Emma Sheldon

Written by Chris Ayton.

Last week brought some welcome relief to equity and fixed income markets. The MSCI All Country World Index rose +2.0% and the FTSE All Share Index recovered +1.4%.  The Bloomberg Global Aggregate Index was -0.3% in GBP Hedged terms.

UK news last week was dominated by the UK government’s decision to reverse its planned axing of the 45p income tax rate just days after having announced it.  “We get it and we have listened” Chancellor Kwasi Kwarteng sheepishly announced on Twitter.  In a further attempt to calm currency and fixed income markets, Kwarteng was also forced to announce he would be bringing forward the disclosure of his debt reduction plan from 23^rd November to the end of this month.  Sterling and UK Treasuries recovered some lost ground, aided by the Bank of England’s promise of intervention through buying up long dated gilts.

In the US, bad news was initially good news as weak manufacturing data increased hope of slower additional interest rate increases from the Federal Reserve.  However, the week ended with news that the US unemployment rate had dropped back to its pre-pandemic low of 3.5% which pointed to a tighter labour market and dampened any enthusiasm that the Fed may choose to take things slower.  Nevertheless, the 1.8% rally in the S&P 500 Index comes after three consecutive quarters of declines for the S&P 500 Index, the first time this has been observed since 2008.

Eyes now turn to the Chinese Communist party’s 20^th national congress, which opens on 16^th October. President Xi Jinping is widely expected to win an unprecedented third term, but the focus will also be on how China plans to deal with the harsh economic challenges caused by its zero Covid policy as well as a rapidly slowing property market.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 10^th October 2022.

© 2022 YOU Asset Management. All rights reserved.

Written by Shane Balkham.

For many investors, it may seem like we have had too many ‘once-in-a-generation’ events over the past few years. Brexit, COVID-19, war on Ukraine and the cost-of-living crisis to name the obvious ones. However, last week truly gave us market ructions on a scale that forced policymakers into emergency measures once again.

The week began with the Bank of England (BoE) and UK Treasury battling to calm markets after the pound hit a record low against the US dollar of $1.035, as the consequences of the Government’s mini-budget played out. There was a lot of rhetoric designed to placate markets, with the BoE announcing that it would not hesitate to change interest rates as necessary, but only after a full assessment at its next scheduled meeting.  This caused new concerns and gilt yields soared on the back of strengthened expectations of a significant rate hike at the next meeting.

The BoE’s Monetary Policy Committee was not due to meet until 3^rd November, when they would publish the next Monetary Policy Report, giving guidance on inflation expectations.  However, on Wednesday the BoE intervened in the gilts market, unleashing £65 billion of quantitative easing in order to stem the meltdown in UK government debt.  The BoE’s plan is to buy long-dated bonds at a rate of £5 billion a day for the next 13 weekdays.  It also suspended the current programme of selling gilts, which was part of the effort, along with interest rate hikes, to bring inflation under control. Although UK government bond markets recovered sharply after the announcement, economists warned that the printing of new money would add to the inflationary pressures.

The International Monetary Fund added to the UK’s woes by publishing a scathing attack on the UK’s plans, urging the Government to re-evaluate proposals amid the threat of spiralling inflation. It claimed that the Government’s plan to cut taxes and invigorate economic growth is at cross-purposes with the BoE’s task of combating inflation. It now puts the central bank in a position of potentially having to move interest rates even higher than may have been planned.

The unintended consequences of the Conservatives’ strategy to boost supply-side economics by reducing the tax burden facing businesses and families, alongside a major programme of investment to stimulate and drive growth, has shaken the faith in the UK’s finances. The timing of the mini-budget could not have been worse. Politically, it provided opposition parties with ammunition to attack the new prime minister and her cabinet. Economically, it has increased the uncertainty over inflation and growth. There are also arguments that proposed policies will push out the point at which inflation will peak and result in higher interest rates.  The BoE’s remit has become increasingly more difficult.

Liz Truss now faces the devastation of her own making at the Conservative conference in Birmingham. While there has been an admission of mistakes, and a subsequent reversal of the elimination of the 45p top income tax rate, there is unlikely to be a retreat from the Prime Minister on the general direction of unfunded tax cuts.  Time will tell how successful this strategy will be.

Long-term investing is the best antidote to market fluctuations. Our studies have shown that the longer you invest for, the higher the probability of making better returns. However, it can be difficult to remain dispassionate during market turmoil and that is why we continue to provide reassurance during your investment journey. Please take time to visit our website: www.YOU-asset.co.uk/stay-invested for an educational presentation on the importance of staying invested.

An appropriately diversified portfolio will provide cushioning during the worst of times and take opportunities during the better times. While Sterling plummeted, it does mean that certain parts of your portfolio will have benefitted.  The consolation of being geographically diversified is that overseas assets are worth more when Sterling weakens.  This is the same effect we benefitted from when Brexit broke in 2016.

