Travel Plans and Arrangements

Like everyone else, apart from our short business related trip to Portugal back in June, our travel plans have been on hold now for the last 18 months.  Chris and I had an extended trip to the US planned for the Autumn of 2020, which had to be postponed and was rescheduled for this Autumn.  Who would have believed that 18 months after the US closing their borders to travellers from the UK, that they would still remain closed?  Although there has been lots of speculation in recent weeks about when those borders may reopen to the UK and the Schengen countries, there is still nothing in prospect.

However, the current restrictions may it clear that entry will not be permitted if you have. Been in the UK or Schengen countries within the previous 14 days and many people are therefore using a third destination to ‘self-isolate’ to then enable them to enter the US.

Having researched this further, we have decided that we are now going to go ahead with our travel plans, but will amend these slightly such that we will be travelling to Canada on 7th October, where we will spend just over 2 weeks before crossing into the US to pick up the trip that we had planned.

The reason I wanted to let you know this is that we will actually be away from the office for a total of 7 weeks and furthermore, we are going to into voluntary self-isolation for 2 weeks prior to our departure, with a view to minimising further any potential risk of coming into contact with people with Covid.  After such a long postponement, it would be ironic if we were unable to travel due to testing positive ourselves!

As a result of this, I will not be engaging in any face to face meetings after 22nd September until our return, but we are able to continue meetings via Zoom or similar, up until our departure.

I mentioned in a recent News Letter that Nigel King joined us from the beginning of June, and he is a Chartered Financial Planner, who I have to say, is settling down extremely well and he has a very similar approach to client relationships and financial planning advice as myself.  Whilst I am away therefore, if any direct advice or input is needed that cannot be dealt with remotely whilst I am away, Nigel would be able to assist.  As always though, Lesley will be manning the office and therefore, she remains a primary contact for you in the event of any needs that you may have.  She will then be able to determine who is best able to deal with this for you.

Whilst we are travelling, I will also be picking up e-mails and will be staying in regular contact with Lesley and Nigel and I am confident that we will be able to maintain business and service levels as usual throughout.

What’s in Store for Q4?

It really is quite amazing to think that we’re coming towards the end of the third quarter of 2021 and before long, dare I say, we will start to see Christmas appearing in the stores!

When we look back at markets over the last 2 years, we can see that all major markets showed a huge dip in the Spring of 2020 as the world got to grips with the uncertainties of Covid and whilst most major markets have fully recovered, both since then and indeed, have reinstated value beyond where we were 2 years ago, notable laggards are the FTSE 100 Share Companies in the UK and the Hong Kong market in general.

Hong Kong of course, has a big influence from China, but closer to home, is there a question mark to raise over the UK?  Bearing in mind the 100 Share Index is the 100 largest Companies by capitalisation, this does not necessarily represent the UK market as a whole.  In fact, the All Share Index has shown full recovery over that 2 year period and looking ahead, it really is the smaller Companies where the greater opportunities lie from a UK perspective.

Looking backwards is always the easy part, but where does this take us in the last quarter of this year is a leading question!  On a regular basis, I’m talking to the Fund Managers that we work with to gather their views and the general consensus is that even pre-pandemic, the UK was trading at a discount when compared to global markets and that although opportunities have been slower to materialise through a number of factors including dare I say, Brexit and the pandemic, the belief is that in the UK mid and small capital Company space, there are some phenomenal Companies which are serving both domestic and international business customers.  A further thought is that the UK Government is looking at ways to remove the previous EU barriers to home grown innovation, in its attempt to create ‘a level playing field’, this should help to further stimulate the innovative smaller Companies. 

Whilst all of this sounds very promising, certainly for the UK and indeed, we should see some catch up with the US markets, this is taking the longer term view.  With the latest inflation figures jumping to 3.5% however, and as trading volumes pick up again this Autumn, we will almost inevitably see some volatility come back into the markets through the last quarter of the year.  As an example, the US market has now passed over 200 days since it had a 5% sell off, which is one of the longest in history and keeps getting longer!  Consequently, the likelihood of this happening sooner rather than later is growing, but as always, it’s worth remembering that this type of pull back or correction in markets is entirely normal and indeed, is very much expected.  It is in fact, the sign of a properly functioning market in which arguably, exuberance and fear exist as opposing forces!

Probably one of the main factors to keep an eye on is the way that the Central Banks, in particular the Fed in the US, start to taper or reduce the financial stimulus that they have been pumping into the market and a surprise announcement from the US could indeed trigger some selling off and profit taking.

My view therefore, is that I think the final quarter could be represented by some market volatility, but the fundamentals with many Companies remains sound and with the continuing economic growth and return to work, the medium and longer term remains positive.

Whilst these thoughts might prompt the question in some people’s mind, is it worth stepping out of the market if we’re expecting volatility until things settle down, but conventional wisdom says this is not a strategy that will work and in fact to quote Warren Buffet, who is a well known investor and philanthropist and currently is Chairman and CEO of Berkshire Hathaway ‘the only value of stock forecasters, is to make fortune tellers look good’ – he went on to say that the short term direction of stock process is close to random because that is largely down to human psychology and the relationship between markets and volatility.  He said that time in the markets, always beats trying to time the market every time.

I hope that you will find these thoughts useful and as always, if you have any questions, I would be pleased to hear from you.

Take care and we will be in touch.

Best wishes.

Richard, Chris Lesley and Nigel

In the last two newsletters, I have taken a look at Wills and Powers of Attorney, and this has sparked a few questions about Will Trusts and Trusts in general, so I thought I would include a few thoughts for you on this subject.

It is often assumed that placing things into a Trust fund is all about saving tax and whilst tax can be a consideration, it is actually more about keeping control, as I will explain.

Trusts are arrangements that are widely used in the UK and other locations, but not all countries will recognise them. Notably, Spain, France and Italy do not recognise the Trust status as a separate legal entity and will simply look through the Trust at the Settlor and Beneficiaries and treat Trust assets as though they belong to the individuals.

The Settlor to the Trust is the person who creates it and typically, adds the assets to be held in Trust. The Beneficiaries are people, who could be individuals or other entities, such as charities, who are the intended recipients of value from the Trust. As to what is available and when, this will be determined by the way the Trust is constructed.

