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WeekWatch 03

Articles 17 January 2023 7 minutes

Stock Take

Good economic data helped shares from across the globe surge last week, with good news coming from China, the US and the UK.

Starting with the UK, data from the Office for National Statistics (ONS) showed the UK economy managed to grow by 0.1% in November. It was expected to shrink by 0.2% in the month. Football fans had a hand in this, as the ONS noted food and beverage service activities grew 2.2% ‘in a month where the FIFA World Cup started.’

The news means the UK has a good chance of avoiding a recession for now, although commentators have been at pains to point out this does not mean the UK is out of the economic woods just yet. Economic activity remains weak, inflation remains high, and it seems the Bank of England will continue to raise interest rates for at least the next few months. In other words, there is still a good chance the UK will enter a recession in 2023.

The GDP data only came out on Friday, which was too late to have much of an impact on the stock market. That said, UK equities have enjoyed a strong start to 2023, and this continued last week, with the FTSE 100 finishing the week up 1.9%. This means it’s now up almost 15% in the past three months.

Part of the reason for this was US inflation data, which showed another drop last week. This helped the S&P 500 grow 2.7%, while the tech-heavy NASDAQ spiked by +4.8%.

Some of the larger members of the NASDAQ, like Microsoft and Amazon, have rebounded this year after a difficult 2022.

With inflation falling, investors are hoping this will lead the Federal Reserve to start cutting rates. On Monday last week, President of the Federal Reserve Bank of Atlanta, Raphael Bostic, said it was ‘fair to say that the Fed is willing to overshoot,’ indicating a willingness to push interest rates further. After the December inflation figures were released, he also said he would be potentially comfortable with a 0.25% rise at the next Reserve meeting if conversations with business leaders were consistent with slowing inflation.

So far, much of the conversation around markets has been dominated by inflation and interest rates. This will likely continue into the coming week, as the UK is due to release its December inflation figures, which are expected to show another small drop to an admittedly high 10.5%. However, looking further into the future, Kristina Hooper, Chief Global Market Strategist at Invesco, says: “Looking ahead, I suspect markets will become increasingly less focused on inflation as it continues to show signs of moderating and being well under control. In turn, that would mean greater certainty around central bank behaviour.

“I think markets’ attention will shift to economic growth. In particular, determining how much damage has been done by tightening in Western developed countries and when economies will begin to rebound.”

Another economic story which is looking to become increasingly relevant is China’s reopening after its COVID-19 lockdowns.

For example, Julian Evans-Pritchard, Senior China Economist at Capital Economics, notes: “We had expected disruption from China’s reopening wave of COVID infections to weigh heavily on activity well into Q1. But there is mounting evidence that much of China’s population has already been infected and that disruption is already fading rapidly. Coupled with a wider shift toward more pro-growth policies, this points to a reopening rebound starting this quarter and a stronger 2023 as a whole. We now expect China to grow by 5.5% this year.”

Wealth Check

For many people, passing on the wealth they’ve built over a lifetime to their children or grandchildren is an important long-term financial goal. There are other ways to have a positive impact, through philanthropic giving.

We see many clients who are interested in philanthropy, including those from the LGBTQ+ community as well as child-free, opposite-sex couples and individuals.

Giving back is one of our core tenets, and we understand the desire to make a difference. Implementing your philanthropic vision and the charitable impact you want to have, now and in the future, can also have important tax benefits.

You may already have causes you want to support. Perhaps you have personally been touched by a particular issue or illness. When you’re considering which organisations or causes to leave money to, you can choose to talk this through with us or keep it private.

Generally, philanthropy is about building assets during your lifetime so you can give on an ongoing basis, as well as leaving a legacy. You might use a trust structure to do this, which will give you more control over how and when your money is given.

Or, if you opt to give through a charitable foundation, you could give a charitable endowment, an invested pot of money that can give a charity a reliable stream of annual income. You could even donate a property that generates rental income to a charity so it can benefit from the monthly payments.

Philanthropic endeavours and charitable giving shouldn’t be treated as an afterthought, but instead should be built into your wider wealth plan, suggests Tony Clark, Senior Propositions Manager at St. James’s Place.

“IHT planning is making sure that you’ve got all your plans in place so that you’re passing on a legacy, but actually that planning starts years ahead. An adviser will help you think about how best to use your money to support any worthy causes or charities, but it doesn’t all have to be at the point of death.”

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

Trusts are not regulated by the Financial Conduct Authority.

In The Picture

2022 saw significant market volatility thanks to increasing interest rates and inflation. However, history tells us that the key to long-term investment success is the ability to navigate these testing times.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

Source: MSCI. Data from 1 January 1990 to 1 January 2023. All figures are calculated on a total return basis which includes the reinvestment of income. Equities are represented by the MSCI World Index in GBP terms.

Past performance is not a guide to the future and may not be repeated. The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

Some of the products and investment structures documented within this article will not be available to our clients in Asia. For information on the funds that are available please get in touch.

The information contained is correct as at the date of the article. The information contained does not constitute investment advice and is not intended to state, indicate or imply that current or past results are indicative of future results or expectations. Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.

Source: London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2023. FTSE Russell is a trading name of certain of the LSE Group companies. “FTSE Russell®” is a trade mark of the relevant LSE Group companies and is used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.”

© S&P Dow Jones LLC 2023; all rights reserved

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