THE REAR VIEW MIRROR
As we step into 2022, and look back at 2021, Global equities provided stellar returns finishing the year up ca. 32%. For the stock pickers, in particular within the technology sector, returns which one might expect to see annually, seemed to deliver almost monthly for a while, before, inevitably, the reality of forecasted interest rate adjustments and company overvaluations started to creep towards the end of the year.
Meme stocks, (don’t worry it’s a new term to me too!) driven in large part by retail (so called “Hood” investors) helped drive the whipsaw of volatility with some delivering eye watering temporary returns for companies with very little balance sheet substance and scything those short sellers in hedge funds who had acted rationally.
OUTPERFORMERS & LAGGARDS
Geographically, the US was the best performing region and within business sectors, we saw some rotation as the Growth companies gave some ground to Value companies through the redistribution of capital within the markets. Across sectors, Energy (+53%), Technology (+40%), real estate (+39%) and Financials (+38%) all outperformed the markets with the laggards being the income producers such as consumer staples, telecoms and utilities, much in line with what might be expected given the emergence from a COVID restricted world.
THE RETURN OF INFLATION
Rising inflation started to take hold in 2021 with the CPI finishing the year at 5.5%. In the US, inflation hit 7% and beyond depending on states, and with the Federal Reserve finally signalling to the markets their intention to raise interest rates in 2022, we saw the start of an increase in market volatility which continues today.
Rising inflation also increased bond yields, thus reducing prices, the effect of which was seen greatest in long dated sovereign bonds.
The final big headline was the price inflation in commodities (with the exception of Gold which was flat) as the economic rebound saw sharp price increases across Oil (+55%), Gas (+53%), Aluminium (+37%) Copper (+27%), Steel (+49%) and …….Coffee (+76%)
DOWNSIDE RISKS IN 2022
So, with COVID and its variants still ever present, supply chains still not repaired, a high inflationary environment, imminent rising interest rates, war mongering in Eastern Europe, China tightening regulation, the US / Sino tensions rising and billionaires flying to space, it’s fair to say that we can expect some significant volatility across all markets in 2022.
We can’t control nor predict the markets. We do know from experience, that during times of great uncertainty, the worlds innovators, will step back, re-evaluate & adapt to the new macroeconomic reality in their continued pursuit of greater earnings growth and we, as owners of these companies benefit from these adjustments in the long-term.
If you are interested in starting your conversation about how investments fit into your Lifetime Financial Plan, please message me direct or contact us through www.lifetimefinancial.ie
Michael Wall PhD CFP® is a Director at Lifetime Financial Planning. Lifetime Financial Planning Ltd Trading as Lifetime Financial Planning is regulated by the Central Bank of Ireland. All views and details contained within this article are for information purposes only, are subject to change & are not advice. We recommend you seek independent clarification for your particular circumstances. Lifetime Financial Planning makes no representations as to the accuracy, completeness nor suitability of any of the information contained within and will not be held liable for any errors, omissions or any losses arising from its use.
Monthly Investment Note: May 2023
/in Financial Broker, Financial Plan, Financial Planning, How to invest a lump sum, Investment, Investment Fund, Lump Sum Investment, Personal Finance, Retirement, Stocks and Shares /by Michael WallWhile global GDP and inflation pressures continue to persist in the financial system, European & US economies are reporting lower inflation in the first quarter of 2023. However, in these economies inflation is still viewed as being stubborn and requiring a considered interest rate increase which is juxtaposed with balancing the cost of credit considerations. The key for Central banks is to find the optimal terminal interest rate; just high enough to continue reducing inflation but not to stifle growth too much and push their economies into recession.
At the end of March, US annual inflation was measured at 5% and European inflation at 6.9% (Ireland is estimated to be 7.7%) while UK inflation was estimated to be 8.9% and these headline figures continue to drive interest rate policies from Central Banks, currently. Notably also are the oil prices (as measured by Brent Crude) which have dropped by ca. 7.4% since early January and are currently trading at below $80 pb (ca. $79.60) at time of writing.
