It’s That Time of the Year Again!

As we approach the end of the 2020/21 tax-year, thoughts inevitably turn to end of year tax planning and any unused allowances (ISA, Pensions etc.) that may be available.

The ISA allowance for 2020/21 is £20,000 and if you have not made a subscription (or perhaps you have only made a part subscription), there is still time to use this allowance, if you have the funds available.

Since 6th April 2016, in addition to the subscription, it has been possible to top-up ISAs by any amounts withdrawn during the tax-year, including any charges deducted. This means that even if you have not made a subscription this year but have ISAs from previous years, your personal ISA Allowance may be more than £20,000 because of charges deducted during the year. If you made a subscription at the beginning of the tax-year, you may still have a residual allowance left because of these deductions which can be utilised by 5th April 2021.

If you have a Standard Life Wrap Account, the scope for top-up (in addition to any unused subscription) does not apply, unless you take physical withdrawals from your ISA. This is because Standard Life deduct ISA charges from the cash held in your Portfolio and not from the ISA itself.

If you have a Transact Wrap Account and you would like to know your personal ISA allowance for the remainder of the 2020/21 tax year, you can access this information on the Transact website. From your home page, select reports and from the drop-down menu, select ISA Subscriptions.

If you would like to use the balance of your allowance before 5th April, please ensure you advise us of your intentions before the end of March; we will be very pleased to assist.

Just for information, the ISA Allowance for 2021/21 is likely to remain £20,000 each, so £40,000 per couple.

Possible changes to Capital Gains Tax (CGT) in the Budget on March 3rd

There has been speculation that Rishi Sunak might try and align CGT rates with Income Tax rates in the upcoming Budget, the effect would be to significantly increase the tax payable on disposal of investment assets not held within ISAs and Pensions.

Currently, rates for CGT are 10% for Basic Rate Taxpayers and 20% for Higher Rate Taxpayers, where property assets are concerned (excluding the main residence) the rates are 18% and 28% respectively. There is an allowance each year (currently) of £12,300 before CGT becomes payable.

Income Tax rates of course, are 20%,40% and 45%, so potentially quite a step up!

Is there anything you might be able to do to lessen this blow? The truth is not very much but it might be sensible to at least consider using this year’s CGT allowance before the end of the Tax Year. If you do wish to look into this, please do let us know and we will try to assist.

If you have a General Investment Account (GIA) with us worth more than £250k, we will be contacting you individually over the course of the next 10 days or so.   

Despite the speculation, The Sunday Times this weekend seemed to suggest that such a change was unlikely.  

Most of our clients will not be affected in any event, as most assets are held within ISAs and Pensions, where CGT does not apply.

As always, if you have any questions about this piece or any other finance related matter, please do not hesitate to get in touch.

Yours sincerely

Graham Ponting CFP Chartered MCSI

Managing Partner

Alternatives to a Wealth Tax?

My last missive on speculation about a possible wealth tax raised a few eyebrows, even though I think it is safe to say, it is unlikely to get the go ahead in the upcoming Budget. It did remind me however, of a piece written by Giles Coren, published in the Times, on 1st September 2012, when we were under the Conservative/Lib-Dem coalition government. It took me a while to find it, buried as it was in an old archive but find it, I did. Enjoy!

Soak the rich. Start with the mustard cords – Giles Coren

Nick Clegg’s useless tax wheeze will never work. You have to use stealth – and that means using your imagination.

If Nick Clegg wants to “hardwire fairness” into the Government’s austerity measures then he is going to have to do a lot better than implement a French-style wealth tax of 0.5 per cent on rich people’s assets because, as Denis Healey explained to Harold Wilson 350 years ago this week, rich people are too clever for that. That’s how they got rich in the first place. They’ll see a thing like that coming from a mile away and just hold all their expensive stuff behind their backs and go “tra-la-la” until the tax man walks past, or they’ll go, “Oh look, is that a cormorant?” and then stuff it all down their trousers when he looks up.

The only way to tax the rich is by stealth. Not with a “stealth tax” so unstealthy that even bone-thick Labour backbenchers can spot it without their NHS specs on, but one that is actually stealthy. Stealthy as a mink with a diamond-studded cane and a sex worker on his arm at a cocktail party on an oligarch’s yacht. A tax nobody could notice because it is just too, too clever.

If the coalition wants to save the economy without picking the pockets of the poor it need only tax the following items, then sit back and enjoy the inevitable upturn of the curve.

Red trousers

Slap a tenner on every pair of these and you’ll be half way out of the doldrums already. Just take a glance around Kensington and Chelsea on a Saturday afternoon if you don’t believe me. Nobody with a ten million quid town house in that part of the world appears to own any other type of weekend trouser. If red slacks did not exist I am sure they would be walking up and down the Fulham Road in their underpants. Tax those, Mr Clegg, and nobody will raise an eyebrow.

Mustard cords

Rich bastards looking for loopholes will no doubt be advised by their devious accountants to move completely over into these heretofore occasional alternatives to red legwear, and thus you may find yourself compelled to tax these as well, to stop the fiscal leakage. Consider also a levy on green quilted bodywarmers.

“Builder’s Tea”

Drunk only by squawking posh hags in the South of England. Actual builders, as everyone knows, drink Red Bull for breakfast.

Labradors, Gordon setters, golden retrievers, Weimaraners, pugs, Afghans . . .

Slap huge licence fees on these elitist hounds (your spin guys should be looking for the headline “Capitalist Dogs!”) but nothing at all on pit-bull crosses, Rottweilers or Dobermans, so that your core working-class voters can still afford something to kill their toddlers, savage their nans and crap on the middle-class pavements where they take them for their morning toilet.

Heroin

As the fallout from the death of the Rausing woman has shown us, the truly super-rich can honk their way through absolute kilos of the stuff. A “smack tax” would be a great way to batter the idle rich while passing it off as some sort of namby-pamby health tax.

Football tickets

Nobody poor has been able to afford one since the end of the last century anyway. Time to profit from or tax into extinction this ridiculous pastime of the unimaginably wealthy.

Electric cars

Also, hybrids, gas-powered vehicles, bicycles and horses. Everybody knows that environmentally sustainable travel is a luxury of the super-rich. Who have you ever seen getting out of a Prius apart from Gwyneth Paltrow or Bill Gates? Honest working people drive gas-guzzling rust buckets because they don’t have the spare cash to indulge in luxuries like saving the planet. So, tax heavily any non-petrol or petrol-efficient vehicle and slash the deficit with absolutely no knock-on hardships for the poor. This is about squeezing the rich and saving the nation — the Earth can go screw itself.

