Global dividend update

A new study1 analysing global dividend trends has highlighted that, in the third quarter of last year, 89% of companies chose to maintain their dividend levels or raise them. Despite this, it was noted that during the quarter, global dividends reduced by 0.9% (on a headline basis) to total $421.9bn. 

The underlying growth of dividends, paid by the world’s 1,200 largest firms measured by market capitalisation, was recorded at 0.3% in Q3 2023; this follows adjustments for the strengthening US dollar and for special dividends. Interestingly, the overall growth rate was ‘significantly impacted’ by a diminutive number of large dividend cuts; the report noted that this ‘masked encouraging growth across the wider market.’ If you exclude the two largest dividend reductions, for example, underlying growth was 5.3%. 

From a year-on-year perspective, the 2023 headline forecast has been reduced from $1.64trn to $1.63trn, also reflective of reduced special dividends and a stronger US dollar, and ‘not a cause for concern,’ according to the report. Head of Global Equity Income at Janus Henderson, Ben Lofthouse, signalled that, “dividend growth from companies generally remains strong across a wide range of sectors and regions,” adding that the data highlights “a globally diversified income portfolio has natural stabilisers,” as sectors in ascendance are “able to counteract those with declining dividends,” before concluding, “Dividends are typically much less volatile than earnings over time, providing comfort in times of economic uncertainty.” 

1Janus Henderson, 2023 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. 

Prospects of stronger economic growth

As we enter a new year, the global economy sits in a relatively precarious position, with the long-term consequences of the pandemic, as well as ongoing conflicts and geopolitical tensions all hindering growth prospects. While such times can appear daunting for investors, the key to successful investing actually remains the same: focus on long-term goals and mitigate potential risks by maintaining a well-diversified portfolio. 

Global recovery remains slow 

In its latest assessment of economic prospects, produced just before the Middle East conflict began, the International Monetary Fund (IMF) dampened its baseline global growth forecast for the coming year. The international soothsayer is now predicting growth will slow from 3.5% in 2022 to 3.0% in 2023 and 2.9% in 2024; all three figures are below the long-term average global growth rate of 3.8%. 

Challenges ahead but growth prospects 

The IMF noted that the current weak growth outlook allied with heightened uncertainty, still-elevated global inflation and limited fiscal space, do pose a series of challenges for policymakers. However, the report also highlighted some more upbeat aspects including disinflation, rebuilt buffers to help manage future shocks and the prospect of stronger, more balanced growth. 

Diversification is key 

In the current economic climate, strong research capabilities are clearly vital and that is our strength. It enables us to formulate and develop an effective investment plan tailored specifically to your needs, and helps us ensure you continue to hold a well-diversified, balanced portfolio firmly aligned to your long-term financial objectives. 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. 

News in Review

“Inflation may give us a slightly bumpy ride during the next couple of months”

Last week, data from the Office for National Statistics (ONS) showed the UK’s annual inflation rate, as measured by the Consumer Prices Index (CPI) increased by 4% in the year to December. An unexpected uptick from the 3.9% reading in November, it contrasts with expectations of a modest decline to 3.8% in a Reuters poll of economists.

The first increase in CPI since February 2023, main upward contributors were a sharp rise in tobacco duty and alcohol, rising by 12.8% in the year to December, versus a rise of 10.2% in November. The upward blip was partly driven by increases in tobacco duty announced in the Autumn Statement.

Director of Policy at the Institute of Directors, Dr. Roger Barker, commented on the inflation news, “After nine straight months of monthly declines, December’s increase in the headline inflation rate was an unwelcome surprise… Inflation may give us a slightly bumpy ride during the next couple of months. Next month’s figure will have to incorporate a 5% rise in the Ofgem utility price cap from 1st January and could also therefore tick upwards.”

He continued, “ Inflation in the economy is still broadly moving in the right direction… We still believe that the Bank of England should consider a cut to interest rates sooner rather than later in order to provide a boost to depressed levels of business confidence.”

