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As 2024 draws to a close, it’s an opportune moment to reflect on history and the lessons it offers for the investment landscape ahead. The extraordinary performance of the U.S. stock market over the past two years has dominated headlines, but does this signal smooth sailing—or a potential storm on the horizon?   The U.S. Dominance   The U.S. market continues to be a heavyweight in global equities. The U.S. accounts for a staggering 73.92% of the MSCI World Index . The S&P 500 has delivered annual returns exceeding 20% in 2023 and 2024—levels not seen since 1997-1998. This success has created a loop: investors pour more money into U.S. markets, further driving prices upward. While this trend is alluring, history suggests we should remain cautious of such concentrated growth.   Recognising Bubbles   One of the hallmarks of a market bubble is widespread denial of its existence, paired with a disregard for fundamental investing principles.   The Man Group’s analysis of historical bubbles provides a telling example, highlighting how exuberance and overconfidence can distort valuations. Another red flag is insider activity. Take the Magnificent Seven —the most prominent U.S. tech companies. In these cases, directors are selling rather than buying shares, signalling potential concerns about sustainability.   Additionally, the Fear and Greed Index , a measure of market sentiment, started 2024 in a state of extreme greed and ended in extreme fear—a stark contrast that often precedes volatility. The Decade Ahead   Predicting exactly when a market correction will occur is nearly impossible. However, several indicators can guide cautious investors.   Chart 1: Decadal Investment Themes   Each decade tends to be shaped by dominant investment themes. The 2020s have been characterised by U.S. market supremacy. While it is tempting to believe this trend will persist indefinitely, history suggests otherwise. Chart 2: Market Valuations   Data from JP Morgan  underscores a key principle: the higher the market valuations, the lower the expected future returns. The U.S. market’s current valuations warrant scrutiny. Chart 3: Future Return Potential   Another JP Morgan analysis highlights that markets with the lowest current valuations often have the greatest potential for future returns. This reinforces the importance of looking beyond the U.S. for opportunities. The Case for Diversification   As we move into 2025, exercising caution is prudent. While predicting when a potential bubble might burst is impossible, the signs suggest a measured approach.   Key strategies to consider:   Diversify Geographic Exposure:  Reducing an overreliance on U.S. equities can mitigate risks while preserving potential upside. Monitor Valuations:  Keeping an eye on markets with lower valuations may uncover opportunities for long-term growth. Stay Balanced:  A diversified portfolio with exposure to multiple regions and sectors can help navigate uncertainty.   Conclusion   2025 may not bring an immediate correction, but the lessons of history suggest vigilance. By staying aware of market signals and prioritising diversification, investors can better protect their portfolios against potential downturns while staying poised for future opportunities.   Risk Warning: The value of investments can go down and up, and you may not get back the amount you initially invested. Past performance is not a reliable indicator of future results. Diversification does not guarantee a profit or protect against loss. Always seek professional financial advice tailored to your circumstances before making investment decisions.

Investors often find themselves drawn to market trends and hype, especially when markets appear booming. The US stock market is a prime example. With its market cap representing around 70% of the MSCI World Index , it has become a risky and volatile "playground" for investors. Should We Be Worried?   The US market is undoubtedly in bubble territory , with many comparing its current dynamics to past speculative booms. Investors chasing the exceptional past performance of the Magnificent Seven  (Meta, Apple, Microsoft, Google, Amazon, Tesla, and Nvidia) often overlook fundamentals. Insider activity, such as directors selling shares rather than buying, further adds to the concerns.   Even in the cryptocurrency world, Bitcoin holders  are cashing out profits, signalling a cautious approach from those who’ve already benefited. This behaviour often precedes market corrections. Market Bubbles Eventually Burst   History reminds us that no bubble lasts forever. While the US market remains a strong performer, it is also one of the most expensive compared to other global markets. A shift in sentiment  or trouble with just one of the Magnificent Seven could trigger a significant downturn.   The Case for Diversification   Diversification is key to protecting portfolios from concentrated risks. Reducing exposure to the US market doesn’t mean sacrificing returns; it can lower volatility and shield against potential losses in a seller’s market.   For example:   Emerging markets  may offer opportunities for growth at lower valuations. European markets  have shown resilience and provide diversification benefits. Sector rotation  into underrepresented industries such as healthcare or renewable energy can balance risk.   Understanding what funds hold is essential. A balanced portfolio can better withstand market turbulence and provide steadier growth for clients.   The Warning Signs Are Clear   While chasing the market is tempting, particularly with the fear of missing out (FOMO), the current landscape carries significant risks. Insider selling, profit-taking by early investors, and sky-high valuations are red flags.   In conclusion, now is the time to focus on disciplined investment strategies, diversify globally, and avoid the temptation of speculative bubbles. History has shown that prudence often outperforms panic-driven decisions in the long run.