With the FED interest rate, adjusted in May to 5.25%, EU rates increased to 3.25% and UK rates at 4.25%, bond yields have also risen and have as a result, reduced valuations over the course of the interest rate hikes. While it was thought that the FED might start to ease the rate of interest rate increases early this year, it is now increasingly likely that further rate hikes or longer timeframes at current rates may yet be required. Therefore, it is likely that interest rates may indeed peak over the next 6 months and we continue to move cautiously on long term bond purchases until there is sight of the terminal interest rate, expected later in the year.
Global equities have continued their rally with the index of global stocks up 5.97% since the beginning of the year. While US equities have risen 5.35%, Japanese equities risen 3.02%, it is the European equities that continue to outperform with a rise of 11.4% this year so far; (all Euro hedged). This strong performance is driven (in large part) by the good value on offer with a plethora of companies showing strong balance sheets & free cashflows and trading at good value (12.7 x fPE) in other words good quality companies trading at good value and suitable for this economic cycle. This is in contrast to US equities which are trading at ca. x 18.6 fPE.
We continue to favour taking positions in Globally diverse equity funds which are trading at good to fair value and are cautious on new positions in long / medium term bonds for the foreseeable future. These bond calls will be portfolio dependent. Conservatively, therefore, as per our previous notes, we still look to total return funds as potential alternative investments to bond funds.
As an aside, the link below (Courtesy of Visual Capitalist) shows an animation of the various business sectors contributing to the growth in the S&P500 in the first quarter 2023. Note the contributions from the mega cap companies which provided the greatest returns….Enjoy!
Click Here to See the Sectors Contributing to Growth in the S&P500 in Q1 2023
All views and details contained within this article are for information purposes only, are subject to change & are not advice. We recommend you seek independent clarification for your particular circumstances. Lifetime Financial Planning makes no representations as to the accuracy, completeness nor suitability of any of the information contained within and will not be held liable for any errors, omissions or any losses arising from its use.
The Pace of Recent Interest Rate Hikes is Expected to Ease
/in Personal Finance /by Michael WallAccording to a Bloomberg survey, the European Central Bank (ECB) is expected to ease the pace of rate hikes to 0.25% from next week as the central bank weighs a pullback in bank lending against sticky inflation and a more resilient than expected economy.
It is anticipated that beyond next week’s hike, further 0.25% hikes in June and July will be delivered taking the peak rate to 3.75%. The results envisage that the first cut to borrowing rates will occur in October.
Monthly Investment Note: March 2023
/in Financial Broker, Financial Plan, Financial Planning, Investment, Investment Fund, Lump Sum Investment, Personal Finance, Stocks and Shares /by Michael WallGlobal GDP and inflation pressures continue to persist in the financial system with the European & US
economies reporting higher than expected inflation and lower GDP for the final quarter of 2022. US inflation was measured at 6.3% and European inflation at 10% (Ireland is estimated to be 8%) in Feb, while the UK inflation was estimated to be 10.1% and these headline figures are driving interest rate policy currently.
It was thought that the FED might start to ease the rate of interest rate increases early this year but it is now increasingly likely this may be postponed until later in the year or until they have sight of the core inflation rate (4.7%) falling.
With the FED interest rate at 4.75%, EU rates at 3% and UK rates at 4%, bond yields have risen in line and have resulting in valuation reductions in the last 14 months. It is expected that interest rates will continue to rise over the next 6 months and therefore we have decided to halt long term bond purchased until there is sight of the terminal interest rate, expected later in the year.