With Bank Rate currently standing at 5.25% and the longer-term target for inflation at 2%, there is some uncertainty over when the Bank of England will reduce interest rates this year. The next Monetary Policy Committee (MPC) meeting is due to be held in early February.

US and Eurozone increases too

The December rise in CPI follows increases also seen in the US and Eurozone. However, unlike earlier in 2023, UK inflation is no longer considerably higher than other advanced economies. Eurozone inflation unexpectedly rose to 2.9% in December from 2.4% the previous month, driven by an increase in energy costs. According to the Bureau of Labor Statistics in the US, headline CPI increased at an annual pace of 3.4% in December, rising from the 3.1% recorded in November. Surpassing expectations of around 3.2%, housing costs were cited as a key driver in pushing the reading higher.

Christmas consumer spending impacts retail

New data released by ONS on Friday highlighted that UK retail volumes reduced by 3.2% in December, with shoppers cutting back on Christmas spending. Although the monthly fall in December was considerably worse than a 0.5% decline estimated, it does follow growth of 1.4% in November when consumers took advantage of Black Friday sales. From a quarterly perspective, this means that sales volumes fell by 0.9% in Q4 2023 and have now reduced for consecutive quarters.

Deputy Director for Surveys and Economic Indicators at the ONS, Heather Bovill, elaborated, “Food stores performed very poorly, with their steepest fall since May 2021, as early Christmas shopping led to slow December sales. Department stores, clothing shops and household goods retailers reported sluggish sales too as consumers spent less on Christmas gifts, but had also purchased earlier during Black Friday promotions, to help spread the cost.”

She concluded, “The longer-term picture remains subdued, with quarterly sales dipping, while annual sales volumes fell for the second consecutive year, to their lowest level in five years.”

Davos World Economic Forum 2024

Business leaders had their annual meeting in the Swiss Alpine village of Davos last week, which saw global Prime Ministers, Presidents, leaders of central banks and CEOs from various industries gather to discuss outlooks for the year ahead. Talks circled around many themes including supply chains, global conflicts, taxation, investment and the geopolitical landscape.

Chancellor Jeremy Hunt attended, and with the Spring Budget on 6 March just in sight, he touched on the topic of lower taxation, saying that the current “direction of travel” indicates that economies which are growing faster than the UK, such as Asia and North America, tend to have lower taxes. He continued, “I believe fundamentally that low-tax economies are more dynamic, more competitive and generate more money for public services like the NHS.”

Here to help

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

All details are correct at time of writing (24 January 2024)

The value of advice: much more than the bottom line 

The true value of financial advice clearly goes well beyond simply maximising the monetary value of a client’s portfolio. As we progress through life’s journey, the major events that confront us all certainly come with financial costs. However, they also generate an array of emotions and feelings, and the provision of advice has a critical role to perform in this area too. 

Building a portfolio 

Analysis1 suggests the value of advice can be broken down into four pillars: portfolio, financial, time and emotional. Firstly, by working with an adviser, clients are able to construct, and rebalance when necessary, a well-diversified, tailored portfolio of investments that match their risk tolerance and enable them to achieve their life goals. 

Financial and time value 

Financial value essentially revolves around planning for expected and unexpected events, with help provided in a range of areas, including saving and spending strategies, legacy and estate planning, and tax efficiency. Time is clearly one of our most valuable resources and, by securing the services of an adviser, clients are able to devote more time to the things they actually enjoy doing. 

Peace of mind 

The final pillar, emotional value, focuses on financial peace of mind. This aspect of advice is often highlighted in research studies, with one survey9 suggesting three times as many investors report having peace of mind because of their adviser. In essence, the advice process allows clients to feel at ease and promotes confidence in the outlook for their financial future. 

1Vanguard, 2022 and 2023 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. 

