A monthly round up of the latest insights and information for financial advisers.
Are talks of recession inflated?
David Butler
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David Butler

Head of Distribution
London

t: 0207 150 4000
 
Email
 
We are now almost halfway through 2022 and although it has been a busy, and at times frenetic, six months for many, there is little to suggest an imminent summer lull. The last couple of years have been characterised by an environment of seemingly constant change and this remains the case with the cost of living going up and the economic situation becoming less certain. We know your clients may have concerns about how this might affect their investments and how we, as investment managers, are taking action.
 
The ‘R’ word is still in the forefront of everyone’s mind
 
At the halfway point of 2022, it’s clear that we aren’t having the best year for both stock markets and the economy. Inflation in the UK is running at 9.1%– the highest for 40 years – as demand for goods and services clashes with pandemic-related supply chain constraints. The story is much the same around the world: inflation is also near 40-year highs in the US and Canada, while in the European Union it is at its highest level since the trading bloc was formed.
 
Central banks have sought to cool things down with a flurry of interest rate hikes, and this has caused stock markets to tumble and raised concerns of a coming recession. Markets are down across much of the world with investors continuing to face volatility. Many of the ingredients that lead to recession are already present: high inflation, concerns about slowing GDP growth as post-pandemic activity dries up, aggressive interest rate hikes from central banks, and increased pessimism in the business sector.
 
Nevertheless, we believe it’s important to stress that a major downturn is not a foregone conclusion. While economists believe it’s increasingly likely the UK will enter recession this year, the full extent will depend on  whether the BoE can contain inflation without inflicting too much pain on consumers and businesses alike. 
Valuations look increasingly attractive
 
Apart from a few sectors, such as commodities, stock markets have followed a clear downward trend as interest rates have gone up. For the most part, share prices have fallen as a result of what is known as derating, when corporate earnings multiples are pushed down as a result of negative sentiment rather than a drop in profits or deteriorating fundamentals. In short: investors are now willing to pay less for each unit of corporate earnings.
 
While on the face of it this sounds like bad news, the reality is that it also creates an opportunity for those who have been keeping their powder dry, as our investment manager, Oliver Harwood, explains in a recent article. At present, stocks are now cheaper than their 10-year average when viewed on a constant basis. It is impossible to time markets when making investment decisions, but the lower valuations we are seeing at present makes share prices more attractive than they were before markets peaked.
 
Helping you to support your clients
 
Our partnership with advisers like you is a major reason for our success and we are firmly committed to providing you and your clients with the highest level of support that we can deliver. This not only includes high-quality investment management, but also a suite of rich content, events and webinars designed to engage and inform, and assist you in conversations with your clients. 

Engaging webinars 
 
Our recent Quilter Cheviot 2022 Principal Adviser Event, which was held on 15 June, was a major success and generated significant engagement. Covering the theme of ‘Financial Advice in the 21st Century’, it showcased keynote speakers such as former pensions minister Sir Steve Webb, Tax expert Nimesh Shah and  General Sir Nick Carter. If you missed it the first time around, you can watch each session on demand.
 
Insightful articles
 
Along with this, we also have two new articles on our website. In his piece on inheritance tax, Quilter Cheviot technical consultant David Denton discusses how the government’s decision to freeze the nil-rate band will cost families and why careful planning in this area is more important than ever. Meanwhile, executive director and head of our Birmingham office, David Jupp, writes about the upcoming Commonwealth Games  and how they will be notable for their carbon neutrality and progress towards the reduction of gender inequality.
 
As I sign off once again, I wanted to add that, while economic and market conditions are challenging, we remain committed to our long-term approach and our ambition of securing the best outcome for advisers and clients. We believe it is important to invest according to our convictions and our view of market fundamentals, and not be swayed by short-term noise and volatility. If you have any questions or concerns, please get in touch and we will be more than happy to help.
 
Climate Assets quarterly webinar:
 
Our Climate Assets Team and Head of Research will tackle the big question - Can sustainable stocks turn the tide and come back in favour?
 
Register now
MPS in Conversation webinar:
 
Our MPS team will to discuss their exposure to the energy and materials sectors, as they search for safe havens amid turbulent market conditions.
 
 
Register now
Is America the powerhouse it once was? Analyst Webinar:
 
Our in-house analysts deep dive on US markets, its status as a world power and future Outlook.
 
Register now
1st September – the next UK Trust Registration Service (TRS) deadline
 
The UK TRS was first introduced in June 2017 with the UK’s adoption of the Fourth EU Money Laundering Directive, designed to tackle money laundering and terrorist finance. It is a central record of information, held by HMRC, and is completely separate from the annual tax return that some trustees need to make.  The Fifth Directive has augmented requirements, so that not only ‘taxable trusts’ must be registered, but also ‘express trusts’, which includes bare trusts, and trusts only holding life assurance bonds, including where there has been no chargeable event. The UK has committed to applying the directive, despite exit from the EU.
 
As more trusts are now within scope, trustees, whose responsibility it is to register, should review their situation and take action if appropriate.  Our ‘trustee friendly’ guide considers in more detail which trusts need to be registered, and what information is required for the register.
 
You can download our guidance document.
 
Download now
  
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