Industry Insights with Stuart Brown

Industry Insights

With Stuart J Brown

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It's hard to believe that we ' re already halfway through 2023. Nonetheless, I hope you ' re eagerly anticipating the upcoming summer holidays and the opportunity to spend quality time with loved ones.

Following the Spring Budget and the start of a new tax year, what can we expect for the future of our economy? In this newsletter, I'll provide an in-depth analysis of market performance from 2022 to the present day, a glimpse into private medical care, and much more.

Stuart J Brown Financial Adviser Eight Wealth Management Ltd

Equities & Rising Inflation

Since the conflict between Russia and Ukraine started, many major equity indices have suffered losses. However, oil and resourceheavy indices like the FTSE 100 have been boosted by rising commodity prices due to a cut-off in Russian supply chains

In response to rising inflation, the Federal Reserve and Bank of England have increased interest rates to curb it. This has disproportionately negatively impacted growth stocks, as fast-growing companies are typically "long duration" This means that while current profits may be low or negative, the value and stock price of "growth" businesses are largely based on future earnings, which are expected to be substantial given their growth trajectory. As interest rates increase, this future growth is discounted at a greater rate, leading to a decline in share prices As a result, Growthoriented funds like Global Growth, Global Quality, Managed Growth and International Equity have underperformed relative to the broader market downturn.

On the other hand, Financials have benefited from the rising rates environment, as have Oil and commodities businesses, which have generated outsized profits due to price increases Value-oriented funds like Global Value and North American, which typically have higher weightings in these sectors, have consequently benefited and delivered strong relative performance.

Past performance is not indicative of future performance.

If there's one thing that 2022 taught us, it's that short-term events are unpredictable. Short-term valuations are subject to numerous variables, and it is difficult to predict them accurately with any frequency. While this may appear daunting, there are reasons to be optimistic. Market performance is largely influenced by sentiment, and history has shown that market declines frequently precede a recession but also begin recovery sooner

In other words, while there is a chance that forthcoming data will indicate a recession, much of the pain may have already been priced in. As a result, it is essential to focus on long-term thinking.

A Glimpse into the Fixed Income Market

Bonds have not effectively protected against losses in the recent market conditions where high inflation rates coincided with a rapid rise in interest rates. Despite this, bonds are still viewed as a defensive asset class as the returns from coupons and maturity values are long-term.

Fixed-income markets, except for inflation-linked bonds, have experienced a widening yield (resulting in price declines) due to inflation, interest rates, supply issues, and recession concerns Initially, interest rates led this move, with government and investment-grade bonds experiencing greater reductions than high-yield bonds This is because of their longer duration, which makes them more sensitive to rate hikes Recently, supply issues and recessionary fears have contributed to volatility across all markets.

The price decline in 2022 is attributed to the market pricing in duration risk (risk of rates increasing) and increased credit risk (risk of default). The current market prices better reflect risk premia due to changes in central bank stance and messaging, particularly from the Fed and BoE They have shifted from the "lower for longer" narrative to "rate hikes to combat inflationary pressures. " The rate hikes implemented by the central banks are considered a catch-up to the market's already priced-in rates

With the bond market facing its toughest period in 40 years, it's time to consider the potential for growth and the options available. Here are some key points to keep in mind:

The market is now showing signs of rebounding, with fund managers citing its current cheapness. Bond yields are becoming more attractive, with fund managers buying bonds under par and receiving coupon income and capital appreciation

Investment grade options are becoming more appealing, with higher quality yields

Access to diversified credit instruments and new issuance is possible through scale.

The present yields present an excellent opportunity for fresh capital investment.

While investing globally offers many advantages, it also comes with currency risks, as revenue generated in non-GBP currencies worldwide is exposed to exchange rate risk. A weaker sterling is generally favourable for UK investors since overseas revenues and profits can be exchanged for a greater amount of sterling, which is less expensive. However, since exchange rates are volatile in the short term, FX risk can introduce volatility to a portfolio

If lower Sterling is good for globally-minded GBP investors, then hedging against lower sterling (by reducing FX exposure) becomes less advantageous. As the Sterling has depreciated against several key currencies throughout 2022, the hedging program on the fixedinterest funds has detracted from returns.

Past performance is not indicative of future performance.