Windmills/wood-burners/solar panels etc.

Same principle as above. If you’re not relying on cheap fossil-generated energy from the National Grid then you are almost certainly super-rich scum and we’re going to soak you with petrol till your eyes pop out. A 50 per cent levy on all carbon-neutral energy sources will pull us up to a practically German level of economic strength, and teach those jewellery-rattling bankocrats a lesson or two.

Books

Come on, name a poor person who reads books. You can make this looks like a tax on educational elitism, entrenched values, old technology and Bunterish Tories with their own libraries who hate black people, but in fact you’re just taxing people who think they are too good for television.

Art galleries/museums

And all other places where they serve muesli crunch bars instead of ham rolls in the canteen.

Fresh food

Who apart from the wealthy can be bothered with farm shops, farmers’ markets and little independent grocers? Frozen supermarket ready meals and fast food are good enough for the poor, so let’s put a whopping impost on any foodstuff that is less than a week old and has travelled fewer than 300 miles — the surefire indicators that evil wealthy customers are the target. Working-class voters waddling down the fizzy pop aisle at Lidl with their faces in a Ginster’s pie won’t even notice.  

Thinness

Who is thin these days apart from the wealthy? With their fresh food and their moderate alcohol intake and their gym memberships ... they make me sick (which is great because vomiting keeps me thin). Everybody’s annual tax liability must be divided by the square root of their body mass index (BMI) to create a final payment inversely proportional to how fat they are. Proper huge Northern fatties will pay practically nothing, as is only fair, and bony-arsed gold-hoarders like the Ecclestone girls, the Duke of Westminster, Seb Coe and Selina Scott will be stripped clean. The obese (or “meek” as they used to be called) will truly inherit the Earth.

Flights to Italy

Only rich people go to Italy, to buy castles off each other and whang on about the sodding tomatoes. So, double the cost of flights there, cream off 90 per cent of the revenue towards the deficit and secure more votes by using the rest to subsidise flights to such places as Faliraki and Puerto Banús where poor people like to go to get horribly burnt and beat each other up.

The Guardian

A newspaper run, written and read only by rich people, who take this miserable blatt full of leftist cant and lachrymose inclusivity bilge to assuage the guilt they feel about their rich parents, public school education, high salaries and huge Victorian houses in Hackney. Add another pound to every copy and the soppy rich gits who buy it will never notice, and nor will the poor, who will, as ever, carry on buying something jolly with bare norks in it and the odd free holiday offer for 30p.

The Lib Dems

A party that is the eccentric luxury of super-rich voters and is run entirely by people who went to Westminster School. So, slap fifty quid a year on party membership, which will either raise pots of cash to halt the slump or result in the disintegration of the party and an end to the annual deluge of unworkable hippy-dippy taxation wheezes. So, the nation wins either way. 

When I first read this, I remember thinking how it could so easily have been written by the great wordsmith himself, Alan Coren. I hope it brought a smile to your face on a drizzly February afternoon in Lockdown. I wonder if we’ll all be smiling after the real Budget on 3rd March?

As always, if you have any questions about this piece or any other finance related matter, please do not hesitate to get in touch.

Yours sincerely

Graham Ponting CFP Chartered MCSI

Managing Partner

What might a Wealth Tax look like?

An alternative heading for this piece might be “If you have worked hard all of your life and been prudent, be afraid, be very afraid!”

The following is an article from yesterday’s Money Marketing by Gareth James, Head of Policy at A J Bell.

“Variants of the phrase ‘Extreme times call for extreme solutions’ reputedly date back to the era of Hippocrates.

The economic situation the nation finds itself in as a result of measures taken by the Government to fight Covid-19 has raised the prospect that tax solutions which would usually be considered extreme may be required to plug financial holes. 

The possibility of a wealth tax has not been seriously examined for almost 50 years but, in Spring 2020, the London School of Economics established a Wealth Tax Commission with that purpose in mind. 

The WTC published its final report on the prospect of a wealth tax on 9 December 2020, with the paper subject to a significant level of scrutiny ever since.

In this article we will take a look at what the WTC recommended, as well as clarifying a few items which have been reported as recommendations, but were not; we will touch on the issues with implementing a wealth tax; and we will consider the prospects that a wealth tax sees the light of day.

Key recommendations

The Commission’s starting point was that any wealth tax needed to meet four key principles, with each principle formed from research with the general public regarding the priorities around any such tax. The principles were to:

• Raise substantial revenue - given the size of the hole in the public finances.

• Be fair – with this defined as raising more tax from those with a greater ability to pay.

• Be administratively efficient – so the cost of collecting should not be too high.

• Be difficult to avoid and not encourage avoidance.

Before looking at the report’s recommendations it is worth confirming a few points which have been described as recommendations but were in fact not. For example, the WTC did not recommend a specific wealth threshold at which a tax should apply, or the rate of tax which should be used.

The revenue which could be raised using several options was modelled with most attention focused on, but not to the extent of a recommendation, the option of the wealth tax applying on net assets worth more than £500,000.

The tax would be assessed on individuals rather than households, with the rate of tax being 5 per cent - albeit with a standard payment period of five years, so allowing a tax rate of 1 per cent to be paid in each of those five years.

Arguably the key, and most controversial, recommendation of the WTC was that the value of an individual’s main residence (net of any mortgage), their private pensions, and the value of business assets should be considered when working out whether the threshold for liability was crossed.    

Based on that model it was estimated that £260bn in tax would be raised. To achieve the same level of revenue from increases to other taxes over five years it was estimated that basic rate income tax would need to increase by 9p, or all income taxes by 6p.

A threshold at £500,000 was estimated to affect 8m individuals, or 17 per cent of the UK’s adult population.

If the threshold was only payable on assets over £2m rather than £500,000, the tax take was estimated to fall to £80bn.

Whilst rates and specific dates of implementation were not recommended, a number of broader points were.

A one-off tax

First, that a wealth tax needs to be credibly one-off. A key reason for not recommending an annual tax is that it would drive economically inefficient avoidance behaviours from those who might have to pay it.

It therefore seems obvious that, if the one-off nature of a wealth tax is not credible, this would still drive those broader, negative economic impacts.  

Minimising avoidance was also a significant factor in the WTC’s separate recommendation that the wealth tax should not be pre-announced. 

The recommendation that the tax should be based on the value of all assets (including business wealth, private pensions and main residences net of mortgage) was to meet the principle of fairness.