Global equities have enjoyed a start of the year rally with the index of global stocks up 4.3% (in Euro term) since the beginning of the year. While US equities have risen 3.1%, Japanese equities risen 2.4%, it is the European equities who are the start performers following a rise of 7.9% this year so far. (all Euro hedged). This strong performance is driven (in large part) by the good value on offer with a plethora of companies showing strong balance sheets & free cashflows and trading at good value (12.5 x fPE) in other words good quality companies suitable for this economic cycle. This is in contrast to US equities which are trading at ca. x 18.4 fPE.
We continue to favour taking positions in Globally diverse equity funds which are trading at good to fair value and avoiding the purchase of long / medium term bonds as we expect to see further interest rate rises in 2023. Conservatively, therefore, we are looking at total return funds as alternative investments to bond funds.
All views and details contained within this article are for information purposes only, are subject to change & are not advice. We recommend you seek independent clarification for your particular circumstances. Lifetime Financial Planning makes no representations as to the accuracy, completeness nor suitability of any of the information contained within and will not be held liable for any errors, omissions or any losses arising from its use.
Monthly Investment Note: February 2023
/in Financial Broker, Financial Plan, Financial Planning, Lump Sum Investment, Personal Finance, Stocks and Shares /by Michael WallOn the back of a dismal 2022, global markets have somewhat rallied during January 2023 on the back of a tapering of inflation expectations and sight of what the market perceives to be a landing area for the terminal interest rates.
US Stocks posted gains after the announcement of an above expectations, Gross Domestic Product (GDP) figure for Q4 of 2022. Showing that GDP in the US rose by 2.9% in the last quarter of 2022. Consensus among economists had been for a 2.6% increase. The higher-than-expected result was viewed by many as an indication of a more positive economic climate than had previously been forecast.
The gains seen in European stocks of late have resulted in positive sentiment from investors in the Eurozone, however the European Central Bank (ECB) has remained hawkish in its stance towards tackling inflation. ECB President Christine Lagarde has consistently left little room for doubt about the central bank’s commitment to raising rates and with the ECB set to announce an interest rate decision in the coming week, many investors are poised for a 0.5% rate increase.
Last week also saw the release of the Eurozone Purchasing Managers Index (PMI) for manufacturing and services activity. The figure came in at 50.2 in January, up from 49.3 in December and ahead of expectations of 49.8. This result represents moderate growth while the flash composite PMI for the UK dropped to 47.8 from 49.0 in December adding to investors doubts about recession risk. UK equities finished the week down -0.2% in euro terms. Indeed, coupled with the latest report from the IMF suggesting that the UK will be the only developed economy to enter recession in 2023,
Finally, equities in Japan had a stellar week returning 2.8% in euro terms. Much of the performance is seen as a result of the Japanese central bank’s commitment to maintain ultra-low rates. With inflation showing signs of tapering and economic indicators stronger than previously anticipated, there is a cautiously positive sentiment for equities markets currently and we continue to recommend a globally diversified portfolio of equities as part of any regular investment strategy.
Additionally, with rising interest rates driving the correction in bond prices and yields, in 2022, bonds now offer an attractive portfolio addition for investors for the foreseeable future.
All views and details contained within this article are for information purposes only, are subject to change & are not advice. We recommend you seek independent clarification for your particular circumstances. Lifetime Financial Planning makes no representations as to the accuracy, completeness nor suitability of any of the information contained within and will not be held liable for any errors, omissions or any losses arising from its use.
The CSO Household Finance & Consumption Survey 2020
/in Financial Broker, Financial Plan, Financial Planning, Personal Finance, Savings Plan /by Michael WallThe CSO Household Finance & Consumption Survey 2020 has been published.
