Investment market update: April 2020

Sadly, the market news for April continues to be pessimistic as economies around the world continue to grapple with the impact of Covid-19. The good news is that some of the short-term volatility seen in March has calmed. However, when looking ahead for the next few months and beyond, there’s still a lot of uncertainty.

With countries in Europe and further afield in lockdown for much of April, it shouldn’t come as a surprise that recession fears continue. The World Trade Organisation suggests world trade could shrink by up to 30% in 2020, a bigger drop than the one that followed the banking crisis in 2008. The International Monetary Fund has also warned the world faces the greatest recession since the 1930s. The organisation now expects the global economy to shrink by 3% in 2020, rather than the 3.3% growth predicted at the beginning of the year.

As of the end of April, governments are looking at ways to begin lifting lockdown measures in many countries. How countries respond in the following weeks could give a better indication of what’s to come for the rest of 2020.

UK

The headline figures from the UK highlight how many businesses are struggling to continue operations amid the lockdown restrictions.

Figures from the Office for National Statistics revealed that one in four firms have temporarily closed amid the coronavirus pandemic. Of those firms still operating, many are using the government scheme to furlough staff, with the government paying up to 80% of wages. The scheme has now been extended to October.

In a bid to support businesses getting back on their feet once restrictions are lifted, Chancellor Rishi Sunak unveiled the Bounce Back Loan Scheme, which will help SMEs borrow between £2,000 and £50,000. The government will guarantee 100% of the loan.

The UK composite PMI slumped to just 12.9 in April, down from 36 in March. Anything below 50 indicates a contraction and the latest figure is worse than even pessimistic forecasts expected. Other readings show:

  • UK factories cut jobs at their fastest pace since 2009 after both output and new orders fell, according to Markit
  • Construction activity fell at its steepest pace since 2009, with an IHS Markit reading of 39.3 in March, down from 46

With the travel sector among the hardest hit, airlines have been lobbying the government. There has been growing pressure to bail out Virgin Atlantic, and Airbus and Rolls-Royce are among those calling for greater support.

As the vast majority of shops are shut, retail is another sector that’s suffering due to the restrictions. According to Springboard, UK retail footfall fell sharply by over 80% in the last week of March. Focussing on individual companies, Debenhams, which has been struggling for some time, filed for administration. Well-known high street brands Oasis and Warehouse also collapsed into administration in April.

Europe

The picture across Europe is broadly similar to that in the UK, with businesses struggling and fears of a deep recession growing.

Germany, often seen as the stalwart of the continent, is expected to see GDP shrink by 9.8% in the second quarter. This would be the biggest decline since records began in 1970. With this in mind, it’s not surprising that business confidence in the country is falling. The monthly IFO survey slumped to 74.3 from 85.9, a record low and the biggest monthly fall on record.

Looking at the eurozone as a whole, the PMI data indicates a sharp contraction, similar to the one experienced in the UK. The indicator hit an all-time low of 13.5 in April, down from a prior record low of 29.7 in March.

Once again, the airline industry has been one of the hardest hit in Europe. IATA, the European industry body, has stated that 90% of flights in Europe have been cut, placing 25 million aviation jobs at risk. One of the challenges facing the industry is handling refunds for cancelled flights. The body estimates airlines have £28 billion in tickets that are eligible for refunds.

US

One of the statistics from the US highlighting the situation is the unemployment figure. As jobless claims increased to exceed six million, unemployment reached 4.4%. With the Trump administration often using employment figures to indicate success, it comes as a blow. As restrictions start to be lifted in the US, it’s hoped the job market will begin to recover but how long it will take remains to be seen.

Mimicking other economies, US factory production also slumped. According to Markit, last month experienced the fastest rate of decline since the 2008 financial crisis a decade ago.

Asia

As Asia was the first area to be hit by coronavirus and lift lockdown restrictions, the region could indicate how other economies will fare in the coming weeks and months.

Trade data from China shows tentative signs of recovery. The figures for March show exports fell 6.6% and imports shrank by 0.9% year-on-year. Whilst still in decline, it’s a marked recovery when compared to January and February, providing some light at the end of the tunnel.