Why should two individuals with wealth of £1m, one primarily linked to listed equities and the other linked to their business or residence, be treated significantly differently? 

An issue created by the inclusion of pensions and properties derives from their lack of liquidity – namely the ability to pay the tax.

Those who haven’t, or can’t, access their pensions are given scope to delay payment until they do so, or until they reach state pension age.

Payment is ultimately expected to be taken from tax-free cash. The report also recommends the introduction of a statutory deferral scheme for those with liquidity issues, perhaps those who are property rich, but cash poor.

The valuation of assets is to be based on open market value at the date of assessment. The report indicates that pensions would be simple to value, which is probably true in the case of defined contribution schemes.

However, I suspect the proposal to use the CETV to value defined benefit schemes will create a fair amount of debate given how much higher this is likely to be than the valuation for lifetime allowance purposes. 

One important point to note around pensions is that no value is to be given to State Pension rights. This is linked to their status as a state benefit, rather than a personal asset.

Interestingly, applying the same ‘state benefits’ principle in reverse means that debts associated with student loans are not deducted from the wealth assessment.

Issues around residence of individuals are recommended to be dealt with by pro-rating the tax liability based on place of residence over the previous seven years. So those who have emigrated from, or moved to, the UK in the last seven years would still potentially be liable, but with the tax reduced to reflect their period outside the UK. 

A final recommendation worth noting is that low value items, with the report suggesting a threshold of £3,000, should be excluded from any wealth assessment. Primarily this is because the cost of valuing the item would outweigh any tax liability which arises.

Before turning to the prospects for a wealth tax, let’s look at a quick example of the potential impact on an individual:

'Wealth tax' case study

Frank has a house worth £500,000, but with an outstanding mortgage of £150,000. In addition, Frank has a pension worth £200,000 and ISAs worth £50,000.

After deducting the value of Frank’s mortgage from his property, Frank’s net wealth is calculated as £600,000 meaning he has a liability of £5,000 on the excess of £100,000 over the £500,000 threshold.

He could choose to pay £1,000 a year over the next 5 years or, because all of the excess can be attributed to the value of his pension, he could defer payment until he accesses his pension or reaches state pension age.

Will we see a wealth tax?

It’s important to remember that this isn’t a paper prepared at the request of the Government, although both the Treasury and HMRC are thanked for their assistance in its preparation.

The WTC felt the evidence base around the idea of a wealth tax was deficient given the idea hasn’t been seriously considered for so long, so set out to fill that gap.

The fact the report backed the introduction of a one-off wealth tax will also naturally attract some attention from the government, as well as the wider financial commentariat.

The report itself opens with comments from Rishi Sunak given in response to a Parliamentary question in July 2020, of “No, I do not believe that now is the time, or ever would be the time, for a wealth tax”.

That would seem to pour cold water on the prospects of a wealth tax but, as already stated, these are extraordinary times.  The deficit is expected to reach 19 per cent of GDP in coming months; the highest figure ever in peacetime; twice the level at the peak of the 2008 financial crash, and twice the level when the Chancellor gave his thoughts on a wealth tax.

The government made a manifesto pledge not to raise income tax, National Insurance Contributions or VAT. Will the government risk breaking that pledge, or will it have to consider extraordinary new avenues?

Pensions tax relief is another option – perhaps removing higher and additional rate tax relief and potentially replacing it with a flat rate?

At face value this appears a simple change but, as more than one Chancellor and their supporting team at the Treasury has come to realise, it really is a horrendously complex change to make.

Significant numbers of ‘victims’ would be seen in defined benefit and workplace schemes on far lower salaries than might at first be thought.

Research has consistently shown support amongst the general public for a wealth/fortune tax. In the WTC’s report it was clearly shown to be a more popular option than an increase in income tax, CGT, IHT or council tax.  

An obvious question is whether this support is limited to the point where people become personally affected by a wealth tax. If set at the £500,000 level covered in the report, many people will be liable who might not have considered that to be a risk when expressing support for the idea.

If a tax were introduced there would also naturally be scepticism about its one-off nature. Whenever the topic of one-off taxes is mentioned the fact that income tax was originally intended to be a one-off tax to cover the cost of the Napoleonic Wars, but is now a core ongoing part of the tax system, is brought up.

This is a slightly simplistic analysis of the position, given there have since been short periods during which income taxes were abolished. And of course, a key reason why income taxes have remained popular is the increased efficiency of taxing income in the current labour market rather than taxing capital.

Reviews of several other taxes, more closely linked to the government, are underway or have recently been completed. The House of Commons Treasury committee has launched a ‘Tax after Coronavirus’ inquiry. The Office for Tax Simplification is in the process of completing a review of CGT and in July 2019 completed a review into IHT. 

The next Budget is due on 3 March 2021. The WTC’s report will lead to further speculation over a wealth tax but, given we are some way out of the Covid woods just yet, it feels as though in early March the focus will still most likely be on protecting the economy and health of the nation, rather than introducing new taxes.”

Some interesting points there, including a general view that the introduction of a Wealth Tax seems unlikely during the tenure of the current Conservative Government. I do wonder however, whether Sir Kier Starmer and his Shadow Chancellor, Anneliese Dodds, will be leafing through the report with piqued interest!   

As always, if you have any questions about this piece or any other finance related matter, please do not hesitate to get in touch.

Yours sincerely

Graham Ponting CFP Chartered MCSI

Managing Partner

Investing with a Conscience!

I do hope you are all continuing to stay healthy during these unprecedented times and are just waiting patiently for your turn to be called for a vaccination. Our local area seems to be doing very well with the over 70s being vaccinated already, which is great to hear, my turn can’t come soon enough.

Some of you may already be familiar with the concept of ‘Green’ or ‘Socially Responsible Investing’ and I am writing to let you know that our Investment Partners, Evidence Based Investments Ltd (EBI) has just launched a range of Earth Portfolios which adhere to the principles of ESG.

What is ESG (Environmental, Social & Corporate Governance)?

The three pillars of ESG cover a wide range of issues. The following table summarises the main areas covered by each pillar.

The funds which make up this new range of portfolios have all been carefully selected to ensure that these principles are front and centre in their stock selection process.

One of the big questions you might ask in considering this type of investment is:

How will integrating ESG funds impact on performance?

