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February 1, 2022

Short-term noise

It has certainly been an eventful start to 2022.

“Partygate” has dominated the headlines in the UK along with the military build-up on the Ukranian border and, of course, we are still navigating our way through the pandemic as restrictions begin to be lifted again.

The cost of day-to-day living continues to rise – with energy prices in particular, increasing significantly.

Having enjoyed years of ultra-low inflation, we are now faced with the prospect of CPI (Consumers Price Index – a measure of inflation) increasing beyond 5%.

This threat of inflation and the future path for interest rates as a result, has unsettled the global stock markets, leading to greater volatility – which can be quite unsettling when you consider the positive performance of stock markets over the second half of 2020 and 2021.

The global stock market is down by around 7% and the US by circa 9%. Those growth companies that performed particularly well through the pandemic, have been impacted the most.

In contrast, the UK’s stock market has performed comparatively better on the world’s stage. The reason for this is largely due to the type of companies that are listed in the FTSE (e.g. energy companies, mining stock and banks – which have been more resilient).

Naturally, because of all these goings-on, we start to feel a little unsettled.

It is in our nature to want to “fix” things when they don’t appear to be going our way.

But a key ingredient to investment success is patience – not panicking, not “fixing”, trying not to let the short-term “noise” distract you from your objectives and the bigger picture.

 

There’s an old saying: ‘Life knocks you down. Get up’, and so often, this is how global markets react as well. They roll with the punches, and sooner or later they tend to bounce back from adverse events. The trick is waiting for the storm to pass.

Beyond the “noise”

There are positives too: we have the first indications of success from our national vaccination programme and people in England are now able to go about their business mask-free, if they feel comfortable doing so.

Travel restrictions are easing, making it far easier to see friends and family and for some maybe even the thought of a holiday this year (if you can navigate all that paperwork of course!).

We can all now see that there will be an end to this pandemic.

Revisiting your financial plan is another way to look beyond short-term events, to re-focus on your objectives and look at current events from a wider perspective.

It’s worth remembering that money only takes on true meaning, only achieves its true potential, when we turn it into financial security for ourselves and our family, or turn it into enjoyment, by drawing it out and spending it.

This is where we see the financial plan becomes the most important thing to focus on. As long as that is still linked to where you want to be, and what you want to do, you can start looking beyond the short-term and ignoring the noise. We’ve built in the lifebelts to ensure you’ll still get from A to B, no matter how turbulent the journey.

What next?

We stand just a few weeks away from the end of the financial year on April 5th – the perfect opportunity to start your financial re-set by thinking about what we can do before then.

Have you made use of your ISA and/or junior ISA allowances of up to £20,000 and £9,000, respectively, this tax year?

Remember these don’t carry over – it’s a case of ‘use it or lose it’.

Also don’t forget pension contributions too.

Investing money in this way of course helps towards your financial future, but also potentially significant income and inheritance tax efficiencies too.

Do you have a question in relation to ISAs, pensions or anything else covered in this blog? If so, just pick up the phone or email me and I would be happy to chat.

 

February 1, 2022