It could for example, be an absolute Trust which names a specific beneficiary or beneficiaries and could be for a fixed proportion to be paid on reaching a defined event such as reaching a certain age or perhaps on marriage.

There is an alternative, which is a discretionary or flexible Trust. This will typically identify a class or classes of beneficiary, for example, children and grandchildren and will often indicate what proportions are to be made available to each.

Keeping control can be a concern and, in particular, if children are the beneficiaries and there is a concern over keeping money in the family, even in the event of matrimonial breakdown, then a Trust can be constructed to protect the assets and perhaps provide enjoyment to the beneficiaries during their lifetime, without the assets actually passing to them.

We also see this where Solicitors recommend including a Will Trust in the Will itself. This could often be to deal with property and where a couple may have Wills that mirror each other, there could be a Will Trust to receive the deceased partner’s share of the property on first death, such that the survivor retains a right to live in the property for the remainder of their life, but the property itself is passed into the Trust for the benefit of the children. This ensures security of tenure for the survivor, but potentially protects a share of the property for the children and perhaps ringfences it from future care fees assessments etc.

Gifting into Trust can have some Inheritance Tax savings in the UK, which typically, would use allowances available during the lifetime, or using the “nil rate band” of up to £325,000 per individual. This would be known as a potentially exempt transfer and providing the donor lives for 7 years after the date of the gift, it will fall out of the eventual Inheritance Tax assessment.

These thoughts are really the “tip of the iceberg” when it comes to the subject, and often your Solicitor is the best person to advise on Trusts, but we have a reasonable working knowledge of how and when they can be useful in the financial planning sense, so do ask if you need any help in this area.

The Here & Now!

A couple of weeks ago, I found myself in London for the second time in the last month after a gap of nearly 18 months and it was quite a surprise to see how much busier it was than earlier in the month. I guess with the school holidays and staycationing, that should not have really been a surprise. Walking across Leicester Square seemed to be as busy as it was pre-Covid, and I noticed very few people were wearing masks outside and only about 50% on public transport. I cannot say that I felt totally at ease with the travel, but it won’t put me off either and in fact, I will back in London later this month.

Talking of London, the City was noticeably quieter, and I think many of the financial, banking and insurance companies have large numbers working from home still, although some of the pubs and bars that I walked past, (honestly, I kept walking) were showing signs of customers returning, but not in the same numbers as used to spill out onto the streets across the city at lunch time and early evening. Bad for the pub takings, but good for liver recovery!

There is not really a lot to talk about on the financial scene as trading has been low and markets are largely benign, apart from perhaps Japan and the Alternative Investment Market (AIM) in the UK, both of which have had a good performance over the last month. As holiday season comes to a close, we would expect to see volumes of trading increasing once more and then we may well start to see a few lumps and bumps, but no major trends at the moment.

As always, it will be good to hear from you with any thoughts or comments and in the meantime, stay safe and we will keep in touch.

Best wishes.

Richard, Chris and Lesley

Lasting Powers of Attorney (LPA) vs Enduring Powers of Attorney (EPA)

In the last News & Views, I was talking about the merits of having LPAs in place alongside your Will to act as a safety net in the event that you were suddenly unable to deal with your own affairs or make important health or financial related decisions.

That sparked a few questions and one of these is in relation to EPAs which were the forerunner to LPAs but of course, many people still have them in place.

EPAs were actually replaced by LPAs in 2007 and the later version is more flexible.

With an EPA, you would appoint an Attorney or multiple Attorneys and if more than one, they were obliged to work together such that any decisions had to be on a “joint” basis. Attorneys could not act on your behalf until the EPA is registered and this potentially could not happen until a “trigger event” as defined in the EPA itself. For example, this could be in the event that the person lost mental capacity, the Attorney(s) could then register the EPA and act thereafter. However, their powers were limited to financial and property matters only and could not be used for health & welfare decisions.

An EPA which was set up prior to 2007 is still valid but it begs a question as to whether the Attorney(s) are still relevant 14+ years later.

By contrast, LPAs can be set up for either health & welfare or property & financial matters or for both but they will be 2 separate LPAs. It would therefore be possible to appoint different people to act as Attorney for each aspect.

When setting up the LPAs, you can determine whether all Attorneys have to work jointly or whether they can work individually – this is known as “jointly and severally”, which could be more practical.

With an LPA in place, this automatically stops when the individual dies, at which point, the Executors would take over.

This is a very general summary of the differences, but it is a complex subject  and if you have any concerns or need more specific information, your solicitor who prepared your Will is the best person to speak to.

Latest Travel Experience

On Thursday of this week, I was in Edinburgh for the day for a client meeting and having shared my experience of flying to Portugal back in June, which was incredibly complicated with all the testing, flying from Gatwick to Edinburgh and back could not have been easier. There was no requirement for any testing before or after and as a domestic flight, I did not even need to show photo ID, which actually surprised me.

Masks are mandatory throughout the airports and during the flight, but that was reassuring in its own way and everything ran to time. It was by far the best way to do the trip so if you are thinking about flying within the UK, my advice is, don’t hesitate.

Market Overview

As I think we all know, markets can be very fickle and sometimes the very smallest of things can give them the jitters and other major events leave them without so much as a blip. Over the last week, we have seen both of these aspects in action, certainly in regard to the UK, European and US markets.

The events I am thinking of are first, the lightening speed with which the Taliban regained control of Afghanistan and all the political fallout and finger pointing that will be ongoing for some while to come and yet - the markets didn’t so much as flinch.

Conversely, the Federal Reserve make a passing comment about potentially reining back on their quantitative easing policy and the markets drop 2% on 19th August before showing some later recovery in the day but still closed down. This speculation was not new news at all, and has in fact been on the radar for some months and inevitably, we know the financial support has to slow down and stop sooner or later so you would have expected that to have been factored into market prices already.

The Afghan situation, was largely unexpected in terms of the speed of change and therefore, markets could not possibly have factored that in already, so it is very difficult to find a rational reason why they did not react!

It is fair to say that trading tends to be fairly thin at this time of year and market makers don’t like static markets, as it gives them little scope for making profits, so perhaps the answer is that there is some familiarity in their reacting to a known element, such as the Fed’s fiscal policy and the belief that this is not really a long term concern, but nonetheless, it created short term opportunities, whereas, they don’t yet know what the implications from Afghanistan are going to be, so we could see some volatility yet.