In the past it was assumed that investing in line with one’s principles came at a cost in the form of higher charges and/or lower performance but the evidence does not support this; in fact, there is increasing evidence that ESG integration leads to enhanced returns. Consider the Eccles et al (2012) study The Impact of Corporate Sustainability on Organizational Processes and Performance which identifies companies that had long standing good practice in terms of sustainability (closely equivalent to ESG), and states, “High sustainability companies significantly outperform their counterparts over the long term, both in terms of stock market as well as accounting performance.

In addition, engaging in dialogue with companies on ESG adds value. For example, a study of investor’s engagement activity in the extractive sector identified a 4.4% additional return from companies that engaged actively with their stewards and that engaged companies are less volatile than their peers.

More recently there was the Blackrock Investment Institute’s Global Insights report May 2018. The study, carried out between May 2012 and February 2018, found that the MSCI USA Index’s annual gross return in US dollars was 15.8% - the same result as the MSCI USA ESG Focus Index. The World ex-US index returned 10.5%, while its ESG counterpart beat this by 0.6% over the same period. In emerging markets, the ESG index returned 9.1%, while its parent benchmark only produced 7.8%.

There is no guarantee of course that this kind of outperformance over traditional funds will continue but with so much more attention on how our actions impact the environment around us, it does makes sense that companies which adhere to the principles of ESG, could do very well indeed.

We at Clearwater have no axe to grind or any angle on this, we remain completely agnostic on this issue but we are sure some of our clients might take some comfort from having their money managed in this way. We have some really helpful, easily digestible literature on the Earth Portfolio range and if you are interested in exploring this further, I will be very happy to send it over to you. There would be no cost to switch and there is a corresponding Earth Portfolio for each of the existing portfolios, in terms of asset allocation.  

As always, if you have any questions about this piece or any other finance related matter, please do not hesitate to get in touch.

Let’s hope we can get out of this interminable lockdown soon but in the meantime, do keep safe.

Yours sincerely

Graham Ponting CFP Chartered MCSI

Managing Partner

From Resilience to Rapid Recovery!

Firstly, a very Happy New Year to you all, I do hope you had the best Christmas possible, under what were very unusual circumstances.

As you doubtless know by now, I am something of an optimist and accordingly, I make no apology for sending a broadly positive missive less than 24 hours after we were once again plunged into a national lockdown.

There is little doubt that 2020 will go down in the history books as an extraordinary year. A deadly pandemic swept across the globe. Economies effectively shut down for an extended period to reduce the spread of the virus and limit the number of fatalities. That resulted in the largest decline in output since the Great Depression. However, while the first half of the year was punctuated by fear, that was quickly replaced by resilience and hope in the second half of the year. Resilience came from people rapidly adapting behaviours to the difficult circumstances, and hope from optimism that successful vaccines were being engineered. That hope was also founded on the rapid response of governments and central banks to both the medical and economic emergency. 

While perhaps not always perfect in terms of timing and execution, the support from the state for households and businesses was essential in preventing the debilitating economic effects of bankruptcy and unemployment. Governments correctly recognised that the cause of the crisis was not household or corporate excess, but a temporary shock caused by taking measures to contain the virus, and otherwise healthy, well-functioning businesses needed to be supported; household income should not be negatively impacted where workers were forced to sacrifice wages to contain the pandemic. The use of these financial tools, supported by central banks reducing interest rates as far as possible and undertaking large-scale asset purchases, facilitated a rapid economic recovery in the second half of 2020. 

In 2020 Q3 economies had recovered much of the decline in output over the preceding two quarters. Indeed, the bounce back in Q3 was better than almost all, forecasters were expecting. As economies began re-opening, pent-up demand was released with consumer retail goods purchases rising well above pre-COVID-19 levels and services recovering in sectors where restrictions were less stringent. Interest rate sensitive areas, such as housing also saw a rapid increase in demand, and even companies began to ramp up investment again.

While hugely encouraging, the initial rebound in activity could only be sustained if there was an effective vaccine widely available for use. In early November, several pharmaceutical companies announced the results of their trials show that showed the vaccines to be highly effective. The success of these vaccine trials and the prospect of mass production and distribution starting in late Q4 is the game changer that society had been hoping for. The 'COVID-19 vaccines' section below gives more detail on the next steps for vaccine distribution, but the hope now is for the majority of people in wealthier countries, as well as nearly all of the highly vulnerable sub-populations, to be vaccinated by the middle of 2021. The early and rapid roll-out of vaccines, alongside the high efficacy, is far better than anyone expected when the pandemic began. It dramatically reduces uncertainty about the outlook, allowing households and businesses to confidently plan for the future and draw down on some of the aggregate savings buffer accumulated in 2020. Moreover, it should raise demand expectations for businesses that have let inventories run down during the period of uncertainty, providing a further boost to near-term.

As a result, there appear to be a potent combination of economic drivers for 2021:

1. economies re-opening;

2. COVID-19 uncertainty largely removed;

3. pent-up demand for those activities forgone in 2020;

4. increased savings buffer to draw down; and 5) supportive monetary and fiscal policy.

The economists at AVIVA have raised their growth expectations across all the major economies for 2021. At the global level, they expect growth to be around 6.25 per cent in 2021, following a decline of around 4.25 per cent in 2020 (Figure 1). As a result, it is expected that the level of global activity will surpass the pre-COVID-19 level by the end of Q1 in 2021. A significant factor in that is the earlier and more rapid recovery in China. Amongst the major developed economies, the pre-COVID level of activity is expected to be reached by the end of 2021.

Source: Aviva Investors, Macrobond as at 3 December 2020

COVID-19 vaccines 

We enter 2021 with three vaccines already having proven efficacy and with a very high probability of several more to come over the first quarter. Not only that, but the two mRNA vaccines, representing the absolute cutting edge of vaccine technology, have proven incredibly effective in reducing symptomatic infections. 

It is true that questions remain regarding the details of the 70 per cent efficacy announced by the Oxford vaccine study. However, this study, with greater depth of volunteer examination, offers the first indication that not only can vaccines reduce illness, but just as significantly they may materially reduce the spread of the virus. So, whilst the roll-out of the Oxford vaccine may be delayed by the need for further trials, the lessons learned only increase the expectations that the current Phase Three trials will result in further effective vaccines being found. This is not to say that the crisis is over, but rather to highlight that, from a position of uncertainty as to how we may be able to navigate the crisis, we now enter the well-defined logistical challenges of producing sufficient doses and then inoculating populations at speed. Whilst this will require a monumental effort, it is not quite as large as it may first appear. It is far from clear what proportion of populations are likely to be vaccinated given the extreme variations with which different cohorts experience the virus. 

