Investment market update: April 2021

Investment market update: April 2021

After a year of lockdowns and restrictions, evidence suggests economies around the world are now on the path to recovery, although uncertainty and challenges remain.

The International Monetary Fund (IMF) once again increased its growth forecast for the global economy in April. The organisation now expects global growth of 6% in 2021, followed by 4.4% in 2022. Figures from JP Morgan also indicate that global manufacturing has reached a ten-year high.

UK

In April, Covid-19 restrictions began to lift across the UK, leading to optimism that the economy and businesses will continue to recover over the coming months. In fact, Barclays’ CEO Jes Staley said the UK is heading for its biggest economic boom since 1948 as the vaccination programme encourages consumers to go out and spend.

Figures from the Office for National Statistics (ONS) suggest that consumers have plenty to spend too. UK household wealth increased to record levels during the pandemic. Household wealth net growth grew by 9.1%, almost £1 trillion, to £11.4 trillion between 2019 and 2020.

Here are some of the headline figures that paint a positive picture of the UK economy:

  • The number of workers on furlough continues to fall as non-essential shops, pubs, and restaurants reopen with some restrictions in place. In the two weeks to 18 April, 13% of the workforce was furloughed, down from 17% when compared to the previous fortnight.
  • UK construction activity rose at the fastest pace since 2014 in March. The IHS Markit Purchasing Managers Index (PMI) rose to 61.7 (a reading above 50 indicates growth), up sharply from the 53.3 recorded to February.
  • Retail sales increased by 5.4% in March month-on-month, with the strong growth seen in clothing sales (17.5%).
  • The CBI industrial trends survey found that manufacturing optimism jumped at its quickest pace since 1973 as firms anticipate a surge in output and new orders.

As restrictions continue to lift in May, it’s expected that the economy will benefit even further. Of course, some businesses are still struggling and a rise in Covid-19 cases could push recovery plans off track.

While the challenges of the Covid-19 crisis appear to be fading, Brexit continues to present uncertainty. The impact of the pandemic means it’s difficult to weigh up the full effect of the UK leaving the EU.

Exports and imports have naturally been affected by leaving the EU bloc. UK exports to the EU have almost halved this year. In January and February, exports were down 47% when compared to the same two months in 2020, according to Eurostat. EU exports to the UK have also suffered but the fall hasn’t been as steep at 20.2%.

JP Morgan also warned that higher costs could force banks to move out of London, adding that the Brexit process was not positive for UK GDP.

Europe

The eurozone is back in a technical recession after posting GDP contractions for two consecutive months. GDP fell by 0.6% in the first quarter of 2021, following a 0.7% contraction in the final quarter of 2020 as the economic area was affected by a new wave of Covid-19.

Despite this, there are signs that the economy will improve over the coming months. For example, the March IHS economic composite PMI continued to increase, rising from 53.2 in March to 53.7 in April. It’s the highest the manufacturing PMI has been since 1997. Economic and consumer confidence is also rising. According to European Commission’s latest Economic Sentiment Indicator, confidence is now above the long-term average for the first time since the Covid-19 outbreak on the continent.

Shweta Singh, from economic and investment strategy research provider TS Lombard, added that the downturn has bottomed out and she expects a recovery to start in May.

US

The US also remains on the road to recovery and the Federal Reserve announced it will stick to near-zero interest rates and its bond purchase strategy to continue to support the economy.

Overall, figures from the US are positive. Between January and March, US GDP rose at an annualised rate of 6.4%, up from 4.3% from the three months prior. The latest data is the equivalent of 1.6% of quarterly growth. The boost has been linked to stimulus spending and the roll-out of the vaccination programme. This was supported by US retail sales jumping 9.8% in March, the biggest monthly jump in ten months and much stronger than the 6% expected.

Looking ahead, consumers are also confident about the future. According to the Conference Board, US consumer confidence reached a pandemic high in April of 121.7, up from 109 in March.

Another key figure from the US this month is the trade deficit reaching a record high. While this can be a sign of economic struggle, in this case it’s because other economies aren’t recovering as fast as the US. According to the US Census Bureau, the trade deficit is now $90.6 billion, rising for the third month in a row. In March, imports climbed by 6.8% to a record $232.6 billion, while exports increased by 8.7% to $142.1 billion.

Asia

China continues to post a strong recovery this year. In the first quarter of 2021, GDP grew by 18.3% when compared to a year earlier. The first quarter of 2020 saw Covid-19 forced lockdown and travel restrictions in China. The growth in the first quarter is the best year-on-year growth since 1992, when China first started publishing data.