Residential Property Review – January 2024

Falling mortgage rates bolster housing market  

Hope seems to be on the horizon for the housing market as the year gets off to a promising start. 

The decision from many mortgage lenders to reduce rates seems to have had the desired effect, as buyer interest has noticeably increased. Lenders are competing to offer the best deals.  

At the end of the first week of January, according to Zoopla, there were 10% more prospective buyers than in 2023. TwentyCI has reported that agreed property sales reached a nine-month-high in December, with many commentators now hopeful that this signifies a market that is slowly but surely getting back on track.  

Oxford Economics expects the first cut to Bank Rate will come in May, thus relieving some of the pressure that many borrowers are under. This could further increase the demand for housing which, at the end of December, Zoopla has said was 19% higher than the previous year. Higher levels of demand are likely to have a knock-on effect on house prices, which could continue to stop falling if sellers no longer need to discount their property to make a sale.  

Most sought after areas   

Prospective home buyers seem to be committed to returning to the capital, as London is the most-searched-for location for the second year in a row, according to Rightmove.  

During the pandemic in 2021, there were months where Cornwall overtook London as the most searched-for area. However, the southwestern county has been firmly in second place for the last two years, indicating the mass exodus from cities has subsided. In fact, from 2022 to 2023, there was an 18% fall in the number of people looking to buy properties in Cornwall.  

London is also the most popular location for renters according to Rightmove’s report, with Manchester and Bristol below it in the top three.  

Tim Bannister, Rightmove’s Property Expert, observed that, “Many traditionally popular areas maintained their allure amongst buyers, whilst cheaper areas were also high on the list for buyers last year with affordability stretched.” 

UK landlords owed late rent 

The cost-of-living crisis is taking its toll on the private rented sector as tenants struggle to pay their rent on time.  

According to research from mortgage lender Molo, landlords in the UK are owed an average of £725 in overdue rent. Those in Yorkshire and the North East are particularly affected, experiencing the highest number of late payments each year. Meanwhile, landlords in Greater London are owed the most amount of money.  

VP of Strategy at Molo, Mark Michaelides, commented, “Our recent research found that over half (54%) of landlords have implemented payment plans for tenants facing late rent. He added, “As a tenant, it’s important not to ignore the problem. I’d advise tenants to communicate promptly, explaining reasons for delays and requesting additional time. Open dialogue can lead to collaborative solutions.” 

All details are correct at the time of writing (17/01/24) 

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission

Commercial Property Review – January 2024

 

Different challenges set to confront investors in 2024 

The newly-released UK Commercial Cross Sector Outlook for 2024 from Savills has provided insight for the year ahead. Expectations from Mat Oakley, Director of Commercial Research, suggest that the factors impacting property values and confidence are set to improve this year, but as high inflation and interest rates abate, different challenges are set to confront investors.  

Although reducing, borrowing costs are not expected to return to the levels experienced in the ten or so years prior to the pandemic. With a General Election due to be held this year, it’s impact is likely to be measured. The report outlines, ‘Our analyses suggest that transactional activity is generally lower than normal in the three months prior to the election date, and then recovers in the following six-month period.’  

Focusing on sectors, undersupply of green and prime office space is a continuing theme, driving rental growth. Investor demand is expected to intensify ‘to capitalise on this’ according to the Outlook. With retail, this year ‘cautious expansion of retail footprints’ is likely, which will contribute toward a continuation of a downward trend in vacancy rates, which commenced last year. The expectation is that parts of the retail sector will attract opportunistic investors seeking higher yields and capital growth potential from possible change of use of premises. Evidence suggests that life sciences and logistics top the list for commercial property investors in 2024, with ‘weighting towards these sectors’ on the rise. Income-focused investors continue to be enticed by a mix of robust rental growth prospects, limited supply and structural change-driven demand, in the logistics and life sciences domain. 