However, whatever number that turns out to be, governments will not wait for all to be vaccinated before relaxing restrictions. Once the most vulnerable are protected, we should expect to see easing, even whilst younger age groups continue to receive a vaccine. In the developed world this means in many countries it is not unreasonable to expect to see normality return over the course of the second quarter. Outside of the developed world it is less clear, with production likely to take longer to reach several countries. On the positive side though, these nations have far lower proportions of their populations in the higher risk categories and so programmes can achieve much in their early stages. So, whilst logistics are challenging, the most material outstanding question is not delivery, but is one that we won’t have any clarity on for some time: the longevity of protection. 

It will take some time before we see whether and how the efficacy of vaccines wanes over time. The evidence regarding natural infection is reassuring, with protection appearing to be long lasting for the vast majority. We will now have to wait and see the degree to which vaccines can match or even exceed this longevity. Whilst this uncertainty hangs over us, given the low level of mutation observed thus far, it is unlikely that the downside scenario is materially worse than the prospect of annual booster shots to revitalise population immunity levels.

As always, if you have any questions about this piece or any other finance related matter, please do not hesitate to get in touch.

Wishing you and all those you care about, all the very best for 2021.

Yours sincerely

Graham Ponting CFP Chartered MCSI

Managing Partner

Festive Greetings!!!

Adam, Kim and I would like to take this opportunity to thank you for your continued support and of course to wish you and your family a very Merry Christmas and a Happy New Year!

This has been a difficult year, to say the least but I have been amazed at the good humour and pragmatism with which many of my clients have approached these challenges, we truly are a resilient bunch!

As with quite a number of years now, in lieu of sending individual Christmas cards, we have once again decided to make a donation to a worthy cause.

One of Vikki and my close friends is in the midst of a long struggle with bowel cancer and to support her and also in memory of a wonderful man we lost to this wretched disease, our donation will be to Bowel Cancer UK.

Cancer of course, is not a disease that affects the sufferer only, husbands, wives, children and extended family are all along for the difficult and emotionally draining ride. The more we can do to get on top of this illness in all its forms, the better.

https://www.bowelcanceruk.org.uk

I am sure you will approve of my decision to support this much needed charity.

I do hope 2021 brings you all you would wish for.

With very best Christmas wishes,

Yours sincerely

Graham Ponting CFP Chartered MCSI

Managing Partner

What could the proposed changes to CGT mean for advice?

I do hope you are well and looking forward to Christmas, albeit one that I suspect will look very different from those that have gone before and hopefully, those that will follow.

As you will know, the Government has borrowed substantial amounts of money to help us get through this global pandemic, unprecedented in modern times and it will be need to be repaid – eventually. One element of taxation that the Chancellor has identified as ripe for reform is Capital Gains Tax (CGT).

I am grateful to Standard Life for the technical content that follows.

Recommendations by the Office of Tax Simplification (OTS) on the future shape of capital gains tax (CGT) could have a significant impact on investment and wealth transfer advice.

The Government requested the OTS to undertake a review of CGT in July with a particular focus on areas where the existing rules can distort taxpayer behaviour. The OTS report asks the Government to consider making changes which will have a significant impact on advice if they eventually become law.

It is therefore important for advisers to understand what changes could be on the horizon and how it could affect your clients.

The key proposals

• CGT rates to be more closely aligned to income tax rates

• Annual CGT exemption reduced from £12,300 to between £2,000 and £4,000

• CGT losses to be used in a more flexible way

• On death beneficiaries would be deemed to have acquired inherited assets at the historic base cost of the deceased rather their value at the date of death

• Lifetime gifts of assets to be on a no gain no loss basis

Aligning CGT rates with income tax rates

One of the drivers for more closely aligning CGT rates with income tax is to prevent arrangements which attempt to treat returns which are income like in nature as capital gains to benefit from lower rates of tax. But the impact will be felt across the board, not just by tax avoidance schemes.

We have previously seen gains taxed at the same rate as income tax when taper relief and indexation relief were available to reduce the amount of gain subject to tax. And these latest proposals recommend that there are similar measures put in place so that only the gain above inflation will be taxed.

The OTS was only asked to look at CGT in the context of individual taxpayers and not companies. Aligning CGT to income tax rates creates disparity between the income tax rates on higher rate taxpayers and the 19% rate paid by corporate investors.

The OTS has recognised that this may prompt growth in the family investment company market with investors able to take advantage of the lower tax rates. The OTS have suggested that HMRC put measures in place to prevent higher and additional rate taxpayers using this route to convert gains which could be taxable at 40% or 45% to 19% by setting up a company to hold the investments.

Reduced annual exemption

In addition to the CGT rate increase there is a proposal to cut to the annual exempt amount. The OTS deemed that the current £12,300 exemption is overly generous. They believe the original policy intention was to keep small occasional gains out of the need to report or pay tax.

What they found was that the exemption was being treated as an allowance whereby gains up to the exempt amount were realised each year. In their view cutting the annual exempt amount to between £2,000 and £4,000 would be a suitable de-minimis limit which would still keep most gains free of CGT.

Flexible use of losses

Currently capital losses can be carried forward indefinitely and used to offset future capital gains. But for those who infrequently realise capital gains, relief for capital losses is limited. Aligning CGT rates with income tax offers scope to open up allowing capital losses to be offset against income. And the report also suggests the possibility of allowing losses to be carried back to allow tax to be reclaimed against capital gains from earlier tax years.

CGT on death

There's no CGT payable on death and the deceased's beneficiaries are deemed to have acquired the assets they inherit at their value at the date of death. This CGT free uplift could disappear under the OTS proposals and be replaced with a transfer on a no gain no loss basis.

This would mean that there is still no CGT paid on death but the beneficiaries’ base cost for future disposals would be the deceased's historic acquisition cost. This could create an administrative issue for some beneficiaries in identifying the original base cost. To help it has been suggested that base costs are revalued to the year 2000.

CGT on lifetime gifts

The CGT free uplift on death was also deemed to act as a deterrent to lifetime gifting with the possibility of a double tax charge. This is because CGT could be payable at the time of the gift and potentially IHT too if the donor failed to survive for seven years from the date of the gift.

The OTS report suggests that the lifetime gift of assets is also moved to a no gain no loss basis to encourage the transfer of wealth between generations. This would see gains deferred until the donee disposes of the asset, something which is only currently possible where the gift is of unquoted shares or gifts into relevant property trusts where holdover relief can be claimed.