Last week was one of the most challenging weeks in what has been an incredibly difficult year. In volatile times, the critical message is to remain vigilant but remain true to your long-term investment plan. In turn, we will remain robust in our long-term investment processes and philosophy, adding to our track record of delivering impressive long-term returns to our clients.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 3^rd October 2022.

© 2022 YOU Asset Management. All rights reserved.

Written by Cormac Nevin.

Last week was another challenging one for markets as the MSCI All Country World Index fell -0.3% in GBP terms. The same index was down -4.2% in local currency terms, which illustrates the continued fall in Sterling vs the US Dollar. The US Federal Reserve’s efforts to combat inflation have led it to tighten interest rates aggressively, which has led to a sharp rise in the dollar vs other major currencies. One of the worst affected currencies has been the Yen, which is now at multi-decade lows. The Pound Sterling and Euro have also been heavily impacted, with the Euro falling to below parity with the US Dollar. As of this Monday morning, 1 US Dollar buys roughly 0.96 Euros and 1.08 Pounds. The Federal Reserve’s reversal of quantitative easing, aptly named quantitative tightening, has also put pressure on the US Treasury market where liquidity conditions have deteriorated significantly.

Other events driving markets have been the “mini” budget announced by  Kwasi Kwarteng, the new Chancellor of the Exchequer. In his address to parliament, Kwarteng announced a series of measures aimed at supply-side reform of the economy with tax cuts aimed at incentivising employment and investment. The fact that these tax cuts will be funded by borrowing led to a sell-off in the UK Gilt market and additional Sterling weakness. Only time will tell if these pro-growth measures have the desired impact of raising trend GDP growth.

On the continent, the weekend saw the election of Italy’s first female Prime Minister since the Risorgimento led to the creation of a unified Italy in 1861.  Giorgia Meloni’s Fratelli D’Italia party will lead a right-wing coalition with a comfortable parliamentary majority. The prospect of Italy being governed by the most right-wing government since the end of the second world war will likely set the scene for further confrontation within the European Union, at a time when the block faces significant economic and energy security challenges.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 26^th September 2022.

© 2022 YOU Asset Management. All rights reserved.

Written by Millan Chauhan.

Last week, the US Bureau of Labour Statistics announced that US CPI decelerated to 8.3% which was above estimates of 8.1%.  Estimates had predicted a sharper slow-down in the level of inflation and the market reacted negatively to this news with the S&P 500 closing  the week down -3.5% in GBP terms.  With inflation still persistent and slowing down less than expected, this has increased estimates of a full 100 basis points rise in interest rates. Markets are expecting either a hike of 75 basis points or 100 basis points, which would be the largest rate hike in 40 years and would move the target range to between 3.0% and 3.25%. With further hikes expected, we are on track to see rates reach 4.0% by the end of the year. The Federal Reserve is expected to make its decision on Wednesday evening.

The Bank of England Monetary Policy Committee will make an interest rate decision on Thursday, as inflation came in at 9.9% in August 2022 which was down from 10.1% in July 2022. The expectation is that the policymakers will raise rates by 50 basis points, but they could adopt a similar stance to other central banks and hike more aggressively. The decision comes after the announcement of the Prime Minister Liz Truss’s energy pricing plan that will freeze average energy bills at £2,500 per year.

In the UK, we have observed a period of national mourning over the last 10 days following the death of Queen Elizabeth II, who reigned for 70 years and 214 days, the longest of any British monarch and the longest recorded of any female head of state in history.  The state funeral of our late Queen took place in London yesterday, which was followed by a military procession to Windsor Castle where she was laid to rest in St George’s Chapel. Millions of people watched on the streets or on their televisions at home, witnessing a fitting tribute to mark Queen Elizabeth II’s final journey.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 20^th September 2022.

© 2022 YOU Asset Management. All rights reserved.

Written by Shane Balkham.

While we welcomed in the new prime minister, Liz Truss, last week was dominated by the sad news that her majesty Queen Elizabeth II had passed away.  It is indeed a sombre occasion and one that will be marked by ten days of official mourning.

It does present challenges for the new prime minister, as from 9^th September all parliamentary business is suspended until after the official mourning period has finished.  It has been suggested that the official day for parliament to recommence would be 22^nd September, however there was a planned recess from that day until 17^th October, to allow for political party conferences to be held.

Arguably, the most challenging item to resolve during the mourning period is Liz Truss’s £150 billion energy support package.  It is fully expected that the energy price guarantee will be in place for 1^st October, however legislation will be needed to extend that support to Northern Ireland.

The Bank of England has also announced the delay of their September Monetary Policy Committee (MPC) until after the official funeral.  The MPC will now meet on 22^nd September, which is a critical date, putting it after what is widely expected to be an emergency budget announcement on 21^st September.  That said, it is still unclear how parliamentary business will proceed throughout the period of mourning.

