Spring forward? 2018

Volatility has been the mantra of the first quarter of 2018 and based on the current geopolitical position, this is likely to continue. As a starting line of this section, that sounds a negative stance to take, however, this may not be the case. Indeed, the International Monetary Fund (IMF) as an example has enhanced its position of global growth over 2018 and beyond on 22 January 2018. More detail can be found here: https://www.ft.com/content/d900ef2e-ff74-11e7-9650-9c0ad2d7c5b5 .

With Easter now behind us and the new tax year 2018/2019 upon us, the opportunity to spring forward with personal and business financial planning is here. There is much to consider and thus far, and of course not guaranteed, the position of the UK as we enter our last year of membership of the EU looks more positive than some had originally anticipated, at this point. An example of this was noted by the CEO of international bankers, Goldman Sachs in April here: https://www.politico.eu/article/goldman-sachs-ceo-brexit-effects-not-as-bad-as-i-thought-for-now/

It is widely anticipated that another rise in the Bank of England base interest rate is due and this could be as soon as May 2018, although some have noted that the current rate of 0.50% may be held for a little longer than this. With many pressures on UK consumers at this time, inflation being one and noted below, the High Streets of the UK may continue to endure some pressure over 2018.

Inflation reached a six-year high of 3.1% in November 2017 and has since fallen, with consumer price inflation at 2.70% in February 2018. In its economic commentary on prices from March 2018, the Office for National Statistics (ONS) notes that, amongst other factors, a small fall in fuel prices alongside food prices rising more slowly than last year has helped to reduce inflation. House price growth has remained relatively placid in comparison to the past, although London and the North East are lagging behind other regions of the UK. If you would like to read the full ONS commentary, please visit: https://www.ons.gov.uk/economy/inflationandpriceindices/articles/priceseconomiccommentary/march2018

As noted before, one major global focus for 2018, possibly not on everyone's immediate scope at this point, will be the United States midterm elections in both houses in November 2018. It is widely agreed that the results of the midterm elections will be hugely important both in terms of the Trump presidency and in shaping the US political agenda for the years ahead. If the Republicans lose control of either the House of Representatives or the Senate, the party's ability to push through legislation would be severely hampered. Were the Democrats to win control of the House or the Senate, they would have the opportunity to reject new bills and could also gain subpoena power, which could prompt a more detailed and determined investigation of the Trump administration.

In recent years we have remained keen on investment / pension allocations to the UK, North America, sterling and dollars, with a lower positive view / allocations towards Europe. We have started a process of evolving this view, with an increased allocation being focused on European funds, whilst at the same time taking a more cautious approach with regards to allocations to commercial property. This house view has in part been informed through our in-house investment committee and I have detailed this further below. At regular reviews with our clients for their portfolios, pensions and ISAs where appropriate we have considered these allocation updates accordingly.

As we have maintained before, in our view, 2020-2021 looks interesting and potentially a time of (or the lead into a time of) further change, although probably not before then. Indeed, with this in mind, we think that from a growth perspective the next few years look good, if not strong. This is not guaranteed and is only an opinion, and probably not one that will be shared by the press any time soon.

Chapters Financial Investment Committee

It is important that all directors and advisory team members are briefed and updated on the current economic climate and its data in order to inform our 'house view'. We aim to meet once a quarter and to ensure our process remains robust, we also use the services of an external consultant, Steve Williams of Cormorant Capital Strategies. For information, their website can be found here: http://www.cormorantcapitalstrategies.co.uk/

Steve Williams produces a regular macro-economic review document and, with his kind permission, this is reproduced here. We find these updates helpful in considering the current economic conditions.

No individual advice is provided during the course of this article and please remember that we can be wrong, like many others are and will be. However, have a look at some of the stats and timings that are freely available and, as we have, bring these together. The story outcome is potentially positive; it's just the way you read it!

Keith Churchouse FPFS


CFP Chartered FCSI

Chartered Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.