Investor optimism 

A recent survey of over 100 global real estate fund managers, conducted by professional services firm Alvarez & Marsal, has highlighted that 70% of global real estate investors are planning to increase their UK exposure this year. 

Looking ahead over the next year to 18 months, the research found that of the investors surveyed, most are interested in supporting leisure, travel, work and retail, with 87% keen to invest in the hotel and leisure sector, 71% in office buildings and 67% in retail. 

Interestingly, the vast majority (97%) of investors cite ESG as an important element of their investment strategy, with smart building technology, green building certifications and energy efficient upgrades, prime concerns for ESG-oriented investors. 

Managing Director at Alvarez & Marsal, Kersten Muller, commented on the findings, “The growing consensus that interest rates have peaked suggests that the worst of the uncertainty may be behind us. While this could pave the way for a rebound in the real estate sector in 2024, investors should continue to exercise caution when evaluating the types of properties and markets they deem worthy of their capital.” 

Falling investment volumes north of the border 

In 2023, a total of £1.49bn in commercial property investment volumes was transacted in Scotland, representing a 34% decline year-on-year, according to Savills. 

This reduction can be attributed to uncertainty in the economy, although the second half of 2023 saw an uptick in activity, increasing 39% versus H2 2022 volumes. 

Interestingly, contrary to the wider national trend, retail transactions reached £714m in Scotland, over 50% up on offices (£357m), followed by industrial, leisure and alternatives – £172m, £144m and £105m respectively. Strength in the retail sector is primarily due to the robust occupational market, with destinations like George Street in Edinburgh and Buchanan Street in Glasgow supporting the sector. 

For the second consecutive year, overseas investors were categorised as the most active buyer type, with nearly £46m of transactions (totalling £680m) attributable to this group, although representative of a large reduction in 2022 overseas investor volumes (£1.025bn). Other active investors in the market are property companies (£342m), private investors (£187m) and UK institutions (£127m). 

Director in the Scottish investment team at Savills, Aly Wright, commented on the findings, “All things considered, 2023 was a relatively positive year, and whilst we anticipate a slow first quarter of 2024, we are positive this will pick up post Easter as markets continue to stabilise.” 

All details are correct at the time of writing (17/01/24) 

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission. 

News in Review

“The longer-term picture remains one of an economy that has shown little growth over the last year”

New data from the Office for National Statistics (ONS) has revealed that UK GDP is estimated to have grown by 0.3% in November 2023, this follows a fall of 0.3% in the previous month, and just exceeds a Reuters poll of economists who forecast growth of 0.2% in the month.

The figures show that the main contributors to growth came from the services sector, which increased by 0.4% in November, with production output contributing 0.3% in the month. Growth in the services sector was boosted by retail sales, as people stocked up on Christmas goods, with Black Friday helping to shore-up sales. Meanwhile, construction output provided a drag, reducing by 0.2% in November.

Chief Economist at ONS, Grant Fitzner said the economic growth in November was supported by “strong retail sales but also car leasing, computer games and fewer strikes than we’ve seen in previous months. We have had quite a number of companies telling us they saw strong Black Friday sales which had a positive impact not just on the retail sector but also warehousing, couriers and some manufacturing sectors.” Mr Fitzner went on to caution that “the longer-term picture remains one of an economy that has shown little growth over the last year.”

The quarterly data shows that GDP is estimated to have fallen by 0.2% to November 2023, 0.1% higher than the decline expected by the Reuters poll. The Q4 2023 GDP reading is due in February. If this is a negative reading, the UK would be in what’s termed a ‘technical recession,’ defined by two consecutive quarters of GDP contraction.

On assessing that data, Research Director at the Resolution Foundation, James Smith concluded that the stronger-than-expected growth in November provides the UK with “a fighting chance” of avoiding recession, adding, “the final verdict on 2023 will come next month, but it is essential that Britain builds some economic momentum in 2024.”

