Russia, what are the risks?

This week we saw the US ramp up sanctions on the Kremlin once again, banning the import of oil and gas from Russia – a move perhaps more symbolic than impactful, as the US consumption of Russian energy is limited. The UK followed suit and set out the intention to phase out the use of Russian oil by the end of the year. With Europe being more reliant on Russian energy imports, the EU made a commitment to reduce their consumption of Russian gas by two-thirds within a year.

Whilst the imposition of these sanctions may not have an immediate impact to deescalate the situation in Ukraine, it will certainly make Russian officials think about how sustainable this conflict is for their economy. Wider financial markets should come through the conflict relatively unscathed in the fulness of time; however, there are more short-term risks around trade and supply shortages that are worth highlighting.

Energy

Russia has threatened to retaliate to recent sanctions and cut off the oil and gas supply entirely. Although demand for energy will diminish as the year progresses into warmer weather, the question remains on whether industry can shrug off shortages and rising costs if the taps were turned off completely. Growth would be stifled by continuously rising energy prices, though we have seen a mediation of this trend over the last few days.

Supply Chains

Another risk relates to trade flows and shortages of goods outside the energy sector. Supply chains have already been struggling to get back to normal levels following the Covid pandemic and shortages remain in some areas. While Russia is not a large exporter of manufactured of goods, it does control the supply of certain commodities, including metals – a shortage of which has a knock-on effect on supply and therefore pricing and inflation.

Finances

We have already seen sanctions imposed on the Russian Central Bank, with several other Russian banks being excluded from SWIFT. This could have a spill-over effect to certain exposed institutions, notably French banks.

Bowmore Portfolio exposure to Russia

As a reminder, we have very little direct exposure to Russian companies in portfolios. Whilst some funds have leveraged opportunities in the area within their mandates, most do not invest in Russia at all, which keeps our overall exposure negligible, as shown in the below table below.

 

 

 

 

 

 

 

 

 

Source: Morningstar Direct; as at 28/02/2022
NB: The data is the % of equity or fixed income exposure within each portfolio

Why parents need to inflation-proof their children’s financial future

Charles Inlcledon, Client Director quoted in The i, 14 March 2022

“Putting money in your children’s Jisa is the very epitome of long-term investing,” said Charles Incledon, client director at Bowmore. “But holding cash in such an investment guarantees a loss of money in real terms over the longer term.”

He said: “While there may be some stock market jitters at the moment, over the longer-term equities have proven to dramatically outperform cash. Regardless of whether you are investing for your grandchildren, children or indeed yourself, at the very least you want to ensure the value of your pot today increases sufficiently to ensure it retains its purchasing power as prices gradually increase.”

Read more: https://bit.ly/3MPObJc

Young UK millionaires hit record high

Mark Incledon, CEO quoted in City AM 28th February 2022

The growth in high-earning millennials comes in contrast to the decrease in high-earning Baby Boomers. The figures show the number of baby boomer taxpayers declaring income of over £150,000 and over £1m has hit a five-year low.

In total, 6,000 baby boomers declared income over £1m in 2018/19, down from 7,000 the previous year and the lowest in five years.

Meanwhile, 120,000 baby boomers declared income over £150,000, down from 131,000 in 2017/18 and was again a five-year low.

Bowmore says this could be due to an “acceleration in the number of baby boomers retiring”.

Read more: https://bit.ly/36RmMX3

UK millennial millionaires double in a year

Mark Incledon, CEO quoted in Money Marketing 28th February 2022

The number of UK millennial and Generation Z millionaires has hit a record high, doubling to 2,000 in the most recent year* from 1,000 the previous year, shows research by Bowmore Wealth Group.

Bowmore’s research also shows a 28% increase in millennial and Gen Z taxpayers declaring income over £150,000 to 50,000 individuals, compared to 39,000 the previous year.

The jump in high-earning millennials is largely due to a sharp increase in pay for workers in the tech/fintech sector (especially those with shares or options), as well as a boom in millennial entrepreneurship and high paid areas of financial services such as private equity.

Read more: https://bit.ly/3stkeH5

The number of UK millennial and GenZ millionaires hits record high

Mark Incledon, CEO quoted in IFA Magazine 28th February 2022

“Millennials are earning more than ever before. They should be putting away as much as they possibly can now to avoid the stress of having to catch up on their retirement savings later down the line.”

“During lockdown we’ve seen that more millennials are considering their financial future and putting money to work by investing. Instead of putting all their assets into risky assets like cryptocurrencies or meme stocks, it’s fundamentally important they follow simple, straight forward steps when investing. This includes having a diversified portfolio across geographies, sectors and asset classes.”