Please note: The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

The summer gardening trends that could liven up your outdoor spaces

The summer gardening trends that could liven up your outdoor spaces

As a nation, we’ve embraced gardening over the last year. With social distancing in place, we’ve fallen in love with our outdoor spaces, whether to entertain or relax in. According to the Royal Horticultural Society (RHS), three million Brits have developed green fingers recently.

Are you looking to boost the appeal of your garden or simply enjoy working on it? If so, these 2021 trends could help give your garden a whole new look.

Bring the inside outside

For years, there’s been a trend for bringing the outdoors into homes, with bold floral or leaf-printed wallpaper and potted plants. Now the reverse is happening.

The pandemic means families and friends have been getting together in gardens across the country, so taking creature comforts outside to entertain makes sense. This may include comfy outdoors sofas or a table for al fresco dining. Some entertainers have gone even further, building garden bars and outdoor cinemas. Now with summer almost here, there will hopefully be plenty of opportunities to make use of them.

Embracing this trend is all about thinking about how you like to relax or entertain and whether it could work outside.

Give gardens a wild look

Doing away with neat flower beds, the wild-looking garden is set to be a big trend this year.

One of the benefits of a wild look is that it’s more likely to attract wildlife. A patch of meadow flowers can help pollinators and encourage birds to visit. Scattering tall meadow flower seeds is a simple way to start embracing this trend, for a more ambitious project, why not try adding a natural-looking pond?

While wild gardens might look like they’re less hard work than a traditional garden, it can still mean a lot of hands-on projects for keen gardeners.

Pick your own vegetables

According to RHS, more gardeners are turning their space into patches for growing food. It can help you increase your healthy fruit and vegetable intake, as well as cutting down your food bill. Plus, it can be hugely rewarding to serve up dinner with vegetables you’ve grown yourself.

RHS suggests that staples, such as potatoes, salad and onions, are among the most popular choices. The trend for raised flower beds is also encouraging more people to grow their own food; not only can they help with accessibility, but raised beds can promote faster growing too. If you have a small garden, you can still try this trend by using pots and troughs to grow herbs, tomatoes and much more.

Make the most of small spaces with vertical gardens

While green fingers are usually associated with expansive gardens and plenty of room, the pandemic has highlighted how even a small outdoor space is valuable. For those with small gardens, planting vertically can help them create a sanctuary. They’re even an option for flats that have a balcony.

There’s more than one way to create a vertical garden, but, to start with, pick a bare wall or fence to add plants to. You can purchase premade planters that are designed for walls for a simple solution, or, if you’re DIY minded, add your own planters across the space to achieve the look you want.

Embrace “lazy lawns”

Another trend highlighted in RHS’s predictions is the rise of the lazy lawn. If you dislike keeping your lawn immaculate, this is the perfect trend for you.

It doesn’t mean never mowing or taking care of your lawn, but accepting the inevitable wear and tear it experiences when you’re using it to relax or for children to play. Turn a blind eye if patches turn brown in the summer months, or even look for alternative types of grass from the traditional ryegrass that require less maintenance. This may include mixed grasses that will stay greener without fertiliser and resist drought – perfect for a low-maintenance lawn.

Give your front garden some love

It’s often back gardens that we lavish attention on. But there is a good reason for giving your front garden some attention too.

According to RHS research, greener front gardens can make you feel happier, more relaxed, and closer to nature. A four-year scientific project added ornamental plants to bare front gardens and measured concentrations of the hormone cortisol in residents before and after. Steep daily declines in cortisol levels, which usually peak early in the morning, are linked to reduced level of stress. Before adding front garden plants, just 24% of residents had healthy cortisol patterns. After plants were added this increased to 53%.

Over half of residents said their front garden helped them feel happier and 40% said it helped them relax more. So, if you’re looking for a way to boost your wellbeing, updating your front garden could be an option.

Whatever you decide to do in your garden this year, we hope you can create a small haven for yourself to relax in and welcome family and friends into.

A third of homes for sale are attracting multiple offers: 5 tips for winning a bidding war

A third of homes for sale are attracting multiple offers: 5 tips for winning a bidding war

Demand for property is outstripping supply, placing more potential homebuyers in a bidding war. If you’re looking to move and are facing competition, there are some things you can do to boost your chances of success.

More than a third of homes are receiving at least three offers, according to This is Money. A lucky one in five sellers is receiving offers from five or more buyers, providing an opportunity to sell their home for more. In some areas, competition for property is even higher. Some 65% of homes in Scotland and 48% in Yorkshire & Humber have received at least three offers.

If you’re hoping to sell your home, competition in the market is good news, but it can be frustrating if you’re buying. Taking some steps to make your offer more attractive could help your offer get accepted. Here are five things you can do.

1. Have a mortgage in principle ready

A “mortgage in principle” is an official estimate of how much a lender will allow you to borrow through a mortgage. While it’s not a guarantee, it indicates that you’re in a position to borrow and that the application process will be smooth. Having a mortgage in principle to hand can give buyers confidence in your offer, especially if they’re hoping for a quick sale.