One of the other influences we have spoken about recently, is the question of inflation, and the July figures for the UK actually saw a reduction to the Bank of England 2% target, but that is likely to be short lived and we still expect to see inflation rise over the remainder of this year and into early 2022 before stabilising once more. The general view is therefore that this is not and should not be a concern for markets in the medium and longer term.

The other little flutter we saw in the press this week, is speculation that UK interest rates could well increase by 150% by this time next year! Don’t you just love the headlines; what this actually means is we could see a rise in base lending rate from 0.1% to 0.25%. The percentage increase identified is correct, but the reality is not as extreme as the headlines would have you believe. As far as I can see, the UK market did not react to this speculation.

It won’t be long now before all the schools are back in England for their Autumn term and before you know it, we will be talking about Christmas once more – where does the time go?

As always, it will be good to hear from you with any thoughts or comments and in the meantime, stay safe and we will keep in touch.

Best wishes.

Richard, Chris and Lesley

RAFP – Our Plans for the Future – An Update

Back in March in Issue No. 34, I was telling you about our business continuity and succession plans and introduced you to Martyn Bates and Lynne Campbell, whose business, Bates Campbell Limited, came under our regulatory umbrella from 1st April this year.  It’s amazing to think that we are now 4 months on from that date and I’m pleased to say that although we had one or two back-office challenges to get client data integrated, the process has largely gone relatively smoothly, thanks in no small way to the input from Lesley in persevering with the IT support systems to get everything complete.

I am therefore pleased to be able to confirm that we are now taking the next steps with both Lawyers and Accountants having been instructed to prepare the ground with the Financial Conduct Authority for the two businesses to be merged into one business and I am hoping that this can be completed before the end of the current calendar year.

Subject to receiving FCA approval, the new business will be known as Alexander Bates Campbell Limited Chartered Financial Planners and as you will see, we are not going to win any prizes for imagination in terms of the business name!

It does however confirm the continuity for our respective clients and as part of the process, we are expecting to add new people to the team.

The first of whom I am pleased to announce is Nigel King, who joined us as a Chartered Financial Planner at the beginning of June, and he will be working with some clients in both businesses until we are fully integrated and then for the combined business thereafter.

Nigel is a family man and has a busy home life with 4 children and he brings with him wide ranging experience that he has built up in the industry over 20+ years.

Once we have been given the green light by the Regulator, we will be able to launch the new Company livery, which will mean a complete overhaul of our respective websites and other information, so there will be a lot for us to do to put all of this to bed.

If you have any questions about our plans at this stage, please do feel free to let me know, but I will keep you updated as we make progress.

Wills and Lasting Powers of Attorney

In our world of financial planning advice, we inevitably cover many different topics and quite often the subject of Wills and whether to incorporate Lasting Powers of Attorney will be discussed.  As there still seems to be a bit of an air of mystery around Lasting Powers of Attorney (LPAs), I thought it would be worth just summarising the importance of these and how they work in the UK.  This is based on the UK position, but a similar situation is worth considering if you are living overseas.

The main purpose of an LPA is to be able to give authority for somebody to act on your behalf if you are unable or unwilling to do so.

Typically, you would nominate a trusted friend or relative to look after your affairs, should you lose capacity.

The LPA can only be granted whilst you have mental capacity, but it does not need to come into effect until or unless your circumstances change.

There are actually two types of LPA, one is for property and financial matters and the other is for health and welfare.  Nominating an individual to make decisions for you over your day to day health care and medical treatments, does not therefore mean that you will also give them control over your financial affairs.  You may choose the same person to act as your representative for both finance and health or you could choose different people.

One key difference is that the health and welfare LPA can only be used after the individual loses capacity and not before.

With property and finance, you might choose to have somebody help you or make some decisions on your behalf, even whilst you still have capacity yourself.

Although this is a somewhat emotive subject, it is one that is worth considering seriously and having appointed your representatives, you will have put in place a safety net just in case a situation develops where you are no longer able to make decisions for yourself.  It does not mean you lose any control from the point that the LPAs are set up.

Reviewing Wills from time to time is a good practice, to ensure that they do reflect your current views and that they are up to date and consulting your Solicitor over Powers of Attorney would be a good idea to include in your next review, if not before.

I hope these thoughts might be of use and interest and do let me know if you have any questions.

In the meantime, stay safe and we will keep in touch.

Best wishes.

Richard, Chris and Lesley

[Chris tells me that she thinks I have been a bit political with this issue which was not my intention but see what you think.]

Over the last week, I am sure you will have noticed that we have a new word that has crept into the vocabulary in the form of the ‘pingdemic’.  This is a phrase that is associated with the NHS Test and Trace app, whereby people are being contacted by the NHS to notify them that they’ve been in close contact with someone who has tested positive for Corona virus.

The ping is referring to the message being “pinged” to mobile devices and the Press have coined the phrase pingdemic because of the impact that this is having.

It was reported recently that some 500,000 people had been pinged in a week, with the associated 10 day self isolation being required.

Clearly, this is having a major impact on some businesses and in particular, I believe it was a number of branches of the Weatherspoon’s chain that had to close because so many of their staff had been pinged with the self-isolation notification.

There is therefore a major concern in certain business sectors that excessive pinging will have a huge negative impact on their businesses and as a consequence, we now hear that an increasing percentage of people that had previously signed up for the test and trace app are now either deleting it or disabling the notification section!

To my mind, this seems to be another example of something that started out with the best of intentions that is deteriorating rapidly into confusion and a whole series of unintended consequences.

The messages we are receiving are mixed as ever and become ever increasingly confusing.  For example, what is the definition of being in close contact with someone?  If you look at the current Government guidance, it starts simply enough by saying if you live in the same household as a person who has symptoms of Corona virus or who has received a positive test result, then you should follow the stay at home guidance with a need to stay at home and self-isolate for a period of up to 10 days.