This publication by the Central Statistics Office presents the results of the 2020 Household Finance and Consumption Survey (HFCS), which was carried out between July 2020 and January 2021. Detailed information on household assets and liabilities is collected by the HFCS, as well as data on gross income and credit constraints & the full survey report is available via the link https://www.cso.ie/en/releasesandpublications/ep/p-hfcs/householdfinanceandconsumptionsurvey2020/introduction/
The survey provides an insight into the nations wealth and the data was collected from private households on the basis of self-assessment. A summary of the results is presented below:
If you would like talk to us about your personal finances, contact michael@lifetimefinancial.ie or aidan@lifetimefinancial.ie
Michael Wall Ph.D CFP® is a Director at Lifetime Financial Planning. Lifetime Financial Planning Ltd Trading as Lifetime Financial Planning is regulated by the Central Bank of Ireland. All views and details contained within this article are for information purposes only, are subject to change & are not advice. We recommend you seek independent clarification for your particular circumstances. Lifetime Financial Planning makes no representations as to the accuracy, completeness nor suitability of any of the information contained within and will not be held liable for any errors, omissions or any losses arising from its use.
The Wood from the Trees
/in Investment, Investment Fund, Lump Sum Investment, Personal Finance, Retirement, Stocks and Shares /by Aidan WallWith the plethora of media attention across multiple platforms, it can be difficult to stick to your long-term investment plan, due to postponed investment decision making. This can adversely affect long term planning, so, when I’m reminded of all the worry, I often refer to the below chart to provide some perspective.
The chart shows that during times of great uncertainty, our worlds innovators, step back re-evaluate & adapt to the new reality in their continued pursuit of greater earnings growth; in other words, they adapt. As owners of these innovative businesses, we share in and benefit from these rewards in the long-term.
If you are interested in starting your conversation about how investments fit into your Lifetime Financial Plan, please message me direct or contact us through www.lifetimefinancial.ie
Michael Wall PhD CFP® is a Director of Lifetime Financial Planning. Lifetime Financial Planning Ltd Trading as Lifetime Financial Planning is regulated by the Central Bank of Ireland. All views and details contained within this article are for information purposes only, are subject to change & are not advice. We recommend you seek independent clarification for your particular circumstances. Lifetime Financial Planning makes no representations as to the accuracy, completeness nor suitability of any of the information contained within and will not be held liable for any errors, omissions or any losses arising from its use.
A Brief Look at 2021
/in Financial Planning, Investment, Lump Sum Investment, Stocks and Shares, Uncategorized /by Michael WallTHE REAR VIEW MIRROR
As we step into 2022, and look back at 2021, Global equities provided stellar returns finishing the year up ca. 32%. For the stock pickers, in particular within the technology sector, returns which one might expect to see annually, seemed to deliver almost monthly for a while, before, inevitably, the reality of forecasted interest rate adjustments and company overvaluations started to creep towards the end of the year.
Meme stocks, (don’t worry it’s a new term to me too!) driven in large part by retail (so called “Hood” investors) helped drive the whipsaw of volatility with some delivering eye watering temporary returns for companies with very little balance sheet substance and scything those short sellers in hedge funds who had acted rationally.
OUTPERFORMERS & LAGGARDS
Geographically, the US was the best performing region and within business sectors, we saw some rotation as the Growth companies gave some ground to Value companies through the redistribution of capital within the markets. Across sectors, Energy (+53%), Technology (+40%), real estate (+39%) and Financials (+38%) all outperformed the markets with the laggards being the income producers such as consumer staples, telecoms and utilities, much in line with what might be expected given the emergence from a COVID restricted world.
THE RETURN OF INFLATION
Rising inflation started to take hold in 2021 with the CPI finishing the year at 5.5%. In the US, inflation hit 7% and beyond depending on states, and with the Federal Reserve finally signalling to the markets their intention to raise interest rates in 2022, we saw the start of an increase in market volatility which continues today.
Rising inflation also increased bond yields, thus reducing prices, the effect of which was seen greatest in long dated sovereign bonds.
