Stock Take
Last week, Rishi Sunak caught a number of commentators off guard by calling a General Election for 4 July.
Although a month is a long time in politics, current opinion polls suggest the incumbent Prime Minister faces a steep, uphill battle to remain in his post. Instead, it is Sir Keir Starmer and the Labour Party who are heavy favourites to come out on top.
In this race, the economy is likely to be a key battleground. However, our Head of Economic Research, Hetal Mehta, notes: “Fiscal policy will be highly constrained for whoever wins. Even with very loosely binding fiscal rules, an increase in spending will almost certainly need to be matched by tax increases. We don’t think it’s likely that a Labour government would roll back on the recent tax cuts for those of working age, but an increase in wealth taxes may be the path of least resistance, especially if the government has a large majority.”
Regardless of what the opinion polls show, or whether we end up with a new Prime Minister, Hetal warns the biggest mistake you can make as an investor is to be impatient. She says: “It takes time to understand what the medium to long term impact of an election outcome will be. Whether there is a change in government or a change in government policy, the immediate market reaction is usually a knee-jerk and based on limited information. Avoiding such knee-jerk reactions and focusing on the longer term will help insulate investors from potentially value-destructive decisions.”
“With the UK market, we have seen over a decade of underperformance relative to global peers. The UK has remained unloved by international investors, and this has left the market attractively valued based on most measures. Whilst an election does create uncertainty, it does not change the fact that UK businesses are cheap and have their place in a diversified portfolio.”
When announcing the election, the Prime Minister described inflation as being back to normal. He was referring to an Office for National Statistics (ONS) report released shortly before his announcement, that showed UK inflation had fallen to 2.3%.
Whilst the figure was a notable drop from 3.2% the prior month, and indeed close to the Bank of England’s (BoE) 2% target, there are a couple of important caveats. Markets had been expecting the figure to come in at 2.1% as falling energy prices helped ease inflationary pressures, so 2.3% was met with disappointment by markets. A number of commentators also expect inflation to rise slightly in the second half of the year.
Reflecting on these numbers, Felipe Villarroel, a Partner at TwentyFour Asset Management, said: “We already felt that the BoE was sounding slightly too optimistic and too eager to start cutting rates, even before April’s CPI number. Now, we can only be more convinced than before that the BoE just does not have good enough data to embark on the rate cutting process. Traders seem to agree, judging by the moves in the gilt market and in the implied probability of a June cut.”
Outside the UK, the US Federal Reserve released minutes from its latest meeting, which reinforced the belief that they are willing to keep rates higher for longer, adding to the narrative that the first rate cut is more likely to come from Europe. The general expectation is for the European Central Bank to be the first to pull the trigger, though it is unknown the extent to which they will be willing to diverge from their American counterparts.
TwentyFour Asset Management is a fund manager for St. James’s Place.
Wealth Check
Just one generation ago, it would sound like science fiction. But nowadays, we all have far-reaching digital personas and footprints. We exist in the real world and the virtual world – from the photos we post on social media, to our household accounts and our weekly shop.
Your digital legacy is the sum total of all the digital information that exists about you after your death. It’s often information that you yourself have created – accounts, passwords, memberships, online conversations, even your photos or your website.
Six steps to leaving a good digital legacy
Leaving behind a clear and accessible record of digital accounts is almost as important as making your Will.
Here are six steps to leaving a good digital legacy:
- Include your digital assets – social and financial – in your Will and leave a record of your personal wishes regarding what should happen to digital assets such as social media accounts, photographs, or videos.
- Store your digital account details securely and in a hard copy. Make a backup of key personal assets such as photos for your family or friends.
- Talk to your family about your plans, and how they can access key online accounts when the time comes.
- Make a Power of Attorney that includes your key digital asset information so it’s ready, should you need someone else to manage your affairs.
- If you have an Apple ID, set up a digital legacy contact who can access your accounts if necessary.
- Take professional advice on your digital legacy planning.
The digital world evolves at lightning speed, so your approach to digital legacy planning needs to be proactive and continue to evolve, to ensure it stays fit for purpose.
A robust digital legacy helps protect your digital self as carefully as you would your physical self.
Will writing and Powers of Attorney involve the referral to a service which is separate and distinct to those offered by St. James’s Place and are not regulated by the Financial Conduct Authority.
In The Picture
Although the upcoming UK election will generate a lot of headlines, patience will be a key virtue for investors.
The Last Word
“The future is in your hands… on July 4, you have a choice.”
Labour Party leader and current favourite to become the next Prime Minister, Sir Keir Starmer, reacts to Rishi Sunak’s announcement of a General Election.
SJP Approved 28/05/2024