more than 30 years, ending the week up 1.69% after the country started its vaccination roll out. In China, where trading reopened on Thursday following the Lunar New Year holiday, the Shanghai Composite gained 1.12% whereas the large-cap CSI 300 slipped 0.5% after the People’s Bank of China drained RMB260bn ($40.2bn) of liquidity from the financial system.

Last week’s markets performance*

  • FTSE 100: +0.52%
  • S&P 500: -0.71%
  • Dow: +0.11%
  • Nasdaq: -1.57%
  • Dax: -0.40%
  • Hang Seng: 1.56%
  • Shanghai Composite: +1.12%
  • Nikkei: +1.69%

*Data from close on Friday 12 February to close of business on Friday 19 February.

FTSE boosted by UK reopening plans

The FTSE 100 recovered from Monday’s early heavy losses to end the day up 0.18% after details of the UK’s reopening plan were revealed.

The first step will see all pupils in England return to school from 8 March, with some outdoor gatherings allowed from 29 March. Outdoor hospitality could open from 12 April, and indoor hospitality and hotels may open from 17 May. Stocks across hospitality, retail and travel all rallied on Monday, with JD Wetherspoon gaining 8.7%, Mitchells & Butlers adding 4.5% and WHSmith rising 6%.

In the US, a sell-off in technology shares led to the Nasdaq posted its biggest drop in a month, down 2.46%. The S&P 500 declined 0.77%, marking its fifth consecutive day of losses and the longest losing streak in a year, amid expectations of higher inflation.

In Hong Kong, technology stocks suffered their biggest sell-off since mid-November, dragging the Hang Seng down 1.1% on Monday. The Shanghai Composite also slipped 1.5% in its worst day since 28 January.

UK stocks opened higher on Tuesday despite figures revealing a rise in unemployment to 5.1% in the three months through December. InterContinental Hotels added 3.9%, whereas HSBC declined 1.9% after reporting a 34% drop in annual profit.

UK retail sales slump in third lockdown

The latest retail sales figures laid bare the impact the UK’s third national lockdown is having on the economy. Data released on Friday showed spending in stores and online fell by 8.2% between December and January, with all sectors other than food and online outlets affected by Covid-19 restrictions. The decline was 3% worse than analysts’ forecasts.

Separate figures from the Office for National Statistics revealed public borrowing reached £8.8bn last month – the highest January figure since modern records began.

A small increase in tax receipts was outweighed by the £20bn annual rise in spending, which included £5.1bn of expenditure on coronavirus job support schemes.

The UK’s retail sales figures are in stark contrast with those of the US, which saw sales increase by 5.3% between December and January – the highest jump in seven months and far higher than economists’ predictions. It is thought the government’s second round of stimulus cheques played a big part in boosting consumer spending.

US consumer spending to stay firm The US coronavirus relief package, which was signed in December, also restarted enhanced weekly unemployment benefits, which means household spending could stay relatively firm until the next Covid-19 recovery bill becomes law.

Once the next package is passed, there could be another boost to growth from fiscal stimulus, which is likely to coincide with more of the US economy reopening, enabling households to deploy the roughly $1.5trn in ‘excess savings’ they have built up since April last year. Indeed, the preliminary service sector PMI for February, which was released on Friday, recorded its highest readings since 2014.

PMIs beat forecasts

Last week saw positive PMIs in the UK and Europe, suggesting businesses are becoming more optimistic about a pick-up in activity over the coming months.

In the UK, the IHS Markit/CIPS flash composite PMI jumped to 49.8 in February from 41.2 in January – a bigger improvement than anticipated. Hotels, restaurants and travel companies reported steep falls in activity, but at a slower pace than in January. Financial and business services firms enjoyed modest growth.

“Although the data hint at a renewed contraction of the economy in the first quarter, business expectations for the year ahead improved to the highest for almost seven years, suggesting the economy is poised for recovery.” said Chris Williamson, IHS Markit’s Chief Business Economist.

Meanwhile, the IHS Markit flash German manufacturing PMI rose to a three-year high of 66.6, up from 57.1 in January, while the corresponding index in France gained 3.4 points to 55. A figure above 50 indicates most businesses reported growth in activity from the previous month. However, the German and French services PMIs both declined to 45.9 and 43.6, respectively.

The eurozone’s manufacturing sector is benefiting from demand from Asian countries, whereas many services businesses have been closed in an effort to control the spread of Covid-19. The pan-eurozone manufacturing PMI rose to 57.7, whereas the services PMI fell to 44.7, its lowest reading in three months.

This weekly update from Brewin Dolphin is a useful short look at the Global markets for the past week.

Articles like these help us stay informed as to what is happening within the markets.

Please continue to check back for further blog content from us.

Andrew Lloyd