Investment Briefing
Welcome to our first investment briefing of 2023. We have all felt difficulties this past year and hopefully, we can all look forward to this year being a lot better. However, there are still difficult economic and political headwinds facing the UK - as I write this, we pass the first anniversary of the war in Ukraine. As the war enters its second year, the Chinese government announced that it is pushing Putin for a ceasefire. The call was part of a platitudinous 12-point peace plan released by the government in Beijing, which included "abandoning the Cold War mentality” and “respecting the sovereignty of all countries”. Notably, China abstained in a vote at the UN that overwhelmingly backed a resolution demanding Russia withdraw from Ukraine.
Interestingly, Russia’s economy is expected to grow this year mainly on the back of selling its oil to the likes of China and India despite the embargo from the West. Whilst the market in Moscow remains closed, we should expect some form of ‘bounce’, if and when Putin gets some common sense. The malaise the war has brought weighs heavily on the rest of Europe but there are indications, Europe has weened itself off Russian energy supplies with significant progress made in the major economies of France and Germany.
USA & Climate Change Policy
Speaking of energy supplies it would be prudent to look at the USA and its current climate policy. President Joe Biden has nominated Ajay Banga, a former Chief Executive of Mastercard, as president of the World Bank. The previous head, David Malpass, resigned last week a year before his term was set to expire amid concerns he did not take climate change seriously. The bank’s largest shareholders are seeking to expand operations to focus on combating global warming. I mention this as global stock markets are finally taking the effects of climate change seriously and we are seeing much more transparent information from fund management groups about the origins of some of their holdings.
Whilst we have several risk rated Environment, Social and Governance (ESG) portfolios available for our clients already, it has proved difficult to get fund managers to confirm the exact ESG position of some of their funds and underlying holdings. Regulators have now stepped in and we have a much clearer arena as a result. Our managers have been trying to run as much of the ESG vision through all their portfolios for a while now in advance of the new regulations coming.
Another topic surrounding the US I want to mention is crypto currencies. Sam Bankman-Fried, a former billionaire and founder of FTX, a collapsed crypto exchange, was charged with four new criminal offences including conspiracy to commit bank fraud and securities fraud. Prosecutors allege that Mr Bankman-Fried developed a ‘series of systems and schemes’ through which he could ‘access and steal’ billions of dollars of customer deposits. Mr Bankman-Fried has pled not guilty to all charges against him.
I mention this as we have seen an increase in enquiries around buying or investing in crypto. I can confirm to all our clients we have no intention to recommend such an investment or approve any such funds being put into any of our portfolios.
Our Portfolios
Looking forward to this year, our portfolio managers have been undertaking some changes in their asset allocations and reducing exposure to those markets they believe to be more volatile while looking for opportunities for growth. We have seen a very welcome pickup in valuations from December 2022 which has run through the first two months of this year. Our managers are confident 2023 proves better returns for all the risk levels. I know many will have seen the FTSE break through 8,000 points but unfortunately most of the profits for such companies are made overseas and the UK does not get the benefit.
European equities and large US equities seem to be the short-term home for risk assets but the volatility in these markets remain high. Cash is now paying a decent return and managers are beginning to increase holdings in cash not seen for over a decade. Interest rates will remain at these levels for some time (its normal!) so expect cash positions to remain nearer these limits.
Get Claiming Before the End of the Tax Year
Some of you may remember 1990 for the reunification of Germany or the creation of the first ‘web server’, but it is also the year in which wives (not spouses) began to be taxed independently of their husbands in the UK. The scrapping of an old-fashioned, sexist system was long overdue and, in the 33 years since, many women have benefited from privacy around their tax affairs and income.
Firstly, look at the marriage allowance, a perk of getting hitched if one of you is a non-taxpayer. If you are earning below the personal allowance of £12,570 and your partner is a basic-rate taxpayer earning between £12,570 and £50,270 the non-taxpayer can transfer up to 10%, £1,260, of their tax-free personal allowance to their higher-earning partner to save them up to £252 a year in tax. You can backdate eligible claims for four years up to April 6 2016, which could be worth up to £1,242 in tax relief.
People have forgotten these allowances can apply to them and the time to act is now, especially as we approach the end of the tax year on April 5th.
Beyond this, couples who absolutely trust their spouses, and are willing to be completely transparent about assets and income with each other, have more scope to reduce income tax, whatever their tax band. Money is often a taboo subject in relationships, and at times it can be hard to discuss it but married couples who are transparent about income and assets can collaborate on efficient tax planning, bringing new meaning to “what’s mine is yours”. Instead, think, “what’s taxed as mine, can be taxed as yours”.
Summary
I mentioned political headwinds earlier and it is pleasing to see the government has made real progress with Northern Ireland and all parties looking to give the new deal as much support as possible. Here’s hoping the communities in Northern Ireland can do the same and start looking forward again.
I will leave it there but just to note we are waiting on Mr Hunt’s Budget next month. We can never be sure what the Budget will look like although I cannot see a rabbit of any size being pulled out of his hat, in fact, I think this year, the Chancellor may not even have a hat.
Tax Year End Reminder
This year, the last working day of the 2022/23 tax year is Wednesday 5th April.
Please note due to the time needed to process payments along with any associated calculations and paperwork, the last day we expect to be able to process instructions will be Monday 13th March 2023.
With the impending tax year end deadlines, it is important you take action as soon as possible. If you have any queries relating to your circumstances or wish to take action.
If you would like to speak to an adviser, please give us a call on 01423 223640 or email advice@prosperis.co.uk.