Welcome to our first newsletter of 2018. We hope you all had an enjoyable Christmas and New Year although, like us, this probably feels like it was quite some time ago! Winter should be coming to an end, and we’re very much looking forward to the warmth that Spring will bring.
Many stocks surged in the last quarter of 2017 and at this point, all major economies were generally growing at a healthy pace. The start of 2018 saw markets carry on the same trend where we left off, however more recently we have seen an increased level of market volatility. What some of you may be surprised to hear is that up until this year, market volatility has been at its lowest level for 60 years! At the same time, in the last 10 years since the ‘credit crunch’ the markets have been on an extraordinary run – since March 2009 the FTSE 100 has risen 187%, while the S&P 500 has surged some 284% in Sterling terms – so the volatility that has returned over the last few weeks perhaps arrived as a bit of a surprise but probably should have been expected.
The market ‘correction’ that we’ve seen highlights the fact that the stock market and the economy are two very different things and do not always move in the same direction. There are no indications that the fundamentals of the global economy are in jeopardy and the falls in equity prices ironically came off the back of strong economic news. The UK government enjoyed further good financial news last week, as official estimates showed it is on course to borrow much less in 2017/18 than previously expected. In fact, borrowing in 2017/18 is down almost a quarter compared to the previous year.
While headline economic numbers offered plenty of reasons for optimism, developments around Brexit have been less clear-cut. In addition, investors will need to adjust to the fact that the era of loose monetary policy, which has helped propel markets, is coming to an end. Against that backdrop, it is reasonable to anticipate more volatility in 2018 and beyond.
In this environment, the ability of active managers to identify and invest in companies with strong fundamentals should come to the fore. Companies whose fortunes have been propped up by ultra-low interest rates and cheap money are likely to suffer.
Whatever the next few weeks and months hold, it is important that investors remember the benefits of holding a diversified portfolio, maintain their long-term focus and avoid any temptation to head for the exit. For active, long-term investors who hold their nerve, such periods present opportunities.
Details of our St. James’s Place portfolios including interviews with the fund managers can be found on our website under Clients/Media Library.
Hopefully you spoke with our Apprentice Jess, and of course you may have met her during the 18 months that she spent with us. In December, she completed her Apprenticeship and we offered her a full-time position with us in the New Year. Unfortunately for us Jess made the decision to take the experience and qualifications she has gained and has relocated to the South of England to explore her next career opportunity with her partner. We of course wish her well and support her decision to enjoy and explore her options in life while young.
In January, we welcomed Adam Chotoye to the team – in at the deep end - two days prior to Jess’s departure. Adam joined us as our Client Service Manager and will support the office and our clients while undertaking his financial service exams to increase his technical knowledge in the coming year or so. We’re already very pleased with Adam’s progress and hope many of you get to speak to and/or meet him over the coming months.
Doing Our Bit
Last year we supported the Pied Piper Appeal, a Gloucestershire based charity helping sick and disabled children around the county. What they do is truly fantastic and with the support of many, Andrina’s idea of a 24hr Paddle Boarding was a great success raising over £2,071.59 with a further £4,273.32 for the St. James Place Charitable Foundation.
Since inception the St. James’s Place Charitable Foundation has raised over £71 million which highlights the incredible and continued generosity of the St. James’s Place community. Last year alone, a record £5.7 million - £17.1 million with double matching - was raised to celebrate 25 years of the Foundation!!!! With the running costs of the Foundation borne by St. James’s Place Wealth Management plc, all of these funds are allocated for charitable causes and we are very proud to be a part of it.
During 2018 we have decided to support Gloucestershire Young Carers. We have always been aware of the fantastic work they do and we felt they were a perfect fit after meeting Jane Dyer last year. At a recent event we managed to raise our first £140.00 which will be matched by the St. James’s Place Charitable Foundation and later in the year we will be setting out again with our paddles so please keep us in mind for any help, support, donations or even participation you feel you may be able to offer. For more about Gloucestershire Young Carers we’d urge you to take 5 minutes and have a read about all they do.
Finally… Tax Year End
Coming back to the here and now; tax planning should be a year-round activity, but it is particularly important to maximise the available opportunities as the tax year draws to a close.
In some respects, the scope for tax-free saving has never been better. The ISA allowance climbed to £20,000 in April 2017; another boost for this popular savings vehicle that provides a great opportunity to generate income and capital growth free of any further liability to Income Tax or Capital Gains Tax. But if you don’t use your allowance before 6 April, it will be lost forever.
Meanwhile, the tax advantages of pensions are still hard to beat. If you can afford it, and subject to your eligibility, you should consider maximising contributions into your personal pension to take account of tax relief, which boosts the value of your contribution by 20% from day one. Additional reliefs can be claimed by higher earners via their annual tax return. It’s also possible to pay up to £2,880 each tax year into a pension for a non-earning spouse, or child; that sum will be automatically increased to £3,600 through basic rate tax relief.
Your Capital Gains Tax exemption provides another planning opportunity; but this is another one that will be lost if you don’t make the most of it before the end of the tax year. It’s also worth considering what impact the Personal Savings Allowance and Dividend Allowance have on your savings and investments plans.
This is a time of the year when individuals and couples are given an opportunity to help keep their long-term financial plans on track, by using reliefs and allowances that would otherwise be lost.
Nevertheless, effective tax planning requires knowledge and expertise. That’s why I would welcome the opportunity to spend some time explaining how you can get maximum advantage from your allowances and exemptions, both in this year and the years to come.
To discuss this, and any other financial planning needs, please get in touch.
We will soon be sending out invitations to our next seminar expected to be in May, but in the meantime if there is anything more you’d like to hear about or have any recommendations for upcoming letters or events, we’re open to ideas.
Quayside Wealth Management
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.
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