In a more general sense though, a contact, is a person who has been close to someone who has tested positive for Covid-19.  The Government say you can be a contact at any time from 2 days before the person who tested positive develop their symptoms and up to 10 days after, as this is when they can pass the infection on to others.  But that still leaves the question, what constitutes contact?  The same household definition is easy, but it goes on to say that having face to face contact, including being coughed on or having a face to face conversation within 1 metre, being within 1 metre for 1 minute or longer without face to face contact or have been within 2 metres of someone for more than 15 minutes, either as a one off contact or cumulatively over 1 day!

How on earth can you think back and work out whether any of those conditions applied – it’s no wonder that people are confused.

Turning then to travel considerations, you could be identified as a close contact if you’ve travelled in the same vehicle or plane as a person who has tested positive for Covid-19.

That then leads on to the current traffic light system and the way that this has been amended with effect from 19th July, with people who are fully vaccinated, travelling back from amber list countries, (excluding France), having to take a PCR test within 2 days of returning, but not having to quarantine on arrival if they are fully vaccinated.

When you read through the Government recommendations, they then go on and on, looking at all different scenarios and is it any wonder that people end up even further confused.

I would stress, this is not intended to be any political statement but rather, frustration at the muddled situation we find ourselves in!

There is however, another symptom that is arising from all this uncertainty, with, I believe, more and more people experiencing a form of phobophobia, probably for the first time in their lives.  One definition of phobophobia being ‘an irrational or disproportionate fear of developing or experiencing a phobia’.  I am hearing an increasing number of people talking about friends and family who are now not doing things because they’re frightened of the potential consequences of their actions, and yet if we are to believe the levels of protection that are afforded by having both jabs, then actually a fairly sensible approach to daily life can minimise the risk of infection in any event, with some confidence that if you are unfortunate enough to contract Covid-19, then there is a high percentage probability that you will be protected from serious illness.

The daily incidence of cases may be going up exponentially at the moment, but the rate of hospitalisations and indeed, the mortality rate, are not demonstrating the same proportionate increase.  The graph below, published by the UK Government Dashboard, shows the 7 day average of new cases from February 2020 and you will see the average number is now approaching the peak that was reached back in the winter.  However, the number of patients in hospital with Covid, peaked at just under 40,000 in the winter and today, is at 4,567.  Rather more starkly, the average mortality rate in the winter, peaked at 1,250 a day and currently, the 7 day average is 49.

I am not suggesting for one minute that any level of hospitalisations or death is acceptable and indeed, they are regrettable, but one has to look at the proportionate impact.

My final thoughts on the subject are that it seems that the numbers of new cases that are affecting younger people is much higher now than it was in the winter and typically, even without a vaccination, young people tend to attract much milder symptoms.

The latest move, as I saw quoted in one of the newspapers, of the Government moving from “carrot to stick” for younger people, bringing in new rules that from the end of September, any nightclub goers will need to be fully vaccinated, whether you actually agree with this or not, is another attempt to address the most sensitive areas of the population that are generating the higher number of cases.

I was pleased to see in the same article that other crowd situations may also face the same requirements and although the entertainment and leisure industry may cry foul and say that this is just one more blow to them – my view is that there is plenty of time for people to get double jabs and be fully vaccinated by the end of September and therefore, it a matter of their choice, rather than imposed restriction that may restrict their ability to go clubbing or to other venues.

I say again, this is not intended to be a political rant but rather, I was prompted to summarise these thoughts because I am genuinely concerned that the level of anxiety is potentially getting out of control and that we need to remind ourselves that taking sensible precautions, even if face mask wearing is not mandatory and social distancing is no longer a legal requirement, then to take those sensible precautions and to wash hands and sanitise regularly and generally think about managing the risk, will not only help to protect from Corona virus,  but also from other communicable diseases, which has to be good and sensible for everyone.

Surely these self disciplines are worth following as the new norm and this is the best way to plan for the future.

To finish these thoughts with a quote, in his inaugural speech in 1933, Franklin D Roosevelt said within one of his opening lines, ‘Let me assert my firm belief that the only thing we have to fear is fear itself – nameless, unreasoning, unjustified terror which paralyses needed efforts to convert retreat into advance.’

If that’s a bit too heavyweight for you, “Nothing to Fear but Fear Itself” was also a 1987 episode of the TV series the Golden Girls, but actually that was referring only to a fear of public speaking!

You can breathe a sigh of relief now, my rant is over

As always, take care and we will keep in touch.

Best wishes.

Richard, Chris and Lesley

In the last two newsletters, I was telling you the story about our trip to and return from Portugal and all of the testing and experiences that we had along the way.

Having paid extra for the rapid release test on Day 5, everything was going swimmingly and in fact when I sent the last newsletter, we were expecting to come out of lockdown later that day.  Unfortunately, there was a sting in the tail – later that day, both Chris and I were contacted by the NHS Test and Trace System to say that somebody on our flight had tested positive and therefore, despite the fact that our rapid release tests were showing negative, we would have to stay in quarantine for the full 10 days – how very tiresome!

As a matter of choice, we decided to take a lateral flow test every day from Day 6 to Day 10, just to make sure that there was nothing sinister that we should be concerned about and I’m pleased to say that every test we’ve done, both during that period and since, has proved negative.

On the one hand, you can’t criticise caution, but on the other hand, when you look at the new measures that are being talked about now for the UK, with the next stage of easing of lockdown, where people who have had 2 jabs do not need to self-isolate, even when they have come into close contact with somebody with the virus, it does feel as though the routine that we went through was somewhat over the top.  Nonetheless, as they say, all’s well that ends well!

Looking ahead to the 19th July, which some people in the UK are calling Freedom Day, we are expecting the majority of Covid restrictions to be lifted from that time and the actual announcement is due next Monday, 12th July.

However, we also learned this week that the self-isolation rules of those coming into close contact with people with Covid are likely to be extended until 16th August and whilst this might sound fairly benign, it does potentially have a huge implication for the sport and leisure industry and more specifically, the NHS itself.

It is puzzling to me why from 19th July, it will no longer be a requirement to socially distance or wear masks, other than perhaps in a few confined spaces like public transport, which goes hand in hand with extending the self-isolation period for close contact for a further 4 weeks.

In my mind, it would have made more sense to have these things round the other way, with the self-isolation rules being relaxed, in favour of regular testing, with an extension of use of masks and social distancing.