In a bid to get the economy moving, China announced it was slashing the amount of cash SME banks have to hold in reserve. It’s hoped this move will pump more liquidity into the economy and release around 400 billion yuan (£46 billion) into the market.

Japan has also announced a stimulus package worth 108 trillion yen (£811 billion) in cash payouts to households and small businesses, as well as deferred social security and tax payments.

Whilst the market news paints a gloomy and uncertain picture, it’s important to remember that you’ve invested with a long-term goal in mind. Portfolios have been stress-tested and chosen in line with your risk profile and aspirations. If you have any concerns about your investments, please get in touch.

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.

May 20, 2020adminBlog

What are your rights if you have a summer holiday booked?

Restrictions on travel and concerns about the coronavirus pandemic may have affected your holiday plans for the summer months. There’s been a lot of contradictory information about what you’re entitled to and if you must cancel. So, we take a look at what your rights are and what your next steps should be if you’re affected.

Most people with travel plans in the next few months have had to abandon them. The Foreign Office currently advises against all non-essential travel, whether you’d been planning to visit a destination in the UK or abroad. On top of this, several countries have also, in effect, closed their borders and have stringent restrictions in place.

Even if the borders are open at your chosen destination, it’s likely restrictions and social distancing measures are still in place. It may mean that whilst you’d be able to get there, the activities you’d been looking forward to are no longer possible.

If you’ve yet to book a summer holiday but had hoped to, it’s strongly advised that you delay for a few months whilst the uncertainty remains.

So, if you already have a holiday booked, are you entitled to a refund? This will depend on how you’ve booked your holiday, where you’d planned to go and the travel insurance you’ve taken out.

Package holidays

If you booked a package holiday, you are entitled to a refund under current rules if it’s cancelled due to coronavirus. However, the Travel Association ABTA is calling on the government to make temporary changes as it argues the protection wasn’t designed to cope with current demands.

Whilst you should be issued a refund if your package holiday has been cancelled due to coronavirus, some consumers are finding they’re being refused. This is because, in the wake of thousands of holidaymakers asking for refunds, many companies are going to struggle. They may offer you a voucher or credit note instead. You don’t have to accept this; you’re legally entitled to a refund if you want it.

Keep in mind that some firms aren’t cancelling holidays far in advance. If your holiday isn’t for a few months, you’ll likely have to wait to see how the situation develops before a travel company will issue a refund. Some firms are cancelling holidays just three weeks in advance.

Flights

Flights are a little more complicated and will depend on the airline.

The good news is that all flights, on any airline from an EU country, as well as Iceland, Norway, Switzerland and the UK, and any flights on any EU carrier from any airport are liable for a refund. If this applies to you, contact the carrier directly, to start a claim. Some firms are dealing with this better than others, but delays in responses and getting through to a customer service team should be anticipated.

As with package holidays, some airlines that should be offering refunds under the EU rules are refusing to give them or insisting customers accept vouchers. Again, you are entitled to a refund by law.

Outside of the EU, refunds will likely depend on the individual airline and travel agent’s, so check their terms and conditions and get in touch.

Accommodation

If your hotel has closed and is unable to deliver the service promised, you’ll be entitled to a refund.

However, if you need to cancel accommodation due to not being able to reach the destination or for other reasons, a refund will be reliant on the goodwill of the hotel or website you have booked with. Many major hotel chains and booking platforms, such as Booking.com and Airbnb, have waivered their cancellation fees but there’s no obligation to do so.

Travel insurance

Finally, if you already had travel insurance in place before the coronavirus pandemic, you should be protected if you’re acting in line with advice given by the Foreign Office. Be sure to check what your individual policy covers and seek a refund from providers first. However, as a last port of call, travel insurance may cover the costs that can’t be refunded, this may also include the costs of transfers and excursions. If your travel operator tells you to claim on insurance, ask for this in writing.

If you don’t have travel insurance, it’s too late to get a policy that will cover you for coronavirus-related claims as providers have updated their terms and conditions.

