Investment market update: October 2021

January 24, 2022

The International Monetary Fund (IMF) has warned that the world economy remains “hobbled” by Covid-19 and revised its global growth forecast for this year downwards. The organisation now expects the world economy to grow by 5.9% in 2021.

The IMF also noted that the emergency support provided by central banks and finance ministries during the Covid-19 crisis could leave the world vulnerable to another financial crisis.

UK

As we entered October, the UK continued to face several supply challenges. The impact this has had on fuel and energy continued to make headlines throughout the month.

Chancellor Rishi Sunak delivered his Autumn Budget in October. After previously announcing that National Insurance rates and Dividend Tax rates would both be increasing, he unveiled the new taxation and spending proposals. Promising a “stronger economy for the British people” Sunak announced a raft of changes from a new levy on property developers to the introduction of the new National Savings & Investments (NS&I) Green Savings Bond.

Inflation has also been in the headlines this month. In the 12 months to September, prices rose on average by 3.1%. This figure is above the Bank of England’s 2% annual target. The central bank thinks the figure could go above 4% this year. One of the ways the Bank of England can limit inflation is to increase interest rates. There is speculation that the interest base rate will begin to rise from historic lows later this year or in 2022.

Business secretary Kwasi Kwarteng noted that supply chain disruptions are affecting the economy.

The UK construction sector has been hit by the challenges this presents. The IHS Markit PMI for the sector fell from 55.2 in August to 52.6 in September. This reading shows the sector is still growing, but that the pace is slowing.

As businesses struggle to access the material they need, prices are likely to rise. The PMI for the services sector show prices are rising at their fastest pace on record. In line with this, almost two-thirds of UK firms expect to increase prices during the run-up to Christmas, according to the British Chambers of Commerce. This could mean that inflation will continue to rise as we head into 2022.

It’s not just a materials shortage that’s causing problems, but a staff shortage too. According to a survey conducted by advisory firm BDO, more than a quarter of firms polled said a lack of staff was putting pressure on their ability to operate at normal levels.

The latest industrial trends survey conducted by CBI also supported this. Two in five firms said they were worried about a lack of skilled labour. In addition, two-thirds said material shortages were likely to hit their output next quarter. This is the highest rating since 1975.

As well as the effects of the pandemic, the UK is facing challenges related to Brexit. The Office for Budget Responsibility has estimated that Covid-19 could reduce GDP in the long term by around 2%. In contrast, Brexit is double this figure, and cut GDP by around 4%.

One area where the impact of Brexit, as well as of the pandemic, can be seen is in exports. The UK’s trade deficit widened to £3.7 billion in August compared to £2.9 billion in July.

With these challenges in mind, it’s not surprising that consumer confidence has hit its lowest level since lockdown measures were eased in April, according to data from YouGov.

Europe

Global chip shortages are just one of the supply issues affecting businesses across the eurozone area. According to figures from Eurostat, production figures across the eurozone fell by 1.6% in August. The area’s largest economy, Germany, also posted the largest contraction of 4.1%. This fall was partly due to weak car manufacturing.

Inflation is also an issue, with it reaching a 13-year high.

US

Mirroring the situation in Europe, US inflation reached 5.4% in September, a 13-year high.

US industrial output fell 1.3% in September, data from the US Federal Reserve shows. This impacted output, which also declined by 0.7%. The decline was partly blamed on the production of motor vehicles and parts falling by 7.2% due to shortages within the supply chain.

Job figures were also disappointing. Economists had been expecting around 500,000 new jobs to be added, but the figure was far below this forecast at 194,000.

Despite worries about inflation, the US Conference Board’s consumer confidence index shows optimism is improving. After three months of decline, consumer confidence increased in October. It’s a sign that consumer spending will continue to support economic growth.

Asia

As with other countries around the world, China also faces the challenge of high inflation and stock shortages.

Factory gate inflation reached a 26-year high. Again, this was attributed to global supply chain issues. According to the National Bureau of Statistics, Chinese manufacturers increased their prices by 10.7% in September as they passed on rises in commodity and energy prices to their customers.

These challenges also had an impact on the economy. China’s GDP grew by just 0.2% between July and September, the weakest growth on record. It dragged growth over the last year down from 7.9% to 4.9%.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

What our clients say

The people we help are at the heart of what we do. Here are some of their testimonials.

I knew I needed to begin saving and planning for the future but didn’t know where to start. Stratton helped me to understand my finances and put together a savings plan that is affordable and works for me. I now have and an ISA and a pension, and whilst retirement is many years away, I have the peace of mind that I am saving for my future. I look forward to working with them for many years to come.

Martin Corrigan -

A client since 2016

I have been impressed with the advice and service provided by Stratton Wealth Management and have always found Darius to be approachable, dependable and highly professional in his approach. It is reassuring to be able to have such a high level of confidence and trust when it comes to financial advice.

Russell Jones -

A client since 2018

Many thanks indeed for your in depth report for my client Mrs H – it is most thorough and above all readable. This might sound particularly strange; however you may well gather that in my profession we see many such reports, and I often feel that if the adviser fills it with charts and graphs it evidences a level of research. In truth most of what is produced is readily obtainable from the internet.

I would like to thank you (and your organisation) for your prompt and professional attention to my requirements on behalf of my client. As a practice we shall definitely be putting Stratton Wealth Management on our “preferred supplier list".

Colin Dunstall, Donaldson Dunstall Solicitors -

A client since 2015

I would highly recommend Darius and John. I’ve used a financial adviser previously and could never get in contact with them when I needed their help. Stratton Wealth Management have been excellent from the start. They are always available to talk, and they also don’t talk in financial jargon!

Dave Rigby -

A client since 2015

Having recently transferred my financial management to Stratton Wealth Management, I have been extremely impressed with the highly professional service I have received. I feel I have been fully involved in all decision making, and the company's highly skilled advisers have shown commitment and patience in any dealings I have had with them. I have also always found them to be easily accessible for any discussion I may require.

Denise Thornton -

A client since 2019

As a business owner and father of four children, finances are usually the last thing we think about. Stratton oversees and manages our finances, both in terms of advice for my business and our personal investments. It is comforting to know that our retirement, investment and life insurance planning has been taken care of. Darius and John are always so efficient in dealing with our affairs. As someone with no real understanding of the ins and outs, it has been fantastic to have experts giving us great advice and making sure our best interests are always the top priority.

Lee and Claire Parkinson -

Clients since 2016

Darius deals with my family’s finances and is a very trusted adviser. We meet a number of times a year, but I know I can call him any time if I have any questions. He is proactive, helpful and friendly!

Jonathan Dennis -

A client since 2019

Darius has been our adviser for a number of years, and when he told us he was starting his own firm, we had no hesitation in moving with him. We had a number of areas that we needed help with, including the complexities around an employee share scheme, investments for us and our new child, in addition to our retirement planning. Darius has continually provided us with a first-rate level of service and we would highly recommend Stratton.

Eamon and Holly O’Hara -

Clients since 2017

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