Sadly, when you read all the conflicting stories in the Press, the whole situation is as bewildering as ever and I do have some sympathy with people that raise the question as to how it can be right for 65,000 people to attend a football match in Wembley, whilst restrictions for people attending weddings and funerals and other private gathering, remain in place.

I guess the answer is “you’re never going to please all of the people all of the time”, which leads nicely on to the question of travel.

It would seem after 16th August, people who have been double jabbed will not need to isolate in England if they come into close contact with a Covid carrier.  We are told to expect that people returning from amber listed countries, who have been double jabbed, will not have to quarantine on their return, although there may still be some need for PCR testing.

It’s fair to say, the political noise is getting much louder now in relation to trans Atlantic travel and in particular, opening up a corridor between the UK and the USA.  We are seeing this week, British Airways and Virgin Atlantic on a joint pilot scheme at Heathrow airport to create specific arrival channels for people who have been double jabbed to streamline the process and to demonstrate that the pressure can be taken off border control.  It will be interesting to see how that works out.

In the US, a group of Senators, I believe are currently lobbying President Biden and they are making demands that the travel between the US and the UK should be opened up without any further delay.  They cite the fact that the roll out programme of vaccines in both the UK and the US have been very similar, with similar results and given the controls in place in the UK for people travelling overseas, there is something like a 1 in 10,000 chance of somebody boarding a plane with Covid, and 1 in 1,000,000 chance of them passing that on!  I have to say, I am not quite sure of the source of those statistics, but they make interesting reading nonetheless and as others throw statistics around to suit them, I thought I would have a go myself!

Speaking of which, as I write this News Letter, with an identified adult population in the UK of 52.8 million, I see that the number of first doses are in excess of 45.5 million, which represents 86.2% of the adult population.  Second doses are a little over 34 million, which is 64.4% and if you combine the two, on aggregate, 75.3% of the total adult vaccines that will be administered to achieve 100% of double doses, have now been given.

These by the way, are all my numbers taken from published figures.  I seem to recall reading earlier on in the pandemic, that to achieve “herd immunity”, we needed 70% of the population vaccinated and the conclusion I draw is that we must be above that position now.

Just one final thought on the subject, I understand that the wearing of masks and social distancing could become a matter of personal choice and I have a feeling that the majority of people will feel more comfortable wearing masks in confined spaces, particularly in shops and on public transport. I can’t think of any reason why we would not continue with regular hand washing, using hand sanitiser and where possible, keeping a reasonable distance from others – it is possible to have a conversation with somebody 2 metres away without  shouting, just as easily as you can if they are standing right beside you!

Whilst I have not included any financial information this time, I am attaching to this email, a copy of my Investment Commentary that is being issued to our overseas clients with their June valuations as a general summary, so my apologies if you have already received a copy.

May I just close this News Letter by saying once again, a big thank you to everybody who has responded and sent positive comments about our News and Views, I try to keep this fairly light-hearted and topical and the feedback that I get is very much appreciated.

As always, stay safe and we will keep in touch.

Best wishes.

Richard, Chris and Lesley

In the last News and Views, I was telling you about the experience that I had encountered as we led up to a trip to Portugal, with all of the associated hurdles to cross and tests to attend. Well, I’m pleased to say that the trip went extremely well and we are now back safe and sound having returned to the UK on Saturday.

I thought I would share the experience of the actual travel because that was quite interesting in several ways.

Having read previously that paper is not favoured at the airport and they prefer you to have electronic copies of everything, I had stored the relevant documents on our phones. Mainly these were our boarding passes, the negative PCR Covid test that we had had 72 hours prior and the passenger locator form for entry into Portugal.

Having been warned to allow extra time for check in, we dutifully turned up at Gatwick 2 hours prior to the flight to find the check in area completely deserted, with only 6 or so people in evidence and we were greeted by an EasyJet representative who checked that we had the relevant documentation with us and scanned our boarding passes.

From there, we went to the automated bag drop, which duly delivered a tag that we fitted to the bag, put it on the conveyor belt and within 5 minutes we were on our way to the security check in. As you know, that can often have long queues, but on this occasion, there were about 5 people in front of us and with very little fuss, we were soon through and in the duty free area. Most of the concessions were open, but the place was deserted.

It’s at this point I think it’s time to share some holiday snaps with you – don’t panic, there are only two and neither of them is me on the beach! (Relief all round!)

If you have experience of flying from the north terminal at Gatwick, you will know how crowded it normally gets and indeed, that’s similar with most of the UK departure airports we have used. The following photograph though is a picture of the departure lounge and you can see just how deserted it was.

The second picture is that of the departure board and at first glance, you might think that there are a lot more flights than you would expect until you look more closely and see that the first part is for Saturday which was the day we were travelling, but the rest of the board was for the following day. Our flight to Faro was showing to depart at 3pm and I’m pleased to say that Weatherspoon’s (as seen above) were open and therefore we were able to enjoy a leisurely glass and a snack before boarding.

The plane was about 75% full and masks were worn at all times, with everybody being fully compliant and I have to say, it felt a safe and well organised environment.

On arrival in Portugal, we actually landed half an hour early and only 45 minutes after actually touching down, we were driving out of the airport in our rental car, having sailed through immigration, baggage collection and through to the car hire office, where there was only 1 person in front of us.

In advance of our return journey, we had to complete a video call to undertake a lateral flow test, which again proved negative and then completed the passenger locator form to re-enter the UK – that was fun with all the questions they had! And then the return journey was similarly uneventful, albeit that check in at Faro airport was nowhere near as well organised as Gatwick, which resulted in the plane being late taking off by the time all the final passengers were on board.

We were due to arrive at Gatwick at 9.30pm, so I thought I would check to see how busy the airport was going to be. In fact the flight prior to us, landed 1½ hours earlier and after us, there was only one more flight that day. Gatwick was therefore as deserted coming back as it had been going out and coming through passport control, we were able to use the electronic scanners, which automatically tied up the other documentation and we were through in less time than normal.

The final chapter is that we went for our Day 2 tests, which were negative and tomorrow we are due to go for the Rapid Release Test, which providing they are negative, means we will be out of self-isolation on Friday.