Your next steps

If your holiday is being cancelled or you’d like to cancel it, your first step should be to get in touch with the providers. Many travel companies are offering the opportunity to postpone trips and are not taking bookings until later in the year or until 2021 in some cases. Speaking to them directly can help you understand what your options are.

However, this may be easier said than done. Unsurprisingly, customer service teams are dealing with large numbers of enquiries, whilst also managing with fewer staff due to social distancing measures. So, expect to be waiting a while for a response, whether you call or email. Many companies are working through the bookings in date order, so those with holidays in a few months may be forced to wait several weeks whilst the situation is assessed.

If you don’t have much luck with the provider, then contact your travel insurance company. Again, expect long delays before your query is resolved.

Chargeback also offers an alternative solution if you paid for parts of your holiday by credit card. Paying by credit card gives you added legal protection if the company you’re buying from doesn’t deliver what’s promised, in this case, a holiday. Section 75 of the Consumer Credit Act covers goods or a holiday costing over £100 and up to £30,000. You don’t need to pay the full price by credit card, paying the deposit is enough to get your legal protection.

To receive a chargeback, you should try to contact the travel company first. If they don’t respond or refuse a refund, write to your credit card company, stating what you bought, along with proof of purchase, and that you’d like to refund the purchase price into your credit card account.

May 20, 2020adminBlog

DIY projects that could boost the value of your home

With more time indoors, Brits have been turning to DIY during the pandemic. It’s perfect for filling the time but, choose the right project, and it could add value to your home too, and it doesn’t have to be a huge renovation project. So, where should you be investing your time?

1. Refresh the garden

Summer is almost here, and people will be hoping to spend more time in the garden. Did you know an attractive outdoor space could boost the value of your home by as much as 10%?

If you’re not confident with DIY, even simple tasks of making sure the garden is neat, fences are freshly painted, and the space looks inviting can help. For those wanting to take on a project, laying a patio area or decking can help make a garden part of a home’s living space.

2. Think about your kerb appeal

It’s not just the back garden that you should think about if you’re hoping to raise the value of your home. How your property looks to those walking past matters too.

The front of your home is usually the first image that appears on estate agents’ websites and gives an impression of what the rest of the home will look like. Spending a bit of money on painting the front door and making your front garden or driveway attractive can be valuable. If you are planning to sell in the future, it can help you grab attention from the beginning and boost your asking price.

3. Update the kitchen fixtures

We all know that investing in a new kitchen can add thousands to the price of property. A modern kitchen can work wonders when it comes to how long a property takes to sell. But installing an entire kitchen is ambitious for the average DIY enthusiast.

However, you can give a kitchen a new lease of life with a few small tasks. Updating dated or tired fixtures can lift the whole room and, in some cases, painting cabinets can make them look almost as good as new.

4. Add storage

Ample storage is something potential homebuyers look for, especially if they’re hoping to purchase a family home. It’s an area where many houses fall short. If your home doesn’t have much in the way of storage, you may want to think about where you can add it and the appeal it would have to prospective buyers.

DIY projects such as adding floating shelving in the living room or installing bathroom cabinets can help people see how their possessions would neatly fit into your home.

5. Modernise light fixtures

Old fashion lighting can date a whole room, whilst harsh lighting can highlight flaws too. If you’re comfortable and have the knowledge to deal with electrics, modernising light fixtures can help you update every room in the house if needed. Whilst fluorescent lights have been popular in the past, softer options are now more in style. Choose a contemporary fixture to bring a room up to date.

6. Add a fresh lick of paint

Painted walls can become marked and dull over time without us even realising. If you’ve got time on your hands for a project, this can really help add value to your home with little financial investment. Where plaster has cracked or chipped away, take the time to fill these in. Then add a fresh lick of paint to cover marks and brighten up spaces. It’s a step that can add value by appealing to buyers that want to be able to move straight in without undertaking any DIY themselves.

If you’re hoping to sell soon, keep in mind what buyers will be looking for. Neutral colours that offer a ‘blank canvas’ for prospective buyers to put their stamp on are ideal.