“They also mustn’t forget to take advantage of the various tax reliefs whilst they are still available. There is still the threat of tax changes to recoup Covid-related spending, which leaves the future of some tax reliefs hanging in the balance.”

Read more: https://bit.ly/3M9eee5

Two thirds of all money put into Junior ISAs over past 5 years has been in cash – losing value as inflation destroys purchasing power

Charles Incledon, Client Director quoted in IFA Magazine 28th February 2022

“Putting money in your children’s JISA is the very epitome of long-term investing. Holding cash in such an investment guarantees a loss of money in real terms over the longer term”

“While there may be some stock market jitters at the moment, over the longer-term equities have proven to dramatically outperform cash. Regardless of whether you are investing for your grandchildren/children or indeed yourself, at the very least you want to ensure the value of your pot today increases sufficiently to ensure it retains its purchasing power as prices gradually increase (e.g. over the past 6 months the price of a pint of milk has increased by over 8% (ONS) – therefore your money held as cash buys you less due to the impact of inflation)

£555m flowed into Junior Cash ISAs in the latest year – up nearly £40m from the previous year (from £517m).*** In addition, the annual contribution limit (£9,000 pa) for Junior ISAs refreshes in April and many may be preparing to deposit more into their child’s Junior ISA.

“Favouring Cash ISAs over investment ISAs is part of a broader issue where UK savers have hesitations about short term fluctuations in the stock market. Investors should not be put off investing in equity markets due to the short-term volatility, especially when they’re saving for a 20 or 30 year horizon.” adds Charles Incledon.

Red more: https://bit.ly/3IvZyUa

War Time

Over recent weeks markets have shown significant volatility as investors weighed up the likelihood of a Russian invasion in Ukraine. In the early hours of Thursday morning, we got our answer, as Putin ordered his military to commence multiple invasions across Ukraine.

The immediate reaction for global equity markets saw them move considerably lower. Asian, European and UK markets all suffered daily falls of between 2 to 4% yesterday yesterday (US markets actually turned positive towards the end of the session, finishing c.1% up). However, this was nothing compared to Russia’s own equity market, falling by over 50% at its open. This indicates that investors feel the Russian economy will suffer the most as Ukrainian allies enforce punitive sanctions designed to apply pressure to it.

What can we expect from here?

In last week’s note we referenced Russia as one of the world’s leading suppliers of oil and natural gas. In fact, they account for 24% of global natural gas supply. In other words, they are a net exporter of energy and rely heavily on the rest of the world to purchase their natural resources. Many of the sanctions are intended to limit trade with Russia; the knock-on effect will be a further shortage of oil and gas as other nations refuse to use Russian supplies.  As a result, commodity prices will continue to be pushed higher. On Thursday morning we saw oil prices top $100 a barrel for the first time in seven years.

As the conflict plays out, we can expect wider equity markets to experience further volatility. How volatile markets become will be driven by the political reaction of other nations (how much further tensions will rise) as well as the level of sanctions that are introduced.

There is certainly a correlation between the threat of war and a ‘risk off’ environment for markets, but whilst we are still in the very early stages of the conflict it is hard to predict the short term market reaction.

How have markets reacted during previous conflicts?

In 1990, tensions were simmering between Iraq and Kuwait (supported by US led allied forces) which eventually led to the start of the Gulf War. Interestingly, in the period precipitating the war, markets aggressively sold off with the US market (S&P 500) falling by 13%. However, within 6 weeks of the war breaking out, markets very quickly turned positive.

Any others?

In fact, there are plenty of other examples beyond the Gulf War.  Many conflicts in the past have seen markets plummet in the weeks and months before any war actually started, only to turn positive shortly after war broke out. 

 

 

 

 

 

 

 

Source: Bowmore Asset Management, 2017

What about our Portfolios?

Unfortunately, there had been no hiding from the equity market sell off and portfolios have suffered as a result. However, other areas of the portfolios have held up well, especially within our allocation to Alternatives.  Moreover, despite what the reaction of markets would lead you to believe, good companies do not become bad companies overnight. Our portfolios are positioned to benefit from long term economic and investment trends, and we continue to favour areas of the markets that have long term growth potential with manageable risks. We are still relatively sanguine about the prospects for equity markets in the short to medium term. Amidst the current chaos, Q4 2021 earnings season is in full swing, and the news continues to reinforce the strength and resilience of certain economies and their underlying companies. Without the distractions of war, the wider equity market news would be far more positive, perhaps focusing on the strength of the consumer and M&A markets.

Our thoughts are with the innocent people caught up in conflict. If you have any questions in relation to your own portfolio, please do not hesitate to get in touch.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: Refinitiv – Market returns as at 24/02/2022

Bowmore Bulletin: Your latest update from the Bowmore team

two male cyclists on road with trees

After last month’s food donation efforts, Christmas jumper-wearing for Gympanzees and the introduction of our “Give and Take” annual leave policy, the Bowmore team are back with more charitable giving updates for February 2022.

