This remains the most significant risk to the global economy after August saw both the US and China landing blows that only served to cause the other to retaliate. This spooked global markets leading to stock markets falling for only the second month this year. Central banks (the European Central Bank and the US Federal Reserve) took steps to support markets by cutting interest rates. This was aimed at helping deal with a slowing Global economy and increasing trade tensions. Since this point global stocks have responded recovering most of what was lost in August.
The soap opera that is British politics
This has continued at pace and in his first meaningful act as Prime Minister Boris Johnson suspended Parliament to prepare for a Queen’s speech. At the time of writing the UK Supreme Court has just ruled this suspension unlawful and we await the fallout of this.
Deal or no deal
The pound has strengthened so far in September as Parliament has taken steps to try to prevent a no deal Brexit- however there remains significant uncertainty in what could happen over the coming months. One thing that we can be sure of is continued volatility in the value of the pound in this period.
The market is predicting a low level of growth, but we do believe there are some reasons for positivity. We continue to be supportive of stocks but remain mindful of the potential risks in the current market and we have reduced our overweight position. The main risks still come from Brexit and US-China trade tensions. We also believe the US Federal Reserve will cut interest rates between now and the end of the year which should benefit Global markets.
Investing with us
Our key goal is to deliver good outcomes for our customers. We do this by following our core beliefs:
- Pensions are long term investments
While it can be hard to watch large market drops, especially if the value of your savings is falling, it’s important to remember that investing for retirement is a long term game. It’s very normal for an economy to go through phases of expansion and contraction.
In fact, over the long run there is a recession every five to ten years. We think of these cycles in terms of waves of growth and inflation, and consider which investments do best when growth is strong or weak, and when inflation is falling or rising. Our investment experts analyse and understand where we are in that cycle and which types of investments we should be investing in within the portfolio mix. This is called the short term view and we do this on a day to day basis so that we can try to maximise returns and avoid some of the losses.
Falling markets can be buying opportunities, particularly when you are planning to invest for a long time period. We see the current market falls as potential buying opportunities for equities. The multi asset portfolios are currently holding slightly more equities than average, having bought on the recent dips. We’re also holding more corporate and high yield bonds.
- Greater diversification
We believe that investing in a wide range of asset classes will result in more consistent performance across a wide range of economic conditions. This spread of different investments helps to reduce the risk of having all your eggs in one basket.
The Governed Portfolios are designed for investors who are saving into a pension and aim to maximise returns above inflation within a defined risk framework and term to retirement.
The Governed Retirement Income Portfolios (GRIPs) are designed for customers who are taking money out of their pension on a regular basis and aim to maximise returns above inflation to support sustainable, regular income withdrawals for a range of risk profiles. The portfolios hold a wide range of investments, including company shares, property, bonds, commodities and cash in order to help them meet their objectives.
We believe that all investment options should be monitored on a regular basis, and this is a core part of what we do for our customers. All the portfolios are monitored on an ongoing basis by our experts to ensure they deliver in line with their objectives. You can keep an eye on how your investments are performing using our online service.
If you are in any doubt about the suitability of any particular type of investment, you should seek professional financial advice. Advisers may charge for providing such advice and should confirm any costs beforehand.
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You should consult with an adviser before you make any changes to your investment, and remember that the value of your plan can go up as well as down, and you may get back less than you originally paid in.
Q3 Investment outlook
Hi I'm Trevor Greetham Head of Multi Asset for Royal London Asset Management and I'll be talking to you about the economic outlook over the next three months.
It’s really a mixture of economics and politics. You’ve got two big things going on: you've got a standoff between President Trump and China over trade wars. You've also got a standoff between the UK government and the European Union over brexit. Starting with the global picture the world economy has been slowing down over the last year or so we've had a lot of bad news in the auto industry and bad news out of China.
You've also had an increase in tensions between President Trump and the rest of the world over trade which has been hurting growth at the same time. But the US consumer remains strong and this has been a very long economic expansion because inflations remains low and therefore interest rates have remained low. We think that expansion will carry on, you had an interest rate cut recently in America, we may see another one in the next three months. That will help to boost the US consumer and we think the world economy will probably pick up again in into 2020. There's also a strong possibility that President Trump will backtrack on some of the trade terrace he's been pushing through ahead of the 2020 presidential election in America he may want to see the economy get stronger as well.
Closer to home there's a lot of uncertainty around Brexit. The UK is due to leave the European Union on the 31st of October. At this stage we still don't know whether we will leave with no deal, whether there be some new kind of deal, or whether we won't leave at all because the decision may be may be deferred until further out. If we were to leave with no deal I think the pound would continue to go down. It's likely to be quite damaging for the UK economy over the medium term if we leave without a deal. But there are parts of the portfolio that would do better if the pound were weaker. So stock markets in particular will increase in value if the pound goes down. On the other hand if there's a better deal than that or if Brexit is deferred then the property part of your portfolio is likely to do better. So you've got a mixture of different assets and that should even out some of the bumps in what is quite an uncertain situation. The big picture there is lots of politics around at the moment, some bad news in terms of the economy but we think that the world economy is likely to rumble on and that you mean pretty, pretty good returns over the next year or two. We'll continue to monitor things and we'll report back to you on the situation as it evolves in three months’ time.
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