Last week, Andrew Bailey, Governor of the Bank of England (BoE) cited further “global shocks” as a prime threat to the UK economy, as fresh concerns emerged over the supply of oil following the disruption and conflict on critical Red Sea shipping routes though the Suez Canal. When speaking to MPs on the Treasury Select Committee, Mr Bailey confirmed that the BoE was monitoring the situation closely, which had arisen following an escalation in attacks by Iran-backed Houthi rebels on container ships.

Global economy

According to the World Bank’s latest bi-annual ‘Global Economic Prospects’report released last week, the global economy is ‘set for the weakest half decade of GDP growth in 30 years.’ Following growth of 6% in 2021 as the global economy reopened following the depths of the pandemic, the Bank said the growth rate eased back to 3% in 2022 and to an estimated 2.6% in 2023. Estimated growth in 2023 was supported by US economic resilience, according to the Bank, with the risk of a global recession receding, ‘largely because of the strength of the US economy.’

Looking ahead, a growth rate of 2.4% is expected this year, the weakest level of growth since the 2008/9 financial crisis. Higher interest rates have been a key factor contributing to this slowing, and ‘mounting geopolitical tensions’ cloud the horizon of the global economy. In 2024, the World Bank estimate advanced economies will expand by 1.2%, with developing and emerging market economies growing by 3.9%.

Mortgage product choice on the rise

The recent UK Mortgage Trends Treasury report from Moneyfacts details that total mortgage products (all LTVs) have increased by over 200 products month-on-month (December 2023 to January 2024). Average rates on both two and five-year fixed mortgages have fallen for a fifth consecutive month, and now reside at their lowest level in over six months. In addition, the average shelf-life of a mortgage product has increased to 21 days, this is the highest figure since last June (22 days).

Jobs market

Released on Tuesday, UK labour market data from ONS has shown that between October and December, the estimated number of vacancies in the UK fell by 49,000, representing the longest consecutive run of quarterly falls ever recorded. However, vacancies remain above levels seen before the pandemic.

Here to help

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

All details are correct at time of writing (17 January 2024)

Get the year off to the right start with a protection review

Why not kickstart 2024 by reassessing your finances, particularly if you’ve undergone recent life changes? This should include reviewing your protection insurance to ensure it aligns with your current needs. 

Get protected 

Protection tailored to your circumstances serves as a crucial safety net during unexpected downturns. As we enter 2024, its time to assess whether the type and level of your existing protection cover remains suitable for your individual needs. Any life events you’ve experienced may necessitate updates to your protection. 

Given the ongoing cost-of-living challenges, it’s crucial to ensure everything is in order. Inflation adds complexity and makes things difficult for many people. It only underscores the vital role protection plays in your financial plan. 

Consider all options 

Carefully weigh up your options; cancelling protection not only leaves you vulnerable but may result in higher future costs. 

Secure certainty by maintaining the right protection. Contact us today to explore how we can assist you. 

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments. 

Planning to secure your financial future

Over the past 12 months, the cost-of-living crisis has put significant pressure on household budgets and knocked many people’s confidence in their future financial prospects. Research, however, shows that planning is a key driver of positivity about our financial futures; so, as a new year dawns, now seems the perfect time to take stock of your finances and formulate a plan to help you achieve your retirement goals. 

Plan, plan, plan 

Although decisions around retirement are arguably the most critical people have to make during their whole lives, research¹ suggests only half of over-50s with pension entitlements other than the State Pension have actually formulated a detailed plan. Perhaps unsurprisingly, it also found that those with a plan were much more confident about securing a comfortable retirement than those who do not have one. 

Gender gap 

The research also found clear evidence of a gender gap with men generally more confident about their prospects for a comfortable retirement than their female counterparts. It also found that the 

cost-of-living crisis has been a key driver of low confidence, with half of the sample stating that it has either slightly or significantly worsened their chances of a comfortable retirement. 

