WeekWatch

US technology stocks dipped last week, after a better-than-anticipated jobs report reinforced expectations that the US Federal Reserve will increase interest rates this year.

Minutes from the central bank’s most recent meeting were released on Wednesday last week, revealing that officials are weighing up raising interest rates sooner than many investors were anticipating in order to deal with high levels of inflation. According to the minutes, some officials believe that rates ought to be raised before the Federal Reserve achieves its goal of hitting maximum employment in the US.

Since the COVID-19 pandemic caused economies around the world to shut down, central banks have kept asset prices stable with low interest rates and other forms of support (such as bond purchases).

However, with inflation now growing, many of them have begun moving to taper down this support – with the impact already being felt in some corners of the market such as in the share prices of technology companies.

Actions like the Federal Reserve’s upcoming interest rate hikes signal a shift in economic conditions after a period in which central banks have supported markets so extensively, wrote Mark Dowding of BlueBay Asset Management, a fund manager for St. James’s Place.

He added: “In many respects, 2022 begins with a sense of optimism after two years of pandemic. As normality returns, we are inclined to think that fundamentals and valuations will play a more important role in determining the path of asset prices than they have during a period characterised by abundant liquidity and market technicals.”

Media reports over the weekend suggested that the UK is moving towards ‘living with’ COVID-19 due to indications that the Omicron variant is less severe than previous ones.

With so much uncertainty, the best course of action for investors is to take a long-term view with a well-balanced range of investments. If your funds are invested in a wide range of assets, then their performance won’t be overly reliant on any one outcome.

If you have children or grandchildren and hope to leave them something after you’re gone, it’s vital to factor them into your retirement planning.

That’s because pensions and ISA savings can be handed down to the next generation – just like the family home or investment properties. So, when doing the sums and preparing for your own retirement, it’s good to think holistically about the whole family’s finances and how your pension savings might benefit loved ones when you die.

Many people think that inheritance matters are something to ponder around the time of writing their Will, and then they can be promptly forgotten about. It’s true that having a well-drawn-up Will – one that’s kept updated as your circumstances change – is fundamental to ensuring your beneficiaries are looked after.

But rather than building up your assets and then deciding which family member gets what in your Will, it’s better to start out with imagining what kind of assets you would like to set aside for each of your loved ones, and then creating a financial plan to achieve this.

This subtle twist in thinking, from looking in the rear-view mirror to focusing on the road ahead, can be powerful when it comes to creating your family’s financial future.

Will writing involves the referral to a service that is separate and distinct to those offered by St. James’s Place. Wills are not regulated by the Financial Conduct Authority.

“The thing that might happen in the future is you may see the emergence of a new variant that is less severe, and ultimately, in the long term, what happens is Covid becomes endemic and you have a less severe version. It’s very similar to the common cold that we’ve lived with for many years. We’re not quite there yet, but possibly Omicron is the first ray of light there that suggests that may happen in the longer term.”

Dr Mike Tildesley of the Scientific Pandemic Influenza Group on Modelling