As we entered 2024, it was clear this year would be eventful. The United Nations Development Programme labelled it a “super year” for elections, and nearly half the world’s voters across 72 countries headed to the polls.   Closer to home, the UK saw a major political shift with Labour winning a strong majority, and, more recently, all eyes have been on the Autumn Budget. Meanwhile, the U.S. election has kept us on edge across the Atlantic with a close race, sparking speculation on its potential economic impact. Autumn Budget Highlights   The Autumn Budget has stirred diverse opinions and raised several key questions, such as:   National Insurance Hike for Employers:  Will this additional business cost affect the UK's economic growth? And if so, what does that mean for the future? Inheritance Tax on Pensions: New rules imposing inheritance tax (IHT) on pensions (though managed by scheme trustees) will affect financial planning. However, the rules around beneficiaries pre- and post-75 seem to remain unchanged. Business Relief Adjustment:  The new Business Relief allowance does not include AIM-listed investments, which may prompt significant changes. How could a potential AIM stock sell-off impact the market?   On a positive note, inflation has eased, and interest rates have begun to decline. UK stocks remain relatively cheap compared to their U.S. counterparts, which suggests a slight uptick in investor optimism could benefit UK markets. Whether these factors signal smoother economic waters ahead or more turbulence will depend partly on the Budget’s impact. If effective, it may drive growth; otherwise, it could lead to recessionary pressure.   A Look Across the Atlantic   Turning to the U.S., speculation about the next president raised concerns. It seemed to be neck and neck throughout the campaign; however, in the end, Trump took a comfortable majority to return to the White House for a second term.    Trump’s return to power presents a different economic landscape with higher inflation and interest rates. Historically, U.S. markets have shown resilience regardless of the party in power, as broader factors often play a larger role in performance. One crucial element to watch is tariffs, which could have inflationary impacts on the U.S. and global economies, including emerging markets and Europe. Given the current high valuation of some U.S. stocks, history reminds us that market “heroes” of one decade may not be the standouts of the next.   In Summary   With major events like the UK Budget and the U.S. election mainly behind us, we can hope for a smoother path as we close out the year. The focus now is on how these developments will shape the months and years to come, both here in the UK and abroad.

