Investment market update: January 2022

Posted on

While many countries have now eased Covid-19 restrictions, the knock-on effects of lockdown continue to affect economies, businesses, and households.

According to the Organisation for Economic Co-operation and Development (OECD), inflation in the 38 richest countries has reached 5.8% – a 25-year high. The findings also highlight the driving forces behind inflation rates. If food and energy are excluded, year-on-year inflation is a more modest 3.8%.

Global demand for gas and oil, along with rising carbon prices, means that energy bills for businesses and families are increasing. In the UK, rapidly rising prices have led to more than 20 energy firms collapsing, and other countries are facing similar challenges. According to a report from Bloomberg, households in Europe could see average energy prices increase by up to 54% when compared to bills two years ago.

The United Nations (UN) also reported that world food prices have surged by 28% and affected all major food groups. The price increase has been linked to strong demand, supply chain issues, poor weather, and rising operational costs.

UK

In December, the Omicron variant of Covid-19 began to spread in the UK. This led to prime minister Boris Johnson announcing “Plan B”, which reintroduced some of the restrictions and guidelines previously lifted, such as wearing face masks and encouraging employees to work from home where possible.

The decision affected service sector growth, which fell to a 10-month low. According to IHS Markit Purchasing Managers’ Index (PMI) data, the reading fell from 58.5 in November to 53.6 in December. A figure above 50 indicates growth, but the latest update suggests the pace is slowing.

It’s not just Covid-19 that is affecting businesses in the UK; the effects of Brexit are playing a role too.

According to a snapshot from the Chartered Institute of Procurement and Supply (CIPS), UK factory output was limited at the end of 2021 due to Covid restrictions, and Brexit pushed up costs. Research from Euler Hermes also supports this: the credit insurance lender states that Britain’s exporters are on track to be the slowest among big European economies to recover from the effects of the pandemic.

With this in mind, UK factories are set to increase prices at their fastest rate since 1977. The CBI’s industrial trends survey found that 66% of firms expect to hike domestic prices in the first quarter of 2022 amid a skills shortage.

Retail figures released from the Christmas period paint a gloomy picture. Retail sales across the UK fell by 3.7% in December, which could severely affect businesses that rely on a busy trading period over the festive season. Adding to these woes, a consumer confidence index from GfK suggests that people are less optimistic about their financial position and the wider economy, which could lead to subdued spending.

Rising inflation is likely to be one of the factors affecting consumer confidence. Data from the Office for National Statistics show that wage growth has fallen below inflation. Average basic pay, which does not include bonuses, increased by 3.8% between September and November 2021. This means a real-terms loss when inflation of 5.1% is considered.

Moving on to the housing market, homeowners have benefited from prices surging. In 2021, the average house price increased by 9.8%. While housebuilders also benefit from rising prices, the sector has been dealt a blow. Shares in UK housebuilders fell after the government ordered the industry to pay £4 billion to help remove dangerous cladding from buildings following the Grenfell disaster in 2017.

Car sales also continue to lag behind previous figures, despite the economy reopening. Annual sales data from the Society of Motor Manufacturers and Traders found that car sales increased by just 1% year-on-year in 2021 and remain almost a third below the total sales for 2019. Electric vehicle figures do provide some good news though. Britons bought more electric cars in 2021 than in the previous five years combined.

Europe

In contrast to car sales figures from the UK, German carmaker BMW has reported record sales of more than 2.2 million in 2021, despite global chip shortages.

While the above and unemployment figures are positive for Germany, official data shows that the economy shrank by 0.7% between October and December 2021. As the biggest economy in the eurozone, Germany is often used as a bellwether for the economic area. However, in spite of this, France, Spain, and Italy posted growth for the final quarter of 2021.

IHS Markit data suggests that the private sector across the EU is experiencing a slowdown, although it’s still in growth territory.

US

Data and news from the US are similar to the UK.

Inflation in the US hit 7% in January, the highest level since 1982. This has had a knock-on effect on consumer confidence. Research from the Conference Board suggests that Americans are growing less optimistic about short-term prospects.

This sentiment is likely to have affected consumer spending too. Retail sales in the US were less than expected and fell by 1.9% in December. Once cars and gasoline are removed from the calculation, spending falls to 2.5%. Again, this means spending fell during the crucial festive period and could place businesses under pressure.

However, findings suggest that US businesses remain optimistic. Payroll processing firm ADP said US companies hired twice as many people as expected in December, signalling they are confident about the economy.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

 

We aim to keep our clients up to date on interesting and relevant financial news.

You can sign-up to receive our monthly newsletter by email, even if you’re not yet a client. Sign-up using the form below.