The final big headline was the price inflation in commodities (with the exception of Gold which was flat) as the economic rebound saw sharp price increases across Oil (+55%), Gas (+53%), Aluminium (+37%) Copper (+27%), Steel (+49%) and …….Coffee (+76%)
DOWNSIDE RISKS IN 2022
So, with COVID and its variants still ever present, supply chains still not repaired, a high inflationary environment, imminent rising interest rates, war mongering in Eastern Europe, China tightening regulation, the US / Sino tensions rising and billionaires flying to space, it’s fair to say that we can expect some significant volatility across all markets in 2022.
We can’t control nor predict the markets. We do know from experience, that during times of great uncertainty, the worlds innovators, will step back, re-evaluate & adapt to the new macroeconomic reality in their continued pursuit of greater earnings growth and we, as owners of these companies benefit from these adjustments in the long-term.
If you are interested in starting your conversation about how investments fit into your Lifetime Financial Plan, please message me direct or contact us through www.lifetimefinancial.ie
Michael Wall PhD CFP® is a Director at Lifetime Financial Planning. Lifetime Financial Planning Ltd Trading as Lifetime Financial Planning is regulated by the Central Bank of Ireland. All views and details contained within this article are for information purposes only, are subject to change & are not advice. We recommend you seek independent clarification for your particular circumstances. Lifetime Financial Planning makes no representations as to the accuracy, completeness nor suitability of any of the information contained within and will not be held liable for any errors, omissions or any losses arising from its use.
Sustainable Investment – A Step Change in Thinking
/in Investment, Lump Sum Investment, Personal Finance, Sustainable Investment /by Michael WallTHE WORLD IS CHANGING
Global sustainability challenges such as flood risk and sea-level rise, privacy and data security, demographic shifts and regulatory pressures are introducing new concerns for investors.
More than 3 in 4 people in Ireland are concerned about the impact of climate change on the environment according to recent research from Aviva Ireland and more of us are doing something about it.
A MORE AWARE INVESTOR IS EMERGING
A growing body of studies suggest that millennials are asking more of their investments. Over the next two to three decades, the millennial generation could put between $15 trillion and $20 trillion into U.S.-domiciled Environmental, Social & Good Governance (ESG) tilted investments, which would roughly double the size of the current U.S. equity market.
CORPORATE SCRUTINY IS INCREASING
With better data required from companies combined with superior ESG research and analytics capabilities, we are seeing more systematic, quantitative, objective and financially relevant approaches to ESG investing. This allows investors to categorise companies according to their desired values.
AT LIFETIME FINANCIAL PLANNING, WE BELIEVE ….
Investors can make a real & positive contribution to the world through their investment choices by…
Source: MSCI ESG Investing https://www.msci.com/our-solutions/esg-investing/esg-ratings
With our tailored ESG portfolios, you can join millions of others worldwide and orientate your Pension & Investment funds to invest in companies which operate in accordance with good Environmental, Social and Governance policies and practices.
If you would like us to help you use your capital on your journey for a better more sustainable world, contact michael@lifetimefinancial.ie or aidan@lifetimefinancial.ie
Michael Wall Ph.D CFP® is a Director at Lifetime Financial Planning. Lifetime Financial Planning Ltd Trading as Lifetime Financial Planning is regulated by the Central Bank of Ireland. All views and details contained within this article are for information purposes only, are subject to change & are not advice. We recommend you seek independent clarification for your particular circumstances. Lifetime Financial Planning makes no representations as to the accuracy, completeness nor suitability of any of the information contained within and will not be held liable for any errors, omissions or any losses arising from its use.
New Pension Legislation Relevant to Small Self-Administered Schemes
/in Financial Planning, Investment, Pension, Personal Finance, Retirement /by Michael WallThe Minister for Social Protection, Heather Humphreys announced in a press release issued on Tuesday the 27th of April that she has signed the European Union (Occupational Pension Schemes) Regulations 2021. (IORP stands for Institutions for Occupational Retirement Provision). This means that the EU IORP II directive will be transposed into Irish law through the amendment of the Pensions Act 1990.
How will this impact your Executive Pension Plans?