Planning for retirement is a significant concern for many. A report published by the Financial Services Compensation Scheme (FSCS) in September 2023 revealed that 69% of UK adults worry about whether their savings will be enough to support them. This widespread concern raises a crucial question: Will my money last? The Million Dollar Question: How Much is Enough? Planning often boils down to the big question: “How much do I need to retire comfortably?” . The answer varies from person to person, depending on lifestyle, financial commitments, and health. However, the Retirement Living Standards , developed by the Pensions and Lifetime Savings Association (PLSA), provide a helpful benchmark. These guidelines suggest three levels of annual expenditure in retirement— minimum , moderate , and comfortable —offering a rough idea of how much you might need based on lifestyle choices. It’s important to remember that these figures are based on annual expenses, excluding taxes, so your retirement income goals may need to be adjusted accordingly. Is a Comfortable Retirement Achievable? For many, the state pension will form a significant part of their income. The current full state pension is around £11,500 per year for a single person and £23,000 for a couple. You must generate around £20,000 of additional income annually to aim for a moderate retirement. For a comfortable retirement, this figure rises to about £36,000. But that’s not the whole picture—tax needs to be factored in. To achieve a moderate income after tax, a couple would need around £48,000 gross income per year. To enjoy a comfortable retirement, they’d need around £68,000 gross. How Much Do You Need to Save? When considering your retirement pot, you must consider how much capital you need to generate this income. Assuming you follow the general rule of withdrawing 4% of your investments annually, a couple aiming for a moderate retirement would need approximately £625,000  in savings and investments. For a comfortable retirement, this figure jumps to about £1.125 million . Achieving a Stress-Free Retirement Retirement planning  is about more than just building a large pot of money. It’s about ensuring your income is sustainable throughout your retirement years. By planning effectively, you can ensure your money lasts, no matter how long your retirement is. One critical strategy for securing your retirement is using tax-efficient savings vehicles, such as ISAs and pensions. By reducing your tax liability, you can increase your disposable income in retirement or reduce the amount you need to save in the first place. A Changing Landscape The retirement landscape constantly evolves, with new regulations and advice shaping how we plan for our future. For example, the Financial Conduct Authority (FCA) recently introduced a review of retirement income, focusing on the sustainability of retirement savings. This will likely influence how financial advisers and wealth managers help clients plan for the long term. Partnering with QuantQual and Money Wise UK QuantQual and Money Wise UK have created exclusive material to help financial planning firms in advising clients. Whilst people rush to create solutions we believe you need to start with the basics. Get in contact today to see how we can help.

Over the last few months, I have studied the FCA Thematic Review into Retirement. It has challenged my thinking about retirement and the challenges facing financial planners. So, we ask, "Retirement: what is it good for?".   Below are two case studies:   Case Study One   Imagine a financial planning firm that operated without a clear retirement strategy. As clients approached retirement, they were left to navigate their retirement income with their existing risk profile, relying on selling units for income. This lack of a clear strategy led to potential pitfalls and challenges.   Case Study Two   Consider a couple I recently encountered trying to determine if they had enough money to retire. The financial planner, however, was only considering a solution for one of the pair, neglecting to account for their combined assets and needs. This case underscores the importance of comprehensive financial planning that includes both partners.   It's important to note that the complexity of retirement planning is not to be underestimated. Even in the cases I've presented, where all the facts may not be fully disclosed, the intricacies of retirement planning are evident. This underscores the need for professional advice in navigating this increasingly complex landscape.   Why Is the FCA  Concerned?   As I have developed propositions for financial planners, it has become clear how complicated retirement planning is and the opportunities to demonstrate value. In this blog, I want to touch on some of these. I call it the retirement conundrum.   I often use this to illustrate what we face at retirement:      We live longer, are worried about whether we can afford to retire, and the golden age of guaranteed pension schemes has passed. Navigating and making the right decisions is becoming increasingly complicated. Looking at this and the two scenarios at the start, we can see why the FCA is concerned.   Inflation, longevity and tax   Inflation (the silent killer) is crucial because it erodes what we can afford to buy. When I started managing defined benefit schemes in the late eighties, a lady was receiving a pension of £60 per annum. She began receiving this in the early sixties, and it never increased. What she could afford then, she couldn’t afford now. Just because inflation has been low for the last ten years doesn’t guarantee a path into the future.      The second factor is longevity . Today, a male 60-year-old has a 1 in 4 chance of living to 92. This means any savings to provide income must last a long time.      There is also tax ,  which is the most efficient way to receive income in retirement.      Delivering on income in retirement   Far from being negative about the FCA paper, I believe this is a defining moment for retirement planning. It also provides opportunities for financial planners to demonstrate value within their proposition.   Before we even start, a couple entitled to the entire state pension will receive circa £23,000 p.a. A recent report by the IFS showed that expenditure goes down in retirement.      The point is that managing needs and expectations is becoming increasingly complicated. Switching income on and off to reflect different needs at different times is a crucial element of retirement planning.   Managing Income   One of the other aspects is how do you manage income:   Annuities : Buying a guaranteed income from your fund. Selling Units : Selling down units within your fund to provide an income supported by many academic papers. Natural Income : Taking an income from natural income.   There are probably a hundred more you can add. New solutions are coming to the market every day, and tax also plays a big part in ensuring the right solution is delivered.   Conclusion   We started with two scenarios that reflect some people's approach to retirement planning. The latest FCA paper is good for consumers and financial planners. Financial planners have a massive opportunity to really help consumers in retirement. Consumers, in turn, should be able to feel comfortable knowing that they will be okay in retirement.   Disclaimer: Please note these are my thoughts. There are no recommendations within this. I am not regulated, nor can I provide advice. I would always recommend seeking advice from a financial planner before making any investment decisions. Investments can also fall and go up, and past performance is no guide to the future.