In conclusions therefore, apart from the extra hurdles one had to jump over to get all of the documentation sorted, and yes, that did cause a few stresses and strains, the actual travel itself was absolutely fine.

What has been interesting to note on our return is that some of the statistics being quoted are that having looked at 23,000 passengers returning from amber list countries, there were only 89 cases identified of people testing positive for Covid and of those, there were no new variants noted. The most recent statistics quoted for the UK are that 100 people in 100,000 are testing positive for Covid and therefore, the statistics for returning passengers might be at a higher level of around 350 per 100,000, but it is nowhere near the apocalyptic levels that were predicted or anticipated in the Government decision making process.

Turning briefly now to the investment world, although there have been a few jitters in Stock Markets, there is nothing significant and most short term reductions have been recovered from and the most recent concerns were once again linked to inflation and the potential for interest rates to be increasing sooner rather than originally anticipated. Mind you, on that one, what they are talking about is that maybe rates will nudge up towards the end of 2022, rather than in 2023, so there is plenty of time for all that to settle down.

I think the only disaster area to note at present is for people who have invested heavily in crypto currencies with some fairly significant falls in values, particularly with Bitcoin, which has been compounded by the interventions taken by the Chinese authorities in closing down crypto currency mining Companies.

I have to say, even though I might have just summarised the current position with crypto currencies, they really are a mystery to me and to most people I think, and probably best avoided for the majority!

All being well, I will be back to the office as usual on Monday of next week and thankfully, it looks as though we are seeing a return to summer weather.

As a final thought, not all statistics are helpful and in fact, earlier this week, it was recorded that locally to the office in Goudhurst, at a small village called Frittenden, the maximum temperature on the day of the summer solstice was below that recorded on last year’s winter solstice! In fact, it was the lowest summer solstice temperature recorded for over 40 years – hopefully, it will be that long again before we challenge that particular record.

As always, stay safe and we will keep in touch.

Best wishes.

Richard, Chris and Lesley

A few weeks ago when we were partway through the roadmap to lockdown restrictions being lifted and with the prospect of international travel being allowed from 17th May, I took the plunge and decided to book some flights to visit Portugal in June. 

Whilst the thoughts were initially prompted from a business perspective, because I have a couple of reasons to be there, it’s also been a while since we have taken a meaningful holiday and therefore, we thought that it would be good to spend an early summer week in Portugal. As she always does, Chris had a good look round to find accommodation and we were able to book flights with EasyJet on the basis that if we needed to change because of Covid, we could do so without any charges and we secured a villa that we had 100% cancellation rights on up until 29th May.

Imagine how smug I felt when the green list of countries was announced and Portugal was there!  We had beaten the rush, both in terms of getting the flights we wanted and a reasonable property, all at a sensible price before things started to rocket skywards.

I would imagine you are ahead of me already – whilst looking forward to a week in the sun and anticipating that last Thursday, other countries would be announced for the green list, we then had the disappointing news that Portugal had been downgraded to the amber list!  The major cost of our trip is the villa rental and of course, by the time the amber list announcement comes through, we’ve passed the cancellation date and although our first reaction was to think we can’t go, when I really thought about it, what it means is that the self-isolation on our return can easily be accommodated by working from home for that time and so I started to look into all of the testing requirements to see what we would need to do.

As a green list country, travelling to Portugal meant taking a PCR test within 3 days before travelling out and then to facilitate our return to the UK, we had booked a video on-line test for 3 days prior to return with a further PCR test on arrival at Gatwick.  The full cost of these tests would have been £210 each, but with a promotional code from EasyJet, we managed to secure a reduced price of £170 each.

With the amber list news, this then brings in further considerations.  Not only do we need a Day 2 test on our return, but we also need a Day 8 test – that’s another £85 each.  However, that would mean self-isolation for 10 days, whereas there is a rapid release test that you can volunteer for after 5 days.  The cost of that is £95 each and I thought well that’s worth the extra tenner, we’ll go for that!  Oh, foolish me – the rapid release test is in addition to the Day 8 test, but again, we secured a discount code and therefore, the net cost of these additional tests came down to £144.  So that’s a total of £314 each to have 4 PCR tests and a video on-line lateral flow test.

Now that all of this is in place, the actual cost of testing has cost just about double the air fare, which puts it into perspective somewhat!

Just when I thought we were done and dusted, I then had a message from Easyjet to say our return flight had been cancelled – oh joy. Whilst we are returning the same day, it is later in the day and so I had to change the time of our PCR test on arrival at Gatwick. That was when I discovered that the 24 hour service advertised by the testing company actually translated to them closing at 18.00, some 4 hours before we are due to land so now we have to return to Gatwick the following day, but thankfully that it is all booked now.

The nearest place that we can get the PCR test on a drive through basis, is Gatwick airport and therefore, that will necessitate 6 trips to the airport, 4 to get the tests and 2 for the flights out and back.

Along the way, Chris raised the question why are we bothering – but I’m afraid to say that part of my nature is that the more difficult something gets, or the more somebody tells me that I can’t do it, the more determined I am to see it through! When Easyjet cancelled though, I was on a wobble for a minute or two!

Although now that it’s all set up and perhaps it all looks fairly straightforward, I cannot begin to tell you the length of time it took on-line and trying to decipher everything that needed to be done, both in terms of booking the tests, but also completing pre-arrival paperwork for the Portuguese authorities and then we’ll have to do the same again for the UK authorities coming back.  I have to say, I was starting to question my own sanity towards the end, but nonetheless, our trip would appear to be on, that is of course, unless the Portuguese decide to pull the shutters down between now and Saturday – I guess we should expect the unexpected!

I will let you know in the next News & Views how things worked out.

Turning now to investment markets, I have talked in the past about the increasing emphasis that is being played on ESG – environmental, social and governance issues, both at corporate level and in the collective investment funds that we are familiar with.

There is even more stringent legislation within Europe demanding that ESG considerations are taken into account and discussed as part of an overall investment strategy and more and more existing funds are looking to convert to ESG complaint/friendly and that is where I came across, for the first time, the phrase green washing!

In broad terms, this is where corporations or indeed, in some cases, funds, are trying to create the impression that they are ESG friendly, whilst in fact, it is more smoke and mirrors and façade than reality. 

