Investments Crisis – where are we now?

The 2020 share pricesmarket correction was coming with or without Covid-19, but the scale of the fall in investments values, plus the hit to world-wide and domestic supply chains and trade wasn’t anticipated. Six weeks ago, I sent all my clients an illustrated email whilst the markets were well and truly crashing around our ears. My message was clear: Hold fast! At time of writing now, the markets have recovered a good part of their late Feb/early March falls.

However, I am suspicious of the recovery to date. It seems premature. If one looks at the economic damage that lock-down has caused here and around the world, surely investments portfolio recovery will take at least a year or two.

So, what do you do? If you cashed-in during or after the crash, perhaps expecting worse to come, you may be trying to time your re-entry to the market. My warning to clients was that that is like trying to catch a sharp knife knocked off the counter-top: unless your timing is uncanny you will probably end-up worse off.

Unless your circumstances have suddenly changed, I think the sensible approach is keep your investments in more or less what you had before the crash for the time being. By all means move gradually towards a different long-term portfolio over time if you feel yours was unbalanced or ill-equipped to deal with the last crash, but don’t try and do it all at once.

If you have cash to invest, you might well consider doing some limited buying right now – some call it tranching, or phasing-in – to a target portfolio.

My advice to my clients remains to remain calm, try to ignore markets news and we will see the recovery in due course.

The views held here are my personal views and should not be interpreted as financial advice. I can only advise you after a thorough discussion as to your personal financial position, objectives and risk assessment.

MPAA and Dividend Allowances cuts delayed as Finance Bill trimmed

Some elements of the Finance Bill will not go ahead as planned as a consequence of the early general election. With Parliament due to be dissolved on 3 May it was deemed there was insufficient time to get the current Finance Bill in its entirety on to the statute book.

The following measures, which may affect the advice you are providing to your clients, have been removed from the Finance Bill:

Changes which intended to apply in 2017/18

Reduced Money Purchase Annual Allowance (MPAA)
The Money Purchase Annual Allowance (MPAA) will not now be cut from £10,000 to £4,000 at this time. This reduction would have affected those who have accessed their DC pension under the new pension flexibilities and wish to continue paying into their pension.   Edit: The MPAA was indeed reduced to £4,000 for 2017-18 after all!

Deemed Domicile Rule Changes
Rules were to be introduced from April 2017 to reduce the number of years non-doms can be resident in the UK before becoming deemed domicile. Currently someone would become deemed domicile in the UK for inheritance tax after they have been resident 17 out of 20 tax years but it had been set to fall to 15 years. It was also intended extend the scope of the deemed domicile rules to also apply to income tax and CGT.

Recalculation of Disproportionate Bond Gains
Measures which would have put an end to chargeable gains on a part surrender of an investment bond have been shelved. From April 2017 HMRC had planned to allow gains which were wholly disproportionate to the investment performance to be recalculated on a just and reasonable basis. This would typically arise where a large part surrender in excess of the 5% allowance is made in the early years of the policy.

Changes which intended to apply in 2018/19

Dividend Allowance Cut
From April 2018,  the annual dividend allowance is set to be cut from £5,000 to £2,000. This is no longer part of the current Finance Bill. This would hit small and medium sized business owners who take their profits as a dividend.

What happens next?

While all these changes no longer form part of the condensed Finance Bill it is intended that they will be reconsidered once a new Parliament commences and could form part of the new Government’s first Finance Bill, meaning they may be delayed rather than dropped altogether.

Source – Standard Life

Where next for the UK Economy?

The UK Economy: Artemis Fundmanagers’ CEO Peter Saacke gives his opinion on about Sterling’s recent fall and where the UK economy might be headed in 2017.

Please note this is not necessarily DFM’s opinion. We do however expect to see imported inflation fairly soon, and some tough decisions for the Bank of England.