The way we view success has always influenced our environment. For many people, success is linked to their social standing and, frequently, their wealth. When it comes to investing, this perspective can be risky, leading us to pursue what is seen as "successful" without fully grasping the associated dangers. Throughout history, asset bubbles have been observed as repetitive occurrences where inflated optimism leads to prices significantly exceeding actual value. Recognising these patterns and being cautious is essential to avoid the risk of investing when these bubbles peak. Priced to perfection During the COVID period, I remember chatting with a friend who was excited about the remarkable increase in Tesla's stock price. He had made significant profits, as Tesla peaked at more than $400 per share, resulting in an impressive return of 1,283% over five years. His decision was brilliant, proving that timing is crucial in investments.   However, not everyone had a seamless journey. Investors who entered at the peak experienced a decline in their investments. Nvidia could be facing a similar situation. Nvidia provided returns exceeding 2,000% over five years. Nevertheless, like Tesla, even the most successful companies can start to struggle at a certain point.   It's not that Tesla or Nvidia are not excellent companies—they are. The issue is that their stock prices have been "priced to perfection." Investors anticipate flawless performance so that a slight deviation can lead to a market reaction. The higher the expectations, the greater the disappointment when perfection is not achieved. The wise man There’s a quote I love: A wise man never loses anything, if he has himself . True wisdom is less presuming than folly. The wise man doubteth often, and changeth his mind; the fool is obstinate, and doubteth not; he knoweth all things but his own ignorance. Travel makes a wise man better, and a fool worse. In investing, it’s easy to get sucked into stories of success. The media and market analysts often highlight these dramatic rises, but how many people admit they bought Tesla or Nvidia at their peaks? The allure of big names and huge returns can cloud judgment, but the reality is that most of us aren’t lucky enough to time the market perfectly. It’s important to remember that good investing is rarely exciting. As George Soros once said, "If investing is entertaining, if you're having fun, you're probably not making any money. Good investing is boring."  Similarly, Seth Klarman emphasised, "The single greatest edge an investor can have is a long-term orientation." The Long-Term Perspective While luck can occasionally lead to incredible returns, such instances are rare. More often than not, the most successful investors are the ones who adopt a patient, long-term view. They ignore the noise, the hype, and the short-term fluctuations. It’s not about finding the next Tesla or Nvidia at its peak—it’s about finding solid, reliable investments and holding them through the ups and downs. Quick wins don’t measure success in investing; it’s measured by sustainable growth over time. Chasing the latest success story might feel thrilling, but true wealth is built with a steady, disciplined approach. Ultimately, the real gold rush comes to those who can be patient, boring, and wise.

