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ICM: Inflation and interest rates, 25 April

By 27th April 2022June 30th, 2022No Comments

The latest quarterly Town Close Financial Planning Investment Committee Meeting took place on 25 April 2022.

The TCFP Model portfolio currently remains unchanged, but a rebalance of all pensions and ISA accounts was agreed.

This is happening because our data shows us that equity prices have fallen by just over 10% for the year. This rebalance will realign all pension and ISA portfolios back to our current model.

In doing this we are selling investments that have done relatively well and buying those that have not. This should benefit all TCFP clients in the longer term.

Cash balances and investment accounts will remain as they are because cash is there for your short-term needs and investment accounts have tax matters to consider.

Underlying themes

Since our last meeting Russia invaded Ukraine. This sparked us into action and a rebalance was applied. A month or so later and markets were calmer and war news was relegated to the third or fourth item on ft.com.

The main item on the agenda now is inflation. Monetary policy is being tightened across the world with the aim of bringing this under control. This can mainly be seen in America with the Fed announcing interest rate rises. We will expect this to happen several times this year, which will result in a lower growth from the US and knock-on effects elsewhere.

We do not believe that these interest rate rises are in our best economic interests. However, central banks generally have inflation targets which they have to meet, they have to be seen to take action today. The whole situation is currently entirely politically driven.

That’s not good news. The interest rate theme will continue and spread; markets have already started pricing this in.

Who knows how this shakes out in the short term, in the long term everything will be fine.

Our expectations for global growth and investment returns are less than they were in the short term. Not that those expectations were anything to rely on compared to the longer-term returns, where our expectations remain the same – good growth over and above the rate of inflation.

We did raise one or two other political events – they are insignificant compared to the current inflation / interest rate hiatus.

As always, we will watch this space and will be ready to act accordingly if required.

TCFP

All in all, we continue to remain happy with the position of our portfolio and the current mix of assets.

The rebalance process is underway and should take a week to complete.

This is a good exercise to undertake. It’s also simple, but an effective way to manage your portfolio and these changes all add value in the longer term.

And that was it for April’s meeting. The next meeting is due to take place on 18 July, or sooner if needs be.”

 

Boring But Effective | Truthful, Helpful, Kind

advice@townclosefp.co.uk 

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