WeekWatch

Despite strong retail sales in the UK, the FTSE 100 struggled over the last week.

Retail sales volumes rose by 0.8% in October in the UK compared to September. October sales were also up 5.8% compared to the pre-pandemic February 2020 levels. The month-on-month increase would have been even higher, if it wasn’t for falling vehicle fuel sales. The Office for National Statistics (ONS) pointed out that this represented a normalisation of fuel sales, after they spiked in September as fears of a fuel shortage resulted in panic buying.

While retail sales increasing is typically a sign of a stronger market, it also led to some concerns that it would encourage the Bank of England (BoE) to increase interest rates sooner rather than later. Adam Hayes, Assistant Editor at Capital Economics noted: “Although some members of the Bank of England’s MPC may be concerned that the rise in inflation will take some momentum out of the economy by reducing real incomes, today’s release may, at the margin, ease those concerns and make them more comfortable with the idea of raising interest rates.”

These fears were compounded by high inflation figures released on Wednesday. According to the ONS, CPI inflation hit 4.2% in October, up from 3.1% in September, and the fastest rate in almost ten years. Higher fuel costs and energy prices were the main reasons behind the rise; however, the increasing cost of second-hand cars and eating out were also mentioned. The BoE is maintaining that the high inflation should be transitory; however, Andrew Bailey has admitted inflation could climb as high as 5% before it returns closer to the Bank’s 2% target. European markets fell slightly over the week, as poor market performance on Thursday and Friday wiped out most of the gains in the STOXX Europe 600 made at the start of the week. These falls were from a record high.

The EU is currently facing a new wave of COVID-19, and several countries are taking restrictive measures to slow its spread. Among the most extreme, Austria announced a lockdown on the Monday, which it then extended to a full lockdown by Friday, for a maximum of 20 days. It also announced plans to make COVID-19 vaccinations a legal requirement from 1 February 2022. The Austrian Traded Index fell over 2% in the hours following the news of the full lockdown on Friday, ending the week down overall.

Elsewhere, Royal Dutch Shell announced on Monday that it planned to end its dual-share structure, split between the Netherlands and the UK, and relocate its tax base to the UK. Such a move will see Shell’s corporate structure simplified, something it said would reduce risk for shareholders, while allowing for an acceleration in distributions by way of share buybacks. Several commentators also pointed to the Dutch dividend tax as a reason for Shell to move to the UK. The move will increase pressure on Dutch politicians keen to keep multinational companies in the Netherlands to consider the future of its dividend tax, which would be positive for income investors with Dutch holdings.

American markets fared better than their European counterparts, with both the S&P 500 and the Nasdaq growing over the week, partly thanks to the strong performance of the tech sector.

With the S&P 500 currently sitting at just over 4,700 at the time of writing, Morgan Stanley warned last week that it expected it to fall to 4,400 by the end of 2022; primarily as some of the tech stocks, which have exploded in value during COVID, struggle to hold on to these high share prices. It should be noted that a number of other banks, including RBC and Goldman Sachs, see the S&P 500 growing next year, albeit at a much slower rate than it has this year.

Finally, emerging markets had a tough end of the week. Turkey cut its interest rates on Wednesday, despite rising global inflation. This sent the price of the Turkish lira down significantly, and there have since been several reports predicting higher and higher inflation, and a potential currency crisis, unless interest rates increase.

In India, Paytm went through India’s biggest ever IPO, only to see its share price fall by more than a quarter in its first day of trading.

Whilst it’s never too late – or too early – to start saving for the retirement you want, it’s often helpful to think in terms of saving a percentage of your earnings at certain ages. A good starting point is to halve your age and try to save that percentage of your salary each year.

Another way to look at it is to aim to have saved multiples of your earnings by a certain age. For example, you could aim to have three times your earnings saved by the time you are in your 30s, six times by your 50s, and eight times by your 60s.

When it comes to achieving your goals in retirement, it’s worth noting your different options. While pensions are still the dominant source of retirement income, tax-efficient investments such as Stocks & Shares ISAs and income from other sources, such as property, also provide options.

Meanwhile, knowing how to use your defined contribution pension pot – and defined benefit scheme, if you have one – to maximise income is important in ensuring you can live the life you want during your later years.

Tony Clark, Senior Propositions Manager at St. James’s Place, advises anyone starting to think about retirement to talk it through with an expert to work out your options. “It depends on how much you’ve saved, what income you have coming to you and when, plus when you need and want to give up work – there are a whole range of factors,” he says. “Sit with your adviser, work out what your objectives are going to be over the next few years and into later life, and see when certain incomes are going to switch on and off.”

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.

The levels and bases of taxation, and reliefs from taxation, can change at any time. Tax relief is generally dependent on individual circumstances.

“A big part of the challenge is mental. There’s physical parts of it that are going to hurt and be horrible, but I think mentally every hour some of it is going to be torturous.”

Former rugby player Kevin Sinfield begins his attempt to run 101 miles in 24 hours to raise money for charity.