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

A Positive Outlook Despite Economic Uncertainty

Despite the challenges we face today, there are reasons to be optimistic about the future. Inflation appears to be on the decline, giving central banks some leeway to ease interest rate hikes If this trend continues, there may be opportunities for high-quality corporate bonds, especially given the current attractive yields. Despite ongoing concerns with COVID-19, there is growing confidence in the recovery of the Chinese economy in the coming year. Additionally, Europe has made progress in reducing its dependence on Russian energy

While the road ahead may be bumpy, there are good-quality companies whose values have been suppressed by broader market forces SJP's fund managers are poised to identify these companies, and take advantage of the more reasonable prices, with the aim to deliver better returns. By making sensible decisions now, we can position ourselves for long-term success, even in the face of ongoing challenges.

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

Source: Financial Express, Analytics Data as at 01 January 2023 Please be aware past performance is not indicative of future performance

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

Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products This report is not approved, endorsed, reviewed or produced by MSCI None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

Source: FTSE International.

Why Should I Be Treated Privately?

We are lucky enough in the UK to have the NHS, which provides comprehensive healthcare that is free at the point of need. Accessing private healthcare, meanwhile, is far from cheap - for example, the cost of hip or knee replacement surgery is easily likely to cost thousands of pounds*. What's more, the quality of private treatment isn't likely to be better than that you'd receive through the NHS. So why pay?

The main advantage of private healthcare is the greater choice in where and when you receive treatment, as well as the speed and convenience of the process. Private health insurance is, therefore, one means of fast-tracking lengthy waits without needing to have tens of thousands of pounds handy Private health insurance also covers everything from GP appointments to detailed cancer treatments

Should I Consider Private Health Insurance?

Like me, if you love the NHS and all the amazing work they do, but are concerned about wait times, delays in scans or operations after the pandemic, maybe private health care is something for you and your family to consider.

Private Health Insurance

Get the healthcare you need when you need it, for you and your family.

StuartJ.Brown@spp.co.uk 01489 555 180

How Much Does Private Health Cover Cost?

Like many other types of insurance, private health insurance costs vary according to your circumstances Similarly, your location can greatly affect the costs of your treatment - and therefore your premium. Premiums also inevitably rise with age. For younger customers, a comprehensive health insurance policy might cost a few hundred pounds a year. For customers over retirement age, the cover is more likely to be well into the thousands

You can alter your cover to get you what is specific to you and your family's needs, from operations and physiotherapy to faster access to MRIs and scans.

Costs could be considerably more for those with pre-existing conditions and/or previous claims, and they also continue to rise with age.

Case Study

Source: Health, T B of (2023) NHS Hip Replacement vs private hip replacement, The Best Of Health www thebestofhealth co uk/health-conditions/consultants-specialists/hip-replacement-surgery-should-you-stickwith-the-nhs-or-go-private

Discover a policy that suits both your and your family's needs.

What is a Referral?

A referral is the act of recommending or directing someone to a person, business, or organization for a specific purpose or service

The Way I Conduct My Business

Chances are, if you ' re reading this, a friend, family member, or colleague has recommended my services to you As your financial adviser, my top priority is to manage your finances and provide support where needed My goal is to construct a tailored financial plan for you and assist in comprehending your financial future, whilst ensuring that you feel content and confident in your road ahead.

Please don't hesitate to share my contact information with anyone who would benefit from my services

Client Testimonial

"Stuart has always put our interests first, with his exceptional advice and knowledge in a very professional but relaxed and personal way which makes you as a client feel very confident and reassured "

Stuart J Brown Financial Adviser

Helping people reach their financial goals is what I do for a living. Should you wish to discuss any of the content within the newsletter, please do not hesitate in reaching out and I will be happy to discuss any concerns.

Additionally, I would like to inform you that I will be taking time off with my lovely family for a much-needed holiday. During this period, I leave you in the capable hands of my assistant, Sophie Farrant, who will be happy to answer any questions in the meantime

As your client executive, I work very closely with Stuart Brown and provide the support necessary to make sure your financial journey is managed from beginning to end

Email: Sophie Farrant@sjpp co uk

Telephone: 01489 555 180

Eight Wealth Management Ltd is an Appointed Representative of and represents only St. James’s Place Wealth Management plc ( which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Group’s wealth management products and services, more details of which are set out on the Group’s website at www.sjp.co.uk/products. The ‘St James’ Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St.James’ Place representatives. Eight Wealth Management Ltd is a company registered in England and Wales, Company number 06544529 Registered office: 1460 Parkway, Whiteley, Fareham, Hampshire, P015 7AF.

SJP Approved 31/05/2023

Sophie Farrant

Client Executive to Stuart J Brown