Impact on saving

These changes will undoubtedly affect savings and wealth transfer behaviour. But it is important to look beyond the headline changes to understand the true impact.

An increase to the rate of tax payable on capital gains combined with a cut to the annual exemption is not good news for savers. Savings in unit trusts and OEICs could see the rate payable on gains double. But remember that under these proposals only the gain above inflation would be taxed.

Reducing the annual exempt amount would reduce the benefit of crystallising gains up to the exemption at the end of each year. Currently using the exemption in this way is worth up to £2,460 a year for a higher rate taxpayer but if it is cut to £4,000 combined with a move to income tax rates the annual tax saving is reduced to £1,600.

The reduction would also leave little room for larger portfolios which are actively managed to rebalance assets without triggering a CGT liability. Could this increase the popularity of passive and multi-manager type funds by removing the necessity to make regular disposals to maintain the target asset class mix?

Bonds v OEICs

The proposed changes will narrow the tax gap between investment bonds and OEICS/unit trusts. OEICs are currently taxed at 10% or 20% on their capital growth, rather than income tax rates that investment bonds pay.

Income and capital gains within a bond are rolled up and no tax is payable until there is a chargeable event such as the surrender of the policy. Top slicing relief acts as a mechanism to limit tax paid at higher rates on rolled up bond gains arising in a single tax year.

This ability to defer tax can be beneficial especially if gains can be timed to coincide with a tax year when the bondholder has little or no income in the tax year. However, it can also mean that dividend income is not only rolled up with no opportunity to utilise the dividend allowance each year but also becomes taxable at 20% or 40% compared to the dividend rates of 7.5% or 32.5%.

In addition, bonds can be assigned without triggering a chargeable event, creating an opportunity to pass the bond to another family member who may pay less tax on the gain.

This has made bonds flexible when looking to transfer wealth as a similar change of ownership for an OEIC/UT is a disposal for CGT and tax could be payable unless it is a spousal transfer. But a move to a no gain no loss basis for lifetime gifts brings OEICs in line with bonds in terms of giving assets away without creating a tax charge.

There is no relief for economic losses within an investment bond but the added flexibility to carry back capital losses or to offset them against income would be welcome new feature for OEICs.

Summary

These suggested changes will clearly have an impact on both investment wrapper choice and the transfer of wealth if they become law. And if it the tax gap between bonds and OEICs is set to narrow, advice when selecting the right tax wrapper will increasingly be determined by understanding a client's circumstances and objectives.

While there are no guarantees the Government will adopt these recommendations, they do address the specific points raised by the Chancellor in his letter to the OTS.

As always, if you have any questions about any finance related matter, please do not hesitate to contact me at any time.

With best regards,

Yours sincerely

Graham Ponting CFP Chartered MCSI

Managing Partner

What a difference a week makes!

After a long period of seemingly never-ending gloom, on Monday of last week we turned on our TVs to be told that the Pfizer/BioNTech vaccine trial showed an efficacy of around 90%, far in excess of most scientist’s wildest dreams - there had been talk of anything over 50% being a good result. And then, just a week later, we hear that the US firm Moderna, has developed a vaccine providing close to 95% protection against Covid. The way the financial markets have responded to this news, along with a benign US election result, you would think that Christmas has come early!

There is no denying that these results are fantastic news for us all, although I suspect, once the logistical challenges associated with vaccinating half the worlds’ population sinks in, the euphoria of the last week or so may abate somewhat but there really is a light shining in the tunnel now and life after Covid is definitely drawing closer.

With the above in mind I was very disappointed to read in Money Marketing magazine this morning that many non-advised investors had sold investments during the very worst of the pandemic.

According to the research, approximately 1.38 million retail investors sold £10,000 or more of their investments during the early stages of the crisis, and 531,900 people sold £100,000 or more of their holdings.

In terms of what people did with the funds, 59 per cent left it in cash savings, 31 per cent used it to pay for living costs and 29 per cent to clear debts.

Oxford Risk head of behavioural finance Greg Davies says: “Many of the investment decisions retail investors make are for emotional comfort, and in a normal year this can on average cost them 3 per cent in returns. Driven by the Covid-19 crisis, stock market volatility levels have been greater this year, so the losses will be higher.”

Davies said those investors who pulled money out of the markets in March will already have lost much more as they lost when the markets dropped, and many have missed out on the rebound since. “Many are also likely to find it emotionally difficult to get this money reinvested for the long-term and so may lose out on even more foregone returns in the long-run,” he adds.

The research reveals that despite stock markets having recovered much of their losses in recent months, of those investors who cashed in some of their investments at the start of the crisis, 29 per cent have not reinvested any of this money back into the markets.

Oxford Risk chief executive officer Marcus Quierin adds: “There are many behaviours common with investors during volatile and uncertain times, and they can be tempted to focus too much on the present and feel compelled to do something even when sitting tight is the best solution. This means they can fall into the trap of selling low or buying high, for example, and the cost of this on average is around 1.5 per cent to 2 per cent a year over time. Those worried about falling stock markets should remember that they only turn paper losses into real ones when they sell.

“Retail investors should avoid watching the markets day-to-day as this increase anxiety and remain focused on their long-term plans and ignore much of the background noise that can tempt them into making the wrong investment decisions.”

Regular readers of my ‘Round Robin’ e-mails will recognise much of what has been said above.

For graphical proof that sitting tight through this volatile period (so far at least) has been the best strategy, please see the following chart which shows how a selection of our Portfolios have performed since the market bottom on 23rd March.

The sharp rises in just the last week demonstrate how important it is not to miss those good days when they come along, a strategy of trying to time when to come out and when to go back into markets usually doesn’t match just sitting on one’s hands and accepting the long-term nature of this type of investing. As I am very fond of saying, ‘When all looks grim, just put your tin hat on and hide behind the sofa, things will get better in time!’ Or, to quote Churchill, ‘When you are going through hell, keep going!’     

Let’s hope for more good news from the other vaccine trials around the world and keep our fingers crossed for an eventual end to these lockdowns so that businesses can get going again. I fear there may be a few setbacks yet but I am definitely more optimistic looking at the medium term, than I have been for some time.

I look forward to seeing you all on the other side of lockdown but as always, if you have any questions about any finance related matter, please do not hesitate to contact me at any time.