Having a reign that lasted 70 years and 214 days does allow for some interesting reflections; according to a Bloomberg columnist, the British stock market multiplied more than 2,500-fold during the Queen’s reign. It reminds us that long-term decision making is a powerful tool and something we can all adopt for our investments.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 12^th September 2022.

© 2022 YOU Asset Management. All rights reserved.

Written by Millan Chauhan.

Last week, the Federal Reserve’s Chair Jay Powell delivered a hawkish stance stating that higher interest rates are needed to combat inflation. With annualised inflation having reached 8.5% in July 2022, the Fed now faces a balancing act between controlling inflation and causing an economic slowdown through aggressive hiking. Following Powell’s address, we saw US stocks tumble with the interest rate sensitive segments of the market the hardest hit. This also quickly spread to other geographical equity markets and stuttered the summer rally we have seen in equity markets. In the US, we also saw new single-family home sales fall to their lowest level in two years as higher mortgage rates make owning a home less affordable.

In the UK, we saw the energy regulator Ofgem announce an 80% increase in the cap of household energy bills to £3,549, effective from 1 October 2022, which has been caused by higher natural gas prices and a more restricted supply following Russia’s invasion on Ukraine. There have been further energy cap increases planned with the cap expected to rise beyond £5,300 by January 2023. We are also in the middle of the Conservative’s leadership contest which has been dominated by the respective cost-of-living stance of Liz Truss and Rishi Sunak. Liz Truss remains the favourite heading into the final week, with the outcome of the race set to be announced on 5^th September.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 30^th August 2022.

© 2022 YOU Asset Management. All rights reserved.

Written by Shane Balkham.

Inflation continues to dominate investors thoughts and last week we had the UK’s rate of inflation climbing to 10.1% for July on an annualised basis, the first time the measure has registered a double-digit increase in more than 40 years.  Prices rose 0.6% in the month of July, driven by the persistent increases in energy and food.  Food inflation recorded 12.7% in the month of July, the highest rate for more than 20 years.

This data will certainly increase the resolve at the Bank of England to continue along the current path of interest rate hikes.  Expectations for a further 0.5% hike at the next meeting have solidified.  The quarterly analysis from the Bank of England in its Monetary Policy Report published at the beginning of the month, projected inflation to creep higher, with energy prices poised to soar with the energy price cap set to increase in October.

The situation continues to be highly politicised and whoever ascends to become Prime Minister will have to take measures to ease the pain being felt by consumers.  This could mean using fiscal measures to subsidise fuel costs, while simultaneously tackling headline inflation. This scenario will undoubtedly add further pressure to an already stressful Bank of England.

The Bank of England is not alone.  The minutes from the Federal Reserve’s meeting in July indicated that the Central Bank would continue to prioritise the fight against inflation ahead of economic growth for as long as it would take.  Signals have become mixed, with the US inflation measures falling in July and the Federal Reserve minutes confirming a strong line on the battle to control inflation.

Even if elements of the inflation make-up are seeing signs of reducing pressure, it is clear that central banks will remain focused on fighting inflation, as they continue to play catch-up on a situation where they were caught sleeping.  Cognisant of the ghosts of the past, central banks will not want to stop the rate hiking cycle too early and risk losing the loose grip they are perceived to have on inflation.

The end of the summer will be monitored closely, with the central bank committee meetings in September and the economic symposium in Jackson Hole, Wyoming next week.  A political autumn of discontent with inflation to fight and a recession to avoid?

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 22^nd August 2022.

© 2022 YOU Asset Management. All rights reserved.

Written by Millan Chauhan.

Last week, the Bank of England (BoE) announced it had raised interest rates by 0.50%, the biggest increase in 27 years.  UK interest rates now sit at 1.75% which is still way below the current inflation rate of 8.2%. The BoE has only increased rates in increments of 0.25% thus far since the pandemic, but has now opted for a more aggressive stance following similar moves by both the European Central Bank and the US Federal Reserve.  Previous forecasts made by the BoE stated it could expect inflation to reach 11%.  However, it has since revised this figure to 13%, as the cost of energy is expected to increase in the autumn.  The effect of higher interest rates will increase the cost of borrowing and in theory encourage a consumer behaviour shift from higher spending to higher savings. This would then slow down the demand for goods and services and alleviate the pricing pressures we have seen over the last 12 months.

The BoE also released guidance on its economic forecasts which signalled that the UK would fall into a recession later in 2022 as shrinking demand begins to be priced into the economic data.  It also stated the severity of the recession may be longer than its initial forecast.

Elsewhere, we saw the US unexpectedly add 528,000 jobs to the labour market as their unemployment rate fell to 3.5%. Treasury yields rallied strongly following the release of the economic data, in particular the 2-year Treasury which is often regarded as a proxy for interest rate expectations.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 8^th August 2022.

© 2022 YOU Asset Management. All rights reserved.