A mortgage in principle is often used by first-time buyers, but that doesn’t mean you can’t secure one if you already have a home. If you’re hoping to increase the amount you borrow significantly, it can be useful.

When you apply for a mortgage, you don’t have to use the lender you have a mortgage in principle with. However, taking some time to understand lending criteria and interest rates now can be invaluable. The amount providers will be willing to lend you can vary, so picking the right one could make all the difference in a bidding war. If you’d like help when organising a mortgage in principle, please contact us.

2. If you’re not in a chain, highlight it

It’s not always about more money when a seller is choosing between several offers. In some cases, they may want to sell the property quickly. If this is the case, not being part of a chain can make you more appealing. A chain occurs when homebuyers and sellers are linked because their purchase or sale is dependent on another transaction. For example, you may only be able to buy the property you want if a sale on your current home goes through.

This can put first-time and cash buyers in a good position when there is competition in the market. Without a chain slowing down the process, you can complete a property sale in a matter of weeks rather than months.

3. Organise your solicitor before putting in an offer

Usually, you’d contact a solicitor after an offer has been accepted to start moving the process forward. But like having a mortgage in principle, having a solicitor organised from the outset can make your offer more appealing and demonstrate you’re serious about buying the property.

4. Put your offer in writing and add a personal touch

While selling property is a monetary transaction, homes hold a lot of sentimental value. Sometimes, giving a seller some personal details and explaining why you want this property, in particular, can sway the decision in your favour.

Often, you’ll provide verbal offers through the estate agent. Putting it down in writing can make it seem more tangible to the seller and allows you to make your offer about more than just a figure.

5. Be ready to increase your offer

While the above steps can make your initial offer more attractive, if other buyers want the property, be ready to increase your offer and negotiate.

Some sellers will come back with a counteroffer, others will ask for final offers. Think carefully before you submit a new offer, you may also want to negotiate other terms. For example, would you be willing to pay more if they left some furniture or updated certain areas of the property?

That being said, be prepared to walk away too. Think about what the home is worth and what you can afford. Putting in a higher bid can be tempting when you’ve fallen in love with a property, but it can mean you lose the property further down the line when your mortgage isn’t approved. Remember: there will be other homes.

If you’re hoping to buy a home, whether you’re a first-time buyer or moving up the property ladder, we’re here to help you. We can offer advice right from the beginning of the process, including securing a mortgage in principle and helping you negotiate if necessary. Give us a call to arrange a meeting.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Why you need to review your will if you’re gifting to loved ones now

Why you need to review your will if you’re gifting to loved ones now

Are you thinking about gifting during your lifetime? Traditionally, you’d pass on wealth to family and friends through an inheritance, but many people are finding that doesn’t fit in with their plans. Instead, they’re passing on some assets now, but they do need to think about how it will affect the legacy they leave behind.

There are many reasons why you may be thinking about gifting during your lifetime. The act may allow you to see the joy or security your gift can bring, or use gifting to reduce a potential Inheritance Tax bill. However, one of the biggest drivers behind gifting is that younger generations are currently facing serious financial challenges.

Whether your loved ones are struggling day-to-day due to insecure employment or can’t save for a mortgage deposit as house and rent prices rise, gifting now can lend support when loved ones need it most. A lump sum for children or grandchildren now can have a far bigger impact on their long-term financial security than waiting to leave it as an inheritance.

Financial gifts fund half of house purchases among young adults

The Bank of Mum and Dad now plays a pivotal role in the housing market, and demonstrates the value of gifting during your lifetime.

Half of house purchases among the under-35s involved financial support from family in some way, according to Legal & General. This may range from a significant deposit to a loan, but 71% of homebuyers say it’s unlikely they could have bought a home without the support. A deposit to buy a home may mean your loved one’s outgoings are now lower, as renting can be more expensive, and it also creates long-term financial security.

There are also other reasons you may want to offer financial support now, from paying school fees to providing loved ones with an opportunity to travel while they’re young.

Among retirees that have accessed their 25% tax-free pension lump sum, 6% said it was to provide a gift to children, a survey from Canada Life found. A further 1% planned to make gifts to grandchildren. Many more families are likely to use savings, investments, and other assets to provide gifts during their lifetime.

Before you hand over a gift, it’s important you weigh up the impact it could have on your long-term financial security. Would taking a lump sum out of your estate now mean you could face challenges in the future?

This is why it is important to review your will.

2 reasons to review your will after gifting to loved ones
1. The value of your estate will change

First, if you’re providing significant gifts to loved ones, it could change the value of your estate. Understanding how much your assets are worth can help you effectively plan for the long term and your legacy.