7. Update internal doors

Much like your front door adding kerb appeal, your interior doors set the scene for the rooms and can make all the difference when potential buyers are looking through photos and viewing in person. If you really want to update the look of rooms, installing fresh doors may be an option. But, in many cases, a fresh coat of paint or varnish, along with replacing handles, can have just as much of an impact.

May 20, 2020adminBlog

Lockdown checklist: 6 financial steps to take during the pandemic

If you’ve been putting off reviewing your finances, the lockdown is the perfect opportunity to complete some tasks that could help make sure your finances and plans remain on track. With potentially more time on your hands, here are seven things to do during the stay at home period.

1. Review your will and Power of Attorney

It’s estimated that more than half of UK adults don’t have a will in place and even more haven’t established a Power of Attorney. These two legal documents are vital for ensuring your wishes are carried out. Even if you do have both these in place, take some time during lockdown to review them.

A will is the only way to ensure that your wishes are carried out when you pass away. If you already have a will, you can write a new one or add a codicil to make amendments if your wishes have changed. It’s generally a good idea to review your will following life events and every five years.

A Power of Attorney gives someone you trust the power to make decisions on your behalf if you’re unable to do so. Losing the mental or physical capacity to make your own decisions isn’t something anyone wants to think about, but a Power of Attorney is important. There are two types, one covering health and wealth decisions and the other covering finances, you should have both in place.

2. Update your pension expression of wishes

Did you know your pension benefits aren’t usually covered by your will? Instead, you should complete an expression of wishes with each pension provider, stating who you’d like to benefit from your pension savings if you pass away. As pensions do not form part of your estate for Inheritance Tax purposes and are likely to be one of your largest saving pots, they’re a valuable asset to consider as part of legacy planning.

3. Find out if you have any ‘lost’ pensions

Over the years you may have accumulated several pensions as you switch jobs. If the pension is relatively small or the employment was from some time ago, it’s easy for pensions to become ‘lost’. Luckily, the government has a service that can help you find lost pensions and start taking them into account when it comes to retirement planning. You can find the contact details for workplace and personal pension schemes here.

4. Check your National Insurance record

It’s simple to check your National Insurance record, you can do so here. This tracks how many full years of National Insurance you’ve paid, as well as any National Insurance credits you’ve received, such as when taking time out of employment to raise children or care for someone. Why is this important? You need to have 35 qualifying years on your record to be eligible for the full State Pension when you reach retirement age. If you have gaps, it may be possible to pay voluntary contributions. The sooner you know there’s a gap, the better position you’re in to make the right decision for you.

5. Evaluate financial protection

If you already have financial protection in place, now is a good time to review the policies. As circumstances and priorities change, the policies that are right for us change too.

Whether you have an income protection policy, critical illness cover or life insurance, you should take some time to understand what each policy covers and whether they remain appropriate for you. Life events may mean that your current protection needs to be updated. These events could include starting a family, paying off your mortgage or starting a new job.

If you don’t currently have any sort of financial protection in place, it’s worth considering what would happen if your income suddenly stopped, you were diagnosed with a critical illness or the position your family would be left in if you were to pass away. It’s not something anyone wants to think about, but doing so can help you put steps in place to safeguard your and your family’s future.

6. Consider making gifts now

The current situation has placed a lot of people under pressure financially. Whilst your finances may be secure, your loved ones may not be in the same position and you may want to provide some support.

If this is the case, making use of the gifting allowance can make sense. Gifts are classed as Potentially Exempt Transfers when given. This means they can be considered part of your estate for Inheritance Tax purposes if you die within seven years of them being received. However, some gifts are considered immediately outside of your estate. This includes the gifting allowance. Each tax year, you can gift up to £3,000 to loved ones, which can be carried forward a year if unused, under this rule.

Other gifts that are immediately exempt from Inheritance Tax include those that are given from your disposable income.

During these times of uncertainty, we know that you may be worried about your finances and long-term plans. We’re still here for you, please get in touch if you have any queries about the above checklist or other aspects of your financial plan.

Please note: A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The tax implications of pension withdrawals will be based on your circumstances, tax legislation and regulation which are subject to change in the future.

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

May 20, 2020adminBlog