With best regards,

Yours sincerely

Graham Ponting CFP Chartered MCSI

Managing Partner

Second Lockdown

As we enter our second lockdown, despite assurances that this wouldn’t happen, I am reminded of the famous quote from Yogi Berra “It’s déjà vu all over again”. Although Yogi was a baseball player with the New York Yankees, in his spare time he was something of an amateur philosopher, he is also attributed with saying “It’s tough to make predictions, especially about the future!” He could have been thinking about the US election with that one!

The most bitterly contested US election in living memory is still undecided but a result is getting closer. Biden needs 17 Electoral College Votes (ECV) and leads in Arizona (11 ECV) and Nevada (6 electoral votes) so is close to winning. However, Arizona votes are shifting towards Trump and Nevada is a tiny margin. Georgia, Pennsylvania and North Carolina remain undecided and Trump leads at the moment but here the late votes are swinging towards Biden. In North Carolina Trump's lead looks large enough to hold on but in Georgia (16 ECV) and Pennsylvania (20ECV) the Biden vote may overtake Trump.  We may get the vote in Georgia later today but Pennsylvania can go into Friday. Biden leads the popular vote of course but so did Hilary Clinton in 2016.

If Trump loses, he is likely to mount legal challenges in any of these states that go against him.  He has made tweets about the election being stolen and claiming victory in states that have not been decided. Any Legal challenges could take several weeks to resolve.

Given this uncertainty, markets have responded very positively. The losses in US equity markets last week have reversed with the tech sector particularly strong. The failure of the Democrats to take control of the Senate may be a factor in this. It will probably mean Biden's tax plans will be diluted and regulatory threat to the large tech companies may be reduced.  The Tech heavy Nasdaq was up 4% yesterday and futures are pointing higher this morning. With the Senate still in Republican hands, borrowing may not rise as much as feared and Treasuries have rallied reversing much of the pre-election losses.

Even by tomorrow morning we may not have clarity on the vote and legal challenges will take longer. In the meantime, a new stimulus package needs to be passed and the existing houses of congress continue for the rest of the year with Donald Trump remaining in office until 20th January. Some things remain unchanged whoever gets into power, including the fact that both sides want more fiscal stimulus and they both need growth or inflation to help the economy and to reduce the national debt long-term. Interest rates will remain low for a long time. The pandemic will continue and a vaccine may be getting closer to being ready for widespread use. Fiscal and Monetary stimulus will continue for some time, which will continue to support financial markets.

In spite of the lockdown and whatever the outcome of the US election, it is business as usual for us at Clearwater. Adam and Kim will be working from home in accordance with government guidelines but I will be coming into the office each day to ensure there is someone here to answer any queries or concerns you may have throughout this period.

Kim is already writing to clients to either rearrange planned face to face planning meetings or to replace them with a Zoom or Teams call.

I will leave you with one more classic from Yogi Berra, “You should always go to other people’s funerals, otherwise they won’t come to yours!”

I look forward to seeing you all on the other side of lockdown but as always, if you have any questions about any finance related matter, please do not hesitate to contact me at any time.

With best regards,

Yours sincerely

Graham Ponting CFP Chartered MCSI

Managing Partner

How will the outcome of the US election affect markets?

Well we don’t have to long to find out, the election is next Tuesday but with over 65 million Americans having already voted, early indications are that things are not looking good for Mr Trump! However, I seem to recall reading something similar 4 years ago and look how that turned out!

In this article from this morning’s Financial Adviser magazine, Ed Smith, Head of Asset Allocation Research at Rathbones makes some interesting points on what might happen whoever wins.  

“Contrary to popular belief, elections rarely matter for financial markets. 

Looking at 40 years of data, covering equities, the dollar, and bonds, we have found that presidential elections generate a little noise, but rarely any signals. Popular ideas such as ‘Democratic presidents being worse for investment returns’ do not stand up to scrutiny. 

Even sectoral ramifications are often hard to identify. What were the two worst performing sectors during the Obama years? Financials and energy.

The worst under President Trump? Financials and energy. There were and are bigger forces at work, driving the underperformance of those assets, than the vagaries of politicians indulging in rhetorical flourishes. 

Political polarisation means that the Republicans are now right-wing populists and the Democrats are touting more big government, even socialist policies. It is possible – though not certain – that it is different this time. 

Preparing for what comes next 

In mid-September, the betting markets re-evaluated the huge lead they had given Democratic presidential nominee Joe Biden during the summer. 

What were the two worst performing sectors during the Obama years? Financials and energy. The worst under President Trump? Financials and energy

Nominally, Biden still had the edge, but, given the bookies’ track record, the odds suggested it was really too close to call. 

We agreed with this. We do not pretend to be able to predict elections, but we do have the tools to help assess the spread of likely outcomes. “Prepare, don’t predict” is always a good mantra for investors regarding political matters. 

Biden had a huge lead in the national polls, but not in key swing states, where in some cases he led by less than Hilary Clinton did this time four years ago.

Some political science models favoured Biden, but our own econometric model, suggested that Trump still had the edge if – and it is a big if – this election is a referendum on the state of the economy, which is what it usually comes down to. 

But the betting markets have moved again. After the first debate and Trump’s Covid diagnosis, the odds present a greater probability of a Biden victory than ever: a 68 per cent chance. 

The debate is a red herring: post-debate polling failed to predict Trump in 2016, Obama in 2012 and Bush in 2004. 

We agree that Trump’s Covid diagnosis helps Biden, but not to the extent that the bookies suggest.. 

Analysis of myriad opinion surveys suggests that Biden’s chances are maximized if he keeps voter attention away from the economy and on the disease. 

Trump’s economic track record is too strong (whether US economic strength had much to do with his policies or not is irrelevant). 

Typically, more Americans approve of his handling of the economy than approve of him as their president. 

But the US’s Covid second wave (and possibly now its third) impacted a disproportionate number of counties in swing states that Trump won last time.

Moreover, only 40 per cent of independent voters, who account for about 40 per cent of the electorate, approve of the way Trump has responded to the health crisis. 

Fear of the unknown

Markets believe the worst outcome is no outcome at all. 

November VIX futures – the price of volatility protection – are notably elevated, more so than usual for an election month. 

A recent survey of 1377 institutional investors by Citi found that 45 per cent expect US equities to fall by more than 10 per cent if there’s no result by Thanksgiving (26 November), with another 30 per cent expecting markets to fall by a number in the 5-10 per cent.  

Why are investors more fearful of this scenario than anything else? Some investors believe the hyperbolic articles which envisage Trump ordering the army to seize ballot papers, undermining the rule of law and democracy which have an important relationship with economic development and depth of capital markets. 