Client testimonials

I have always found Black Swan to be caring and understanding of my quirky lifestyle. I always feel they try to get me the best returns while respecting my current needs.

Sally Muir

A client since 2011

We would be very happy to recommend the support and service we receive.

Valerie Locks

A client since 2010

I have always been completely useless regarding finance - thankfully our financial adviser is not! I've retired with far more than I ever expected and investments continue to grow safely. So - thank you!

Bernadette Jane Warner

A client since 2000

Very happy with the professional service I have received and feel a lot happier now with my finances put in order.

Martin Field

A client since 2011

Julie Cooper was recommended to me by a work colleague. She has been very helpful, professional and has explained everything well. I would definitely recommend her services to anyone else who are interested in a financial review.

Steven Rooke

A client since 2018

…Service has been first class.

Hugh Fells

A client since 2012

My face to face meetings with Rob Young and Jessica Lyons have always been very open and understandable. My questions have been answered clearly and I have left feeling that my financial matters are in good hands.

Sandra Jack

A client since 2000

[A] safe pair of hands in a complex financial world.

Gary Middlehurst

A client since 2003

A reliable company with good communication skills and good knowledge of the financial markets.

Alan Evetts

A client since 2014

Maureen Pembridge is a long-time trusted advisor to our family. The market might fluctuate but her attention to detail is consistent.

Linda Burnard

A client since 2000

I am pleased to recommend Julie as a trustworthy financial advisor. She explains financial jargon in plain language, and always listens carefully to my particular financial needs and has helped me make the best of my savings.

Carolann Samuels

A client since 2010

I have always been satisfied with the way that Black Swan has handled my account. And I have always found the staff very helpful whenever I need to call the office.

Robert Anthony Matthews

A client since 2012

An excellent personal service from a person I know and trust.

Michael Dalton

A client since 2010

I am getting a very good services from Black Swan, they have got my investments sorted out which was in a bit of a mess.

Roy Jakens

A client since 2012

A good, efficient team providing clear ideas to shape a winning strategy.

Adrian Michael Levenstein

A client since 2011

Black Swan is a company to be trusted, with friendly staff and professional advisors.

David Brian Jennings

A client since 2017

I have been with Black Swan for many years. I have never wished to change anything. They give a good straight forward service.

Martin Barrett Brooks

A client since 2010

Andy Peters has been invaluable in firstly combining several pension pots and then giving excellent investment advice. It has given us a great deal of comfort to know that our financial affairs are in such good hands.

James Guillum Scott

A client since 2014

I find my financial advisor easy to talk to and feel that she understands my lifestyle. She is always available for help when I need her and explains in words that I can understand.

Margaret Ena Glasgow

A client since 2000

Andy is a first rate Director, excellent communicator and leader.

Ross Perry

A client since

Black Swan Financial Planning and Andrew in particular, are very clever at working out how risk averse we are, and coming up with solutions that we feel comfortable with. We are happy in the knowledge that we can continue to enjoy a comfortable retirement. Andrew Peters is a very, very friendly person who is great to chat to and easy to deal with. He explains things very clearly in layman’s terms, and if we still don’t understand, he explains it until we do!

Alan & Jane Dyer

Clients since 2012

We have always found Rob [Young] to be very approachable and knowledgeable. We have every confidence in the advice given and feel comfortable with the decisions we’ve made. There are certain opportunities that we wouldn’t have known about if Rob hadn’t brought them to light, which makes the advice good value for money as far as we’re concerned.

Peter & Pauline O’Halloran

Clients since 2013

Rob [Young] is extremely knowledgeable. I knew nothing about the different types of trusts which will not only secure my income in retirement, but also leave a legacy for my children. I’m glad that I sought his advice when I did.

Sarah Wilson

A client since 2015

I am extremely happy with the service afforded to me by the company and my adviser Julie Cooper.

Geoff Coxell

A client since 2010

My wife and myself have been dealing with Black Swan for a number of years. We have met with different representatives from the company over the years and have found all very helpful in their own way. We met with James [Anderson] a few years ago and found him very helpful and knowledgeable. He keeps in contact with us on a regular basis. We find the Company information very helpful and we feel very secure with our finances.

Andrew Kirchen

A client since 2015

I have always found my adviser to be easy to contact, very professional in his approach, yet friendly and understanding. I have a sense of an experienced company behind him, really on the ball financially and with good standards.

B McBean

A client since 2011

Partner with the most reliable and experienced team of advisers

Enter your details & we'll be in touch to discuss your needs.
Alternatively, contact us directly and speak to a member of the team.

    Subscribe to our newsletter