This is going to be an area that gains in momentum and ESG will in due course, replace the traditional ethical and socially responsible investing emphasis and the good news is that ESG considerations will become the norm over time.

In the interim, part of the job that we and the investment partners that we work with must do, is to ensure that our due diligence identifies where green washing could be in evidence and is avoided.

It was during the same presentation I referred to just now that the subject of risk washing was also mooted and this really is best described as being where collective investment funds have a description that says they are balanced or medium risk, with the implication that they fall in line with what is generally accepted as balanced or medium risk.

The actual risk level in funds is often determined by the level of exposure that they have to Stock Markets, which in investment management terms are referred to as equities.  To my mind, a balanced or medium risk fund should have a medium position with equity exposure of around 50% in normal times with the ability for this to be decreased to say, 35%, or increase to 65% depending on short term market trends.  The counterbalance to the equity holdings would be lower risk investments in Government debt, property or commodities for example.

What has become evident, particularly over the last 12 months, is that funds bearing the same risk implication by labelling themselves as balanced or medium, can have a very different equity exposure – some could be as low as 35% whilst others could be 75% or more. Why I say the last 12 months is particularly relevant is because since the dark days of March 2020, at the bottom of markets following the Covid-19 concerns, we have seen a significant bounce back in Stock Markets and the so called balanced or medium risk funds with higher equity exposure may well appear to be outperforming.  In the short term, this may be true, but in the long term, the risk that is associated with them, is such that when corrections or downturns come, they will suffer disproportionately badly, which will show they were neither balanced nor medium risk at all!

This is another area where our due diligence is such, that we need to look carefully at the definitions that are being used when we are matching investment solutions with clients attitudes and appetites for investment risk.

I thought that might be of interest to you to know a little bit about some of the things that go on behind the scenes and what we are taking into account as part of our on-going review process and the investment solutions we recommend.

Enough from me for now, so let me close by saying stay safe and we will keep in touch.

Best wishes.

Richard, Chris and Lesley

In my last News and Views, I made some small reference to inflation figures that were being published and that these had been played down by Central Banks as being a blip.  Since then however, more and more of the headlines are latching on to the inflation concerns and how these could have an impact on investment markets and potentially affect the economic recovery.

As always, I thought it would be appropriate to give you the benefit of a few more of my thoughts on this subject, because if we rely too heavily on the headlines, you could be forgiven for thinking that we’re in for hyperinflation, the likes of which we saw back in the 1970’s – in fact, I saw one commentator over the weekend drawing such an analogy and saying how few people would have clear recollections of the impact that very high inflation had on business.

To my mind, this is simply scaremongering in the extreme and I genuinely do not believe that inflation is going to be running out of control.

There are, without doubt, inflationary pressures around at the moment, but these are likely to be short term in nature. 

In many ways, the short term inflation is likely to be driven as we come out of Covid 19 lockdown, with a lot of pent up spending that is likely to hit the High Street and on-line shopping, which will all help to fuel the social and economic recovery.  This anticipated upturn has encouraged reassessment by Governments and Central Banks to look at their policies, including the impact for inflation and interest rates.

The fact that this debate is happening at all led to markets responding with a swift adjustment in prices in the world stock markets.

This is in fact, what has led to the short term volatility we have witnessed, but markets are very resilient and no sooner had values dropped, than bargain hunters were snapping up those lower prices and market values were quickly reinstated.

I think one area where we are seeing a more severe upturn on inflation is in construction costs, and towards the end of last week, I was speaking to one of our clients, who is highly involved within the construction industry, both in Italy and the UK and he said that their raw material costs had been increasing exponentially.  Talking to one of our UK Fund Managers, he confirmed that building costs are indeed, skyrocketing in the short term as certain materials start to run short and it’s the age old question of supply and demand.

Although all of these factors are real and are manifesting in the markets today, the Central Banks, including specifically the US Federal Reserve, the European Central Bank and the Bank of England, they have all indicated that their view is that this is short lived inflation pressure and they are happy to look through it when looking at their longer term strategies.

In fact, conversely, there are many deflationary headwinds that could be driven by developments in technology which themselves have been accelerated due to the pandemic and as importantly, underlying unemployment rates and spare economic capacity will all play their part.

As I saw one commentator put it quite succinctly, these factors ‘remind us that there is a need to distinguish between shorter term price distortions as the world exits a pandemic, vs. the longer term price dynamics where the evidence is in doubt.  As the Federal Reserve Chairman, Jerome Powell, observed in February, inflationary pressures were not a threat prior to the pandemic when US unemployment was at a 50 year low of 3.5%.  Further, it is unlikely that there will be sustained inflationary pressures now, with a US unemployment rate estimated by the Fed to be closer to 10% in January, particularly once the pandemic driven fall in labour market participation and other factors are taken into account’.

In addition, putting my cynic’s hat on for a moment, central Governments can’t afford the cost of borrowing to go up too much in any event because of the huge amounts of debt they are all now managing and although interest rates have been used to try to manage inflation historically, increases are unlikely to be deployed in the short term and the inflationary pressures should even out over the next few months.  [Having stuck my neck on the block with that view, we can only but wait and see what happens now!]

As always, it can be easier to demonstrate these things in pictures and therefore I thought the following two graphs might be of interest.  The line graph actually plots global inflation since the early 1960’s through to 2019 (this was the latest such graph I could find) and you will see there have been a number of spikes along the way, the last notable one being with the global financial meltdown in 2008/09,  but the trend has overall been downwards and continues to be so.

The second bar chart perhaps is a little more meaningful inasmuch that it shows again global inflation rates from 2015 through to the current year and forecast for years up until 2025.  Whilst again this shows a small spike in 2021, this expectation also demonstrates that this is not a runaway trend, but rather that it settles into a fairly repeatable pattern.  Of course, this is a global statistic and individual economies will vary greatly from this average, but nonetheless, it helps to endorse the points that I am trying to make.

Turning to Covid 19 for a moment, it’s encouraging news this week that both Pfizer and Astra Zeneca seem to be virtually as effective against the Indian variant as they were against the Kent variant and other strains of the virus and hopefully, the roadmap can therefore proceed as planned in the UK and as other countries throughout Europe and further afield are catching up with their vaccine programmes, we will see many countries turn the corner soon.