But this may be a misguided fear. States run the election, not Washington, and the concession of the incumbent is not required for power to transition. 

We think investors should be more fearful of a stimulus stalemate.  

While the result is still contested, additional fiscal stimulus is unlikely to happen. 

This would be risky even in the absence of any other bad news, but it could be very problematic if the economy or the virus took a turn for the worse during that time. 

While a delayed stimulus increases the risk of harming the economy permanently, its long-term impact that will be minimal.  

Moreover, while the fiscal backstop may be removed temporarily, the monetary backstop of very low interest rates and quantitative easing would remain operational, and supportive of stock markets and the economy.  

A very long delay to the result is unlikely, but some judicial challenges could happen, delaying the result for a short period.

And while we don’t think it is a useful comparison, for reference, the S&P 500 fell by 4 per cent between election day 2000 and the 12 December, when the Supreme Court intervened to rule in Bush’s favour.

It underperformed the MSCI World Index by 0.8 per cent. But this decline coincided with the start of the dotcom market crash, so will not be a precise example of what may happen this time. 

A Biden bounce

The second most adverse scenario for markets according to the Citi survey is a Democratic clean sweep – Biden in the White House, Democrats controlling both chambers in Congress. Some 23 per cent of respondents expect US equities to fall by more than 10 per cent, with another 25 per cent expecting a 5-10 per cent fall. 

Of course, there are more investors who think Biden will win than there are those who think Trump will win. According to a Deutsche Bank poll from September, 40 per cent of investors thought Trump was either extremely or slightly likely to win, compared to 46 per cent for Biden. 

The Citi poll gave similar results – 41 per cent versus 46 per cent - as did a Goldman Sachs poll. We expect this has risen in October, and so some of this risk will be in the price of financial assets already.

What is more, there has been no correlation between changes in Biden’s polling numbers and US equity market performance.

The first full week in October saw a big increase in Biden’s election odds/polling and a rising S&P 500 and Nasdaq. 

Perhaps that is because past elections have had limited impact on the broad market.

Or because history is on the Democrat’s side in terms of the economy. Pre-eminent economists Nouriel Rubini and Alberto Alesina have shown that the Democrats tend to preside over faster growth, lower unemployment, and stronger stock markets than Republican presidents.

Recessions are almost invariably caused by imbalances built up by Republicans loosening regulations. Nothing destroys stock returns like a financial crisis. 

But Biden’s agenda is more left-leaning than that of most Democratic presidents. 

Perhaps the lack of correlation is because investors do not interpret Biden’s strengthening polling numbers as a proxy for the likelihood of the Democrats retaking the Senate. 

It is easier for Biden to take the White House than it is for the Democrats to retake the Senate, due to the seats up for grabs this year (100 Senators serve six-year terms, with a third of seats up for election every two years). Assuming the Democrats lose Alabama (a very red state), they need to win back four other states. 

However, Democratic challengers have started to poll increasingly well since early September. 

Arizona and Colorado look highly likely to flip. North Carolina and Maine are leaning that way too, and it’s really close in Iowa and Montana. The election forecaster, ‘FiveThirtyEight’ believes the Democrats are “slightly favoured” to win the Senate, a significant change from mid-September when their simulations suggested it was too close to call. 

Again, despite these large moves, US equity markets appeared unperturbed. 

It is entirely possible, therefore, that the institutional investors surveyed are not representative, and that equity markets will not fall sharply on a Democratic clean sweep.

After all, what has been driving markets this year?

1. The hope for a timely, effective vaccine;

2. Supportive fiscal policy;

3. Supportive monetary policy;

4. A levelling-off of previously escalating Sino-US trade tensions.

Are any of those four pillars likely to be undermined by the clean sweep? 

A President is unlikely to alter the outlook for a vaccine. Fiscal policy is likely to stay very loose under both Trump and Biden - its distribution will change materially, but not its scale. 

Historically, a presidential candidate committing to very loose fiscal policy would have caused markets to expect tighter monetary policy, that is, higher interest rates as the central bank decides the extra government spending will create higher inflation, so higher rates are required to counter this threat.  

But this time the central bank, the US Federal Reserve has committed to holding interest rates near zero until the end of 2023, even if inflation rises above 2 per cent. 

As such, is it as simple as the outcome with the most stimulatory fiscal policy is the most positive for markets? 

The risk of intolerably high inflation is a little greater under Biden, but over the next couple of years we expect both structural and cyclical forces to be stronger than the effect of shorter-term factors. 

Structural changes in society such as ageing populations, high debt levels and greater adoption of technology are all long-term trends that create disinflation. Despite the stimulus that was in the economy in September, inflation was very weak, which justifies our position.  

As good as it gets? 

An outcome where Biden wins the presidency, but not the senate, may be the best outcome for markets. 

Institutional investor surveys suggest this outcome is also likely to cause markets to fall, although by a smaller amount than if the Democrats win big or the result is contested. 

Contrarily, we think there is a strong argument to be made for this being a very market-friendly outcome over the medium-term. 

Little changes on the fiscal or monetary policy fronts, while there is no chance that Biden could get any large increases in corporation tax through Congress, or any of his most redistributional agenda items that markets fear the most. 

But foreign and trade policy uncertainty will ease significantly. The substance of Biden’s trade policy is similar to Trump’s, at least on China, but the style will change. 

This change may benefit non-US equity markets more than US markets. 

From a global perspective this election is about whether global policy uncertainty will continue its dramatic ascent in recent years.

Huge increases in uncertainty, particularly around what American protectionism/unilateralism means for foreign export-oriented economies, have augmented US equity outperformance and the US dollar bull market. 

An approach that means America is more conscious of its impact on the rest of the world, would likely lift all boats.  

That is because the US is a more insular economy, with a lower trade-to-GDP ratio, its stock market is less cyclical than many others and less sensitive to the global trade cycle, and the dollar is a safe haven currency 

If Trump is elected, uncertainty will likely spike again – hamstrung by a split Congress he would focus more on trade, where he does not need Congressional approval, just as he did after the midterms. This would support US equities, relative to the rest of the world. 

A Biden win is not a foregone conclusion but whatever the result, history would suggest we will not see huge market swings on the outcome.”

I thought this article was extremely interesting and I would echo Ed Smith’s comment that markets have probably already priced in (to a certain extent) the most likely outcome because that’s the way efficient markets work.   

As always, if you have any questions about any finance related matter, please do not hesitate to contact me at any time.

With best regards,

Yours sincerely

Graham Ponting CFP Chartered MCSI

Managing Partner