With the U.S. presidential election on the horizon, investors are wondering how it will affect financial markets.   Presidential elections are major political events that naturally draw attention, and in close races, anticipation and uncertainty can run high. This often leads to speculation about how stocks and bonds will react, but history shows that markets are influenced by a broad range of factors— not just election outcomes .      The Market and Elections: Separating Fact from Fear      It’s tempting for investors to believe that presidential elections hold the key to market performance. Should you sell your stocks before the ballots are counted? Or perhaps wait for the election results before making any significant investment decisions? While the outcome of an election may have some short-term impact, it’s important to remember that business fundamentals, not politicians, drive markets .   Historical data  shows that markets have performed well under Republican and Democratic administrations. Moreover, the broader economic and geopolitical environment—interest rates, inflation, corporate earnings, and global trade tensions—plays a much more significant role in shaping long-term market trends than election outcomes alone.    Market Performance During Election Years      A closer look at historical election years may offer some reassurance. For example, since 1932, the S&P 500 Index  has produced positive returns in 19 out of 23 presidential election years. This suggests that election years are not necessarily detrimental to market performance . However, it's not uncommon for volatility to rise in the months leading up to an election as investors grapple with uncertainty.   The chart from T Rowe shows that although returns tend to be slightly lower, markets tend to deliver positively:      What History Tells Us About Post-Election Markets      Many investors expect significant market swings after Election Day. Yet history tells a different story: Markets tend to normalise after initial reactions.   In the short term, market volatility may spike as investors react to perceived changes in policy direction, but these fluctuations tend to smooth out.   This chart from Franklin Templeton shows how volatility rises in the run-up to the election and then drifts away after:      Over the long term, fundamental economic conditions —such as GDP growth, inflation, and corporate profits—are far more critical in determining market performance than the party in power.      Avoiding Emotional Investment Decisions      In the heat of an election cycle, it’s easy to get swept up in speculation and news cycles, which can influence emotional decision-making. However, investment decisions based on short-term political outcomes often miss out on long-term growth . Successful investors focus on business fundamentals, not day-to-day political shifts.   The chart below from Franklin Templeton shows that drawdowns during a presidential election year have proven a good entry point for long-term investors, with an average rebound of 24% in the 12 months following the lows:      The Bigger Picture: Key Factors Driving Markets      Ultimately, presidential elections are only one-factor influencing market performance. While they can create short-term volatility, economic fundamentals  such as interest rates, inflation, corporate earnings, and geopolitical events will significantly impact over time. Long-term investors are often better off staying the course through election cycles rather than attempting to predict market moves. Conclusion: Focus on Long-Term Investing      The takeaway for investors is clear: while U.S. presidential elections can create short-term noise, they are not the sole determinant of market performance. History shows that markets tend to recover and follow broader economic trends regardless of who wins the White House. Rather than reacting to political events, long-term investors should focus on maintaining a diversified portfolio and staying committed to their investment goals.

Over the long term, investing in the stock market has consistently proven rewarding, but navigating market volatility is challenging. Historical data from the MSCI World Index , spanning from January 1999 to July 2024, supports this with an average return of 7.39% and volatility of 14%. However, the journey to achieving these returns is far from smooth, as recent fluctuations in the stock markets show.      One insightful tool that captures the emotional rollercoaster of investing is the Fear and Greed Index , which gauges investor sentiment in the US. Over the past year, this index has swung from extreme greed to fear, illustrating how quickly market sentiment can shift.      Timeless advice is to imagine setting aside £10,000 for a decade without monitoring market news. Would we be satisfied if that investment grew to £15,000? Likely, the answer is yes. However, the value could have been significantly higher or lower during that period. We might not notice these fluctuations without the emotional tug-of-war from watching daily market swings. This underscores the importance of focusing on the long term rather than being swayed by short-term volatility.   Here are three key takeaways from the current market swings:   Markets Go Up : While it’s thrilling to watch investments grow, it’s essential to remember that past performance doesn’t guarantee future returns. Staying grounded during bullish periods helps prepare for eventual downturns. Markets Go Down : Downturns are not a reason to panic. With cash reserves, market dips can be like a sale, offering the opportunity to buy quality investments at lower prices. History shows that good investments typically recover and appreciate over time. Time in the Market : As the chart from the FTSE (sourced from Fidelity ) highlights, spending time in the market is more beneficial than attempting to time it. Trying to buy low and sell high often leads to poorly timed trades and diminished returns.      In conclusion, despite the hype surrounding certain high-flying stocks and the anxiety that accompanies market downturns, it’s crucial to maintain a long-term perspective. Holding nerves through market swings is often the best strategy for navigating marketing volatility and achieving investment goals.