I still have longer term concerns for third world countries and particularly when you hear that there are a number of countries in Africa where the vaccines that they have are going out of date simply because they don’t have the infrastructure and/or organisation to get them delivered and administered on time, which is a great pity.  I cannot help feeling that more effort is required from the likes of the G7 countries and as they are due to meet in Cornwall next month, who knows, we might even see some initiatives coming from there.

As always, I hope that you’re keeping well, take care and we’ll keep in touch.

Best wishes.

Richard, Chris and Lesley

We live in an age where there is a constant danger of information overload and as you will recall from some of my earlier News and Views comments, I am always suspicious of headline grabbing news items, with a preference to try to identify the core elements of any story

We are continually bombarded with commentaries and presentations from across the industry and it’s fair to say I’m quite choosy about those I decide to read in any detail. 

One such summary though came this week from Investec, who are one of the groups we work with and the author of that newsletter, John Wyn-Evans, who is Head of Investment Strategy at Investec, could well be moving house because he’s having a clear out of his loft and as he said, sorting through the accumulated memorabilia and family heirlooms, or “junk” as others might see it, he unpacked a box that had been packed many years ago and rather than bubble wrap, back in the day it was old newspapers that were used to protect things.  He referred to a copy of the Sunday Telegraph dated 8th March 1970 and an article that had been written by Ludovic Kennedy, which was about a book that had been written about Richard Nixon’s presidential campaign.  One quote from that article struck me, which was ‘There’s nothing new in the notion of a Politician putting himself in the best possible light, adjusting his tie and clearing his throat and telling half truths and concealing what is awkward.  It’s what Politicians do everywhere all the time.’

Fifty One Years later, I think it’s fair to say, nothing has changed in this regard!

I think that arguably, over the last week, we have seen evidence of this with all 3 of the main party leaders in the UK and in Scotland, displaying varying degrees of this phenomenon.

Boris Johnson is riding high in the polls overall following success in the Hartlepool by- election and local council elections and although lockdown rules are being eased in the UK, the fact that his key advisers are telling him that the rate of easing of lockdown should be accelerated, which he is choosing to ignore, is politically driven to ride the feel good factor from the Covid vaccination programme for as long as possible – ignoring the fact that the early days of managing the Covid crisis was shambolic at best, which is now long forgotten in political circles.

Looking across the House of Commons, Sir Keir Starmer has had a Shadow Cabinet reshuffle following the disastrous election results, which I heard described by one commentator as having little more effect than rearranging the furniture in the living room!

Sir Keir was quoted as saying he takes full responsibility for the results and yet, appears to do anything but.  Don’t get me wrong, I think he seems a genuinely nice person, however he has a mountain to climb to reshape the Labour Party if they are to provide meaningful and effective opposition.

North of the border, Nicola Sturgeon was saying prior to the Election that if the Scottish National Party achieved an overall majority, she would take that as a mandate for a second independence referendum.  They didn’t get the clear majority, falling in fact, just one short, but nonetheless, she said that this still gives her a clear mandate in any event and points to the UK leaving the European Union as being against the wishes of the majority of Scottish voters, with the implication that re-joining the EU for an independent Scotland would be a natural outcome, but is virtually silent when it comes to the tricky questions as to exactly how the books will be balanced and what post-independence implications there might be for the Scottish people. No mention of the fact the EU may not actually welcome Scotland in any event!

To my mind without doubt, we are still witnessing half-truths and concealment of what is awkward across the political divide.

(Hopefully, in expressing those views, I have not offended anyone, because I do not have any strong political views other than a mistrust of politicians in general and their self interest.)

It is pleasing to see how the vaccination roll out continues apace in the UK, with over 53 million vaccine doses now having been delivered, with over 1/3rd of those being second doses.

Clearly, this is being reflected in all the other statistics with only 4 deaths in the UK being recorded on Sunday, all of which were in Wales, meaning that Scotland, Northern Ireland and England had zero deaths that day.  I read one article the other day that said technically, the pandemic has come to an end in the UK, albeit that it remains prevalent globally of course.

There is still quite a large proportion of the UK population for the 18 – 40 age group to receive their first jabs, but hopefully, we will see the trend continue with the Government stated target of all adults being vaccinated by the end of July.

I think there was a lot of disappointment expressed in the “green list countries” for overseas travel from the UK that was announced at the end of last week, with Portugal being the only main holiday destination for UK holidaymakers making the list.  It’s hardly surprising that there has been a stampede of people trying to book travel to Portugal.  In theory, it will be another 3 weeks before any other countries are added to the green list, but of course, that may change.

Turning now to the markets and we have seen over the last few days some volatility with big reductions in market values, which have been largely driven by the concerns over the re-emergence of inflation.  This tends to demonstrate the sensitivities that can affect markets and as I read in one article, 12 months ago, we had an oil price that had gone into negative territory and as so much of the economy relies on transport, it is little wonder that an inflationary impact would be felt 12 months on, when oil prices have largely recovered.  The traditional method of controlling inflation is manipulation of interest rates and if inflation was to become a factor, then increasing interest rates may well follow at some point, but no time soon in my opinion.

The world often looks to the US for trend setting and the latest inflation figures in the US were announced yesterday with quite a jump, more so than had been expected. Last week, the former Chair of the Federal Reserve in the US, Janet Yellen, suggested in an interview that interest rates might have to rise if growth and inflation started to accelerate too quickly.  In itself, that was quite a natural and logical comment and yet it sent shock waves through the markets until she then executed a rapid U turn by saying that it was actually none of her business and said that the independence of the Federal Reserve should be respected. The main view seems to be that the impact of inflation is not a new trend, but rather a relatively short term blip, but nonetheless, one to be kept on the radar.

In fact, Jerome Powell, current chair of the Federal Reserve kept US rates at 0.25% and commented that he is not even thinking about, thinking about interest rate increases at the moment.

Whilst this all manifests in short term market volatility and reduced values, above all else, the medium and longer term views remain unaltered that we should see sustained economic recovery in most global areas, although there will be on-going uncertainty as far as China and India in particular, are concerned.

As always, stay safe and we will keep in touch.

Best wishes

Richard, Chris and Lesley

©
2021
Richard Alexander Financial Planning Limited
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