Triple default trap 

People without a plan are also more likely to get stuck with their default pension settings. Recent years are thought to have seen a sharp rise in the number of triple defaulters who ‘set and forget’ their pension choices, with millions of auto-enrolled 32-40 year olds failing to update their contributions, investment choices or target retirement age. Even relatively small tweaks to one or more of these default choices could potentially boost a pension pot by thousands of pounds. 

Here to support you 

The evidence clearly shows that formulating a plan is the key to boosting confidence in your financial future. So, let’s kick off 2024 on a positive footing ‒ get in touch and we’ll help you develop a plan capable of securing the rewarding retirement you deserve. 

1Nucleus Financial Platforms, 2023 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. 

News in Review

“The traditional retailers always tend to do well in the run up to Christmas and this year was no exception”

There was good news for supermarkets last week, as new data from market research firm Kantar showed they experienced their busiest Christmas in four years. During the four-week period to Christmas Eve, Britons made 488 million visits to supermarkets, 12 million more trips than the same period the previous year, and the highest number since before the pandemic.

The data shows that the average household spent a record high of £477 during the four weeks running up to the big day, with £13.7bn ringing through the tills. The prime shopping day during the run-up to Christmas was Friday 22 December, when over 25 million trips were made and £803m was spent in shops (excluding online purchases), this represents an 85% uplift in average spending compared with Fridays last year.

Strong performances were experienced by supermarkets’ own-label ranges, while sales of premium ranges also saw a healthy uptick, with sales of ranges such as Tesco Finest and Sainsbury’s Taste the Difference increasing by almost 12% from last year, to total £790m (5.7% of all grocery sales).

Fraser McKevitt, Head of Retail and Consumer Insight at Kantar commented on the findings, “The traditional retailers always tend to do well in the run-up to Christmas and this year was no exception… We’re creatures of habit when it comes to Christmas and our data shows that the classic festive plate remains much the same.”

From a specific retailer perspective, growth in market share was recorded by Tesco, Sainsbury’s, Lidl and Aldi.

Boxing Day property bounce

A record number of sellers took to the market on Boxing Day, new data has highlighted, with a 26% increase in new sellers, overtaking the previous record set the year before. In addition to sellers pondering their plans and taking action, buyers also leapt into action on Boxing Day, with enquiries to estate agents about homes for sale 17% higher than Boxing Day 2022. An increase in activity is usually expected during this period. Data from Rightmove shows that visits to its website increased year-on-year by 8% on 26 December. Reflecting on the figures, Tim Bannister, Rightmove’s Property Expert, said that the “scale of this year’s Boxing Day bounce is an early positive sign at the start of the year that buyers and sellers are out there and taking action, likely including some movers who had put their plans on hold last year.” 

Although acknowledging that it’s early days, Mr Bannister added that “it will be key to monitor activity as it ramps up through the end of winter and into spring, particularly to track whether sellers are pricing attractively enough to agree a sale with a buyer quickly, given buyers now have more choice to consider than last year and are still very price sensitive.”

Average 2-year mortgage rates lower

The new year rung in some changes to mortgage rates, with data from Moneyfacts showing that the average rate on a two-year fixed mortgage reduced to its lowest level for almost seven months in the first week of 2024. According to Moneyfacts, the average rate fell to 5.87% (from 5.92%), as lenders look to compete for customers. Although potentially providing some relief for homeowners, mortgage rates are still higher than many people have been accustomed to, and with around 1.6 million homeowners currently on a fixed-rate mortgage due to expire during the next year, the vast majority could still see their monthly repayments rise.

General Election H2 2024?

Last week Rishi Sunak suggested he is working on the assumption that he will hold the General Election “in the second half of this year,” adding that“I’ve got lots to get on with and I’m determined to keep delivering for the British people.”  The latest the election needs to legally be held is 28 January 2025.

Here to help

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

All details are correct at time of writing (10 January 2024)