In some cases, reducing the value of your estate may be part of the reason you’ve decided to gift. For example, you may want to bring the value of your estate under Inheritance Tax thresholds, reducing the bill loved ones will face when you pass away.

However, it can also mean the way your money is split up in your will isn’t appropriate anymore. A pecuniary bequest, which means you leave a fixed sum of money, could become a higher portion of your estate than you’d wish. Switching to a residuary bequest, where you leave a percentage of your estate, could make more sense.

2. You may want to distribute assets differently

Second, giving a gift now may affect your wishes for later. For instance, if you’ve just given a lump sum as an early inheritance to one of your children, you may want to adjust your will to reflect this. This may include leaving the recipient a smaller portion of your estate so each of your children receives an equal amount when gifts and inheritance are combined.

How to update your will

As a general rule, you should review your will every five years, or following major life events such as getting married, making significant gifts or your family growing.

If you need to make changes to your will, there are two ways to do this.

The first is through a codicil. This is a document that allows you to make amendments to an existing will. It must be signed and witnessed in the same way as a will and should be kept with the original document. While there are no rules about what you can change using a codicil or how many you can make, it’s a good idea to keep changes small and straightforward to avoid complications when you pass away.

The second option is to write a new will. This should clearly state that your new will revokes any older wills or codicils. You should also destroy your old will and any copies so it’s clear which will should be followed.

Your finances and estate planning are intertwined and it’s important they’re considered together. If you’re planning to give a gift or make other lifestyle changes, you can talk to us about what it will mean for your estate plan.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate will writing, tax or estate planning.

Should you defer your State Pension? It could reduce your tax liability

Should you defer your State Pension? It could reduce your tax liability

There’s often a lot of talk about the State Pension Age rising and the impact it could have on retirement plans. But, in certain circumstances, delaying your State Pension payments could pay off.

The State Pension Age is currently 65, but is gradually increasing and will reach 67 by 2028. You can use the government’s State Pension Age checker to see when you’ll be able to claim the State Pension. Remember, the State Pension Age is under review, so it could rise if your retirement is still some way off.

It’s also important to note that you don’t have to start claiming your State Pension when you reach State Pension Age – you can defer it.

If you choose to delay taking your State Pension, it will increase by 1% for every nine weeks that you defer. Delay accessing it for a year and your State Pension will increase by just under 5.8% (10.4% if you reached State Pension Age on or before 6 April 2016). In monetary terms, that would increase the full State Pension by £10.42 per week, from £179.60 to £190.02. The State Pension increases each tax year, so the amount you receive could be larger the longer you defer.

If you defer your State Pension by at least 12 months, you may be able to take a lump sum rather than increasing payments. This will include interest of 2% above the Bank of England base rate, which is currently 0.1%. This is not an option for anyone who qualifies for the State Pension on or after 6 April 2016.

You should consider your life expectancy and health when deciding whether to defer your State Pension. If you reached State Pension Age after 6 April 2016, deferring for a year would mean it takes 17 years for deferring to pay off financially.

However, delaying your State Pension can make sense in some circumstances, including when:

You’re working past the State Pension Age

More people are choosing to work past the State Pension Age for a variety of reasons. If you’re receiving a regular salary, taking the State Pension could mean you pay more Income Tax and potentially get pushed into a higher tax bracket. Deferring your State Pension until you’re ready to give up work can reduce your overall tax bill and increase your income in the future.

You have a retirement income from other sources

Much like earning a salary, if you’re receiving an income from other sources, such as a defined benefit pension, deferring your State Pension can also make sense from a tax perspective. You may also choose to first use savings that are earning little interest in the current climate, or other assets. Keep in mind that your life expectancy will impact how much you benefit.

You’re healthy and want to increase your income in later years

If you have other sources of income and are in good health, deferring your State Pension can provide you with more income to enjoy your later years. If you defer for several years, you can create a more comfortable retirement.

You’ve retired abroad to a country that isn’t subject to pension annual increases

If you’ve decided to retire abroad, you may not benefit from the State Pension annual increases. This means your State Pension won’t keep up with the cost of living and will fall in value in real terms. Deferring your State Pension can increase your income and help it keep pace with inflation during the years you’re not claiming it.

Deferring your State Pension and Income Tax

While deferring your State Pension can make sense from a tax perspective, you also need to consider the long-term tax implications.

Any income you receive from the State Pension, whether as a regular income or a lump sum, may be liable for Income Tax if your total income exceeds the Personal Allowance (£12,570 for 2021/22). As a result, deferring your State Pension could mean you end up paying more tax later in life.

If you’re not sure if deferring the State Pension is the right option for you, please get in touch. We’ll help you understand the short- and long-term implications of the decision.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.