The legislation specifically targets the Administration and Investment Rules for Small Self- Administered Schemes including Executive Pension Plans. While one-member schemes, such as EPPs, have been granted a transitional period of 5 years to adopt the legislated changes, the increased governance and trustee responsibilities required by the rules are designed to bring immediate benefits to consumers.
What are the Administration Rule changes?
The New Regulations
• Cover trustee qualifications where trustees must pass a “fit and proper” test, risk management, auditing and reporting, cross-border activities, solvency and supervision.
• Provide better protection through enhanced governance and risk management.
• Provide clear, relevant and more consistent communication about pension schemes.
• Remove barriers to cross-border schemes.
• Ensure that trustees have the necessary powers and credentials to supervise schemes.
• Small schemes (schemes with less than 100 members) and trust RACs are no longer exempted from the IORP investment rules.
What are the Investment Rule changes?
The change in investment rules are effective immediately. They apply some restrictions to EPP investments as follows:
• Scheme assets must be predominantly invested in regulated markets. This means that direct property investments and unregulated investments will be restricted to no more than 50% of the aggregate portfolio. We await guidance on what this might look like in practice.
• Scheme assets must be properly diversified in such a way as to avoid excessive reliance on any particular asset, issuer or group of undertakings and accumulation of risk in the portfolio as a whole and
• Environmental, Social and Governance (ESG) issues must be considered when making investments.
These conditions apply only to new investments or borrowings entered into by EPPs and are not retrospective.
What is next?
The Pensions Authority will provide further information and guidance over the coming weeks and months, to ensure the new obligations are fully understood. We are working through the changes as quickly as we can with our providers and will update all our clients where appropriate.
If you have any queries regarding how this new legislation may affect your scheme, please contact our office on 046 92 40961.
Fee Based Financial Planning Service Now Available
/in Fee Based Financial Planning /by Michael WallWe are delighted to announce that we now offer a Fee Based Financial Planning Service which is designed to help graduate Employees, Managers, Executives or Professionals, kickstart their Lifetime Financial Planning journey towards enhanced wealth creation & Lifestyle protection.
Our Fee Based Financial Planning Process:
The step-wise process outlined above, involves two meetings and a final report designed to provide you with a thorough understanding of your financial position today. This is aligned with your lifestyle objectives and your income requirements in retirement highlighting any shortfalls.
These are the basic concerns of us all and the report will recommend any changes required in order to meet your specific objectives.
If you would like to know more about this service, please get in touch using our Contact Form Here or email me directly at michael@lifetimefinancial.ie
How Can a Company Pension Benefit Me?
/in Estate Planning, Financial Plan, Pension, Retirement /by Michael WallTax Relief on Contributions
Employer contributions – Corporation Tax Relief
Employee Contributions – income tax relief & not treated as a BIK
Investment Options
Access to thousands of Global Equities, Funds, Bonds, and Property, on regulated markets and managed though a single portfolio
Tax Free Investment Growth
Capital Growth & Income received from Investments made within Retirement Funds are tax free
Retirement Benefits
Tax Free Lump Sum up to €200,000 is available, (can be 1.5x salary or 25% of fund) the next €300,000 is taxed at standard rates
Income Drawdown Options
Flexible Income drawdown using an ARF allows tax management with other retirement income
Guaranteed income from an Annuity
Estate Planning
Protect the Family Balance Sheet
Lump Sums & pension options for your dependants in service & in retirement. ARF asset passes to your estate
Lifetime Financial Planning Remains Open During Lockdown
/in Financial Planning, Investment, Pension, Retirement /by Aidan WallWe at Lifetime Financial Planning wish to reassure our Clients that we are included in the Government’s list of Essential Services. So we are continuing to work as normal through the lockdown. We have however switched to conducting many Client meetings online, and our Clients are finding this very convenient and safe also in these Covid times.
So stay safe everyone and we will all get through this.
Aidan Wall QFA FLIA SIA RPA