Last week, world stock markets continued reacting to data related to how economies are recovering from the pandemic, such as inflation measures and economic output. These themes have been dominating headlines for the past few months.
In particular, the question of how quickly the Federal Reserve (the US central bank) will reverse its monetary policy this year continued to generate attention. Having stepped up its various forms of support in 2020 to help markets recover from the shock of the pandemic (like many central banks around the world), officials at the bank are now signalling that they will reduce their support in order to combat the challenge of rising inflation.
On Tuesday, for example, the Chairman of the Federal Reserve (the US central bank), Jay Powell, spoke to a Senate committee about the future. His comments have been closely scrutinised for clues about the direction of US monetary policy, and last week’s remarks appeared to reassure markets. In particular, he said that the bank will act to curb inflation, but that it expects inflation to peak in the middle of this year.
New data emerged last week on inflation, showing that US consumer prices were up 7% in the month of December compared to the same month the year before.
By the end of the week, US stocks had recorded their second weekly decline in a row, after the shares of large US banks dropped after some lower-than-expected financial results from JP Morgan.
It’s worth remembering that despite the uncertainty surrounding the Omicron variant, and rising inflation numbers, global equity markets are still close to their all-time highs. For example, the FTSE All-World index remains close to the record high that it reached earlier this month.
In the UK, meanwhile, there was some positive news towards the end of the week. On Friday, the Office for National Statistics revealed that the UK economy surpassed its pre-COVID level in November for the first time since the pandemic struck. It put the rise down partly to a surge in early Christmas shopping.
Suren Thiru, the head of economics at the British Chambers of Commerce, said: “Stronger growth in November is likely to be followed by a modest fall in output in December and January, as consumer caution to socialise and spend, and mounting staff absences sparked by Omicron and Plan B limit activity.”
“While the UK economy should rebound once Plan B measures are lifted, surging inflation and persistent supply chain disruption may mean that the UK’s economic growth prospects remain under pressure for much of 2022.”
As investors, it can be challenging to choose the best path forward amid so much uncertainty about the rate of economic recovery, inflation, and COVID-19 variants. However, investing with a long-term mindset and a diversified portfolio means you can take comfort from the fact that your investments aren’t reliant on any one outcome.
There’s no better time than the New Year to get into good habits that will make a real difference to your life. Financial goals are an ideal place to begin, not least because they’re often attached to tangible positive outcomes.
“Getting into good tax and financial habits will make your life so much easier,” says Tony Clark, Senior Propositions Manager at St. James’s Place Wealth Management. “The key is to form new habits that make your good intentions stick, to the point that you don’t even know you’re doing them.”
Here are five simple but effective habits to get into before the end of the tax year:
All of us have allowances we can use that help our money go further. Many of us have ISAs, but there are other possibilities that can be overlooked and left unused.
“Make sure you’re not missing out on the allowances that you can benefit from,” says Clark. “Are you using what you’re entitled to, such as carry forward on your annual pensions allowances or gifting for Inheritance Tax?”
In other words, find out what’s available and what you could benefit from. You might be missing out on a real money-saving opportunity.
This is about controlling your money rather than letting it control you. Downloading the HMRC app is a good place to start, says Clark.
“There’s loads of information on there that people might not be aware of, so it’s very useful. You can use it to keep track of your records, and stay on top of things such as your tax code for example.”
The tax year may not end until 5 April, but there’s no need to create deadline stress by leaving everything until the last minute. There are practical reasons for taking action sooner rather than later, such as the additional time it can take providers to process transactions at tax-year end.
Whether you need to top up your ISA, make extra pension contributions or put other changes in place, it’s worth carving out time well before April. After all, you don’t know what else will be on your to-do list by that point.
The ranks of the self-employed swelled during the pandemic, putting more people in the self-assessment system. The January deadline for online self-assessment returns can trigger a panicked search for the records and information you need to get your facts straight. Get into the habit of keeping your paperwork up to date and you’ll make life much easier come self-assessment time.
“It’s easy to miss the deadline and incur penalties that you might otherwise have avoided. If you’re self-employed, your personal finances will be inextricably linked to your business, so you’ve got more work to do,” says Clark. “It’s especially important to be organised and get advice.”
This is perhaps the best habit to get into and the step that will drive other good financial habits.
“A regular check-in with your adviser will give you the impetus and momentum to keep on top of everything,” says Clark. “They will help you with gentle reminders and ask the questions you need to think about.”
When it comes to financial and tax matters in particular, getting into good habits so that they become second nature can set you up for the rest of your life. Now is the time to start.
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 and are generally dependent on individual circumstances.
“We can begin to see that the post-pandemic economy is likely to be different in some respects. The pursuit of our goals will need to take these differences into account. To that end, monetary policy must take a broad and forward-looking view, keeping pace with an ever-evolving economy.”
Federal Reserve chair Jerome Powell tells the US Senate last week that the central bank will try to prevent inflation becoming entrenched.
The information contained is correct as at the date of the article. The information contained does not constitute investment advice and is not intended to state, indicate or imply that current or past results are indicative of future results or expectations. Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.
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