This month, we’ve got a very exciting announcement: two of our team, Mark Millet and Duncan Harvey, are embarking on a charity cycle ride this summer in support of Children’s Hospice South West.

But first, congratulations to Adam Canavan, who got engaged over Christmas.

Love is in the air

Who’s the lucky person and how did you meet?

Her name is Rachel. Rachel had just moved from New York to London for work and her office was down the street from mine. One evening we happened to be in the same pub and at the bar at the same time, and things went from there.

How did you pop the question?

Rachel is from Northern Ireland, so I thought it would be nice to propose while we were over there. So, I booked out the private dining room at the Merchant Hotel and then used their planning people to decorate the whole area, including using photos of us!

On the evening of 30 December, I told Rachel that I had a dinner reservation and we needed to be ready for 7pm. It worked out really well as Rachel was totally unaware until the doors opened on the private room and she saw what I had planned.

When do you hope to tie the knot and what are you looking forward to the most?

We are looking at early 2023 and had a few venue viewings last weekend. We are looking forward to having everyone together to celebrate such a happy moment in our lives.

Ride for Precious Lives 2022

Mark and Duncan are already training for the ride of a lifetime, as they prepare for their charity cycle ride in support of Children’s Hospice South West.

The 215-mile Ride for Precious Lives 2022 will begin at Charlton Farm, Bristol on 8 July, finishing at Little Harbour, St Austell on 10 July, with all money raised going to Children’s Hospice South West (CHSW).

Mark and Duncan will be cycling through the Somerset, Devon and Cornwall countryside for a very special cause and we’d love for you to get involved.

About Children’s Hospice South West (CHSW)

Children’s Hospice South West have three hospices in North Somerset, Devon and Cornwall. They support more than 500 families across the south-west by caring for children with life-limiting conditions, providing respite, end-of-life care, emergency care and bereavement support.

Our local hospice, Charlton Farm in North Somerset, supports more than 230 families in the Bristol and Bath area who are going through the most unimaginable of times.

It costs almost £4 million each year to run Charlton Farm; what’s more, they only receive an average of 16% of this sum from the government. This means they rely heavily on donations and voluntary support. In 2021, CHSW celebrated 30 years of helping sick children and their families.

Show your support for Mark and Duncan and give to a great cause with a donation to CHSW via our JustGiving page.

Hear from Mark and Duncan

As Mark and Duncan get ready for the ride of a lifetime, read how they’re getting on with training, as well as how they are personally connected with this incredible cause.

How Mark got involved with the Ride for Precious Lives

“Being a slightly portly cyclist, I was approached by one of my fellow weekend riders to take part in a sponsored cycle ride.

“Mark Paxford has done this ride four times before, in memory of his late daughter, Emily, who was one of my daughter’s classmates at school. I recall the support and help that Children’s Hospice South West gave Emily and her family, Mark, Christine and George.

“I asked some colleagues who I know enjoy cycling if they would like to take part – and I’m delighted to say that Duncan was keen from the start.

“I’ve since found out that Duncan is an old hand at cycling, having completed the Bristol to Scotland ride in the past. He cycles most days to work, so I have my work cut out to keep up with him!

“Training-wise, I am using my weekends to build up the miles and last weekend completed a 30-miler and 10-miler. I am also using an indoor turbo trainer to do some small riding segments when it’s just too rainy and cold.

“So far, I have had a fantastic response from clients with some generous sponsorship at this early stage.

“Rest assured, I will be updating everyone on the trials and tribulations as we go.”

A Q&A with Duncan Harvey

What inspired you to do a charity bike ride?

My friend’s daughter died from Mitochondrial disease in 2020, when she was just three years old. They were assisted by a charity providing respite and palliative care; seeing what they went through and the support that charities such as Children’s Hospice South West provide was a real motivator.

Have you done anything like this before?

Yes, I did an unsupported ride from Bristol to Edinburgh in 2019.

What training and preparation will you need to do for the charity bike ride, and when will you start?

My round-trip to work is 15 miles and I do this most days, which gives me a bit of a head start as I have been doing it for a couple of years.

I need to up my cardio, though, so I am going to start running too, starting with two 5k runs a week from February.

Anyone who knows me will attest to the fact that I’m not really built for running – my rugby coach used to tell me that I ran “like a pork pie” so it’s going to be tough getting into it!

How competitive are things between you and Mark?

Nothing competitive yet, but we’ll see as we get closer to the date. I am sure we’ll support each other along the way.

Words of thanks from Amanda, corporate partnerships fundraiser with CHSW

“We’re delighted that Mark and Duncan are taking on our Ride for Precious Lives Challenge in 2022. They have a great team behind them at Bowmore Financial Planning and their fundraising and support will make a real difference to children with life-limiting conditions.

“Our care teams have had to adapt to ensure Covid-safe support wherever and whenever families need it most, including in our three children’s hospices, and for the first time ever, in the families’ own homes.

“They have been amazing, working in such different ways and in difficult circumstances, but we can only continue to do this work thanks to such wonderful support from individuals and businesses like Bowmore Financial Planning.”

How you can help

If you’ve been inspired by Mark and Duncan and the Ride for Precious Lives 2022, you can offer your support by donating to Children’s Hospice South West. Your donation will help provide invaluable support to families going through unimaginable circumstances in these ever-trying times.

You can donate securely via JustGiving or scan the QR code to access our donations page.

 

 

 

 


 

How to read the news without increasing your anxiety

man reading news on iPad outdoors with black coffee.

Read the news these days and it’s hard not to despair. It’s getting tough to stay informed without feeling overwhelmed by the state the world is in.

Political unrest, the threat of war and the Covid-19 pandemic can weigh heavily on any person’s mind. Today, we are exposed to more information than anyone in human history, so if you feel anxious when you pay attention to the news, you aren’t alone.

Here are five anxiety-relieving tactics you can put into practice that may help lower your stress levels when you read the news.

1. Consider the agendas of your favourite news outlets

Did you know that, according to Press Gazette, two billionaires control two-thirds of the UK press? Rupert Murdoch and Lord Rothermere own the majority of UK newspapers, including The Daily Mail, The Times, The Sunday Times and The Sun.

We often forget that all our news outlets are owned, funded and run by human beings with their own biases and opinions, that ultimately place a political lens over everything we read.

If you have a few sites or papers that are your go-to news sources, it may be wise to research their political affiliations and ownership. If you often become anxious about the news they report, having that extra awareness of their agenda might help.

This additional knowledge could help you to look at the news with a critical or intellectual eye, rather than just responding emotionally. This extra layer of awareness when taking in current affairs could help you create some much-needed emotional distance.

2. Focus on local news

While world news is, of course, an important part of our lives, it can quickly become a source of anxiety. It is easy to feel powerless in the face of widespread unrest.

If you want to feel like you can do something about the issues you read in the news, it might be helpful to focus on local issues.

Reading about problems within your community might still bring up some anxious feelings, but you may be able to combat these by getting involved in a local initiative.

By focusing your attention on local issues, you might feel empowered by your ability to affect change and feel greater peace of mind as a result.

3. Use time-limiting apps to stop you from over-consuming news

According to Addiction Center, out of the 3.8 billion smartphone users worldwide, approximately 6% are addicted to their phone.

News and social media apps are designed to pull you in and make you want to keep scrolling, so if you truly can’t resist doomscrolling your nights away, there are other apps that lend a hand.

Apps such as Moment and Offtime can limit the time you spend on certain applications, including news apps and social media.

These apps lock you out of your favourite sites after a certain number of minutes or hours a day – and you can control the time limits.

By limiting your own access to the news, you might find that you feel more in control of your news anxiety, and can spend more time focusing on your work, health and relationships.

4. Remember your algorithm feeds you what you already see

The YouGov news-consumption tracker reports that, as of December 2021, 24% of Brits get their news from social media, while a further 41% get theirs from newspaper websites.

If you get your news from either of these sources, these sites will be targeting you with stories or posts they think you want to see. Every time you click on a news story, you are feeding data into the site’s algorithm, which will then use that data to suggest other stories with similar content.

Understanding how social media algorithms work is important, because it allows you to recognise if you are in a cycle of obsessive reading about one particular subject. If you feel like a certain issue is “taking over” and you are becoming anxious about it, it might be because your phone or computer is showing you more and more content about that issue.

It might be a good idea to reject additional cookies on news sites, and keep in mind that your home page suggestions are largely determined by your previous activity. Try and vary your news sources by reading more than one newspaper. This will help widen your view of current issues and focus less intensely on one website, app or point of view.

5. Combat news stress by spending time with loved ones

Focusing on what’s real in your life and what can bring you joy is especially important in today’s world.

The Covid-19 pandemic reminded us of what we hold most dear, and if the news is keeping you up at night, it might be a good idea to lean on those you love for support. Reconnecting with those who accept and understand you might be a great stress-reliever.

You could even engage your friends and family in lively conversations about news stories you have read – there’s nothing wrong with a healthy debate. By talking things out, you could feel yourself relax.

Ask for help

If you feel that anxiety is impacting your life, it may be beneficial to seek help. Speak to a health professional if you are experiencing anxiety symptoms.