WeeklyWatch – A lofty week for US stocks

14 December 2021

Stock Take

Positive gains

Last week saw US stocks experience their best week since February, with the S&P 500 Index closing at a record high. The index of blue-chip US stocks rose 0.95% on Friday, meaning its weekly gain amounted to 3.6%.

The Nasdaq Composite Index likewise witnessed a positive week, rising by 3.39%.

On Friday morning, the US Bureau of Labor Statistics announced that US inflation rose by 6.8% over the course of the year. It would appear that markets had anticipated this type of figure, or had at least ‘priced it in’, given that markets didn’t lose their gains for the week following the release of this data.

Virus versus vaccine

In other news, markets continued to feel the effect of the Omicron variant last week. On Wednesday night, the UK made its ‘Plan B’ restrictions public – effective as of yesterday – in response to the surge in case numbers. People are advised to work from home and wear a mask at many indoor venues.

Markets are still eyeing up new data as to how successful current vaccines are against Omicron. In this regard, there was some positive news last week, as the UK Health Security Agency shared that booster shots could be up to 75% effective against symptomatic infections. What’s more, last week, data from a hospital at the centre of the outbreak in Pretoria, South Africa, indicated that less severe symptoms are being seen in patients than during previous waves.

“Investors are increasingly optimistic that Omicron won’t prove as bad as feared,” wrote Adrian Frost at Artemis, which manages funds for St. James’s Place.

On the other hand, Frost observes investors are still at risk. For example, the Federal Reserve’s tapering of economic support may be swifter than previously thought, which might subsequently ruffle markets if investors believe that the central bank is doing too much, too soon.

Debt default

Meanwhile, in Asia last week, Chinese real estate developer Evergrande neglected to make interest payments on some of its bonds. This led ratings agency Fitch to state that the company is in ‘restricted default’.

The ripple effect of Evergrande’s failure to pay will be felt on an international level – after all, it has more than $300 billion in liabilities. When news about the company’s problems first emerged in September, there were concerns that there could be a major fallout – yet fears of a 2008-style contagion from Evergrande’s issues have since dwindled.

Scholz takeover

In Germany, Olaf Scholz was elected as Chancellor last week. Set to lead a three-way coalition between the Social Democrats, Greens and Liberals, his initial task will be attempting to contain COVID-19; however, his pledges also include modernising the country and implementing progressive social policies.

Wealth Check 

The festive season is all about fine food and quality time with the family. But when it comes to presents, have you ever thought a little more creatively than gifting a pair of socks or an unimaginative gift set?

An alternative could be to make a financial gift to your loved ones. It’s a win-win, in that it could make both you and the recipient feel good, while also saving you a lot of money in tax if you seek the right advice.

As a parent or grandparent, setting up a child’s pension is a thoughtful gift that will help improve their future finances.

When children begin their working life a decade or more from now, paying into a pension is possibly the last thing that many of them will be thinking about. After all, contending with house prices, technological changes and salary negotiations is quite enough to deal with.

While a child’s pension has to be set up by a parent or guardian, anyone can pay into it on the child’s behalf thereafter. Setting one up is generally quite straightforward, but it’s always wise to discuss options with your financial adviser and involve other family members when making that all-important decision.

By the same token, Junior ISAs are a tax-efficient savings opportunity for children, providing more flexibility over the medium term than a junior pension. They can be set up by a parent or guardian for any child under 18 who lives in the UK (there are some exemptions for children living outside of the UK).

The annual savings cap for Junior ISAs is £9,000, with the child being unable to withdraw cash from the account until they turn 18 – making it accessible much earlier than a junior pension.

In short, there are two options – a Stocks & Shares Junior ISA or a Cash Junior ISA. If in doubt, speak with your adviser to gain a sound understanding of your options.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and the value may fall as well as rise. You may get back less than the amount invested.

An investment in a Stocks and Shares ISA will not provide the same security of capital associated with a Cash ISA.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

Please note that St. James’s Place does not offer a Cash ISA.

The Last Word

“Everyone eligible aged 18 and over in England will have the chance to get their booster before the new year.”

Boris Johnson announced an expansion of the vaccination programme on Sunday night.

The information contained is correct as at the date of the article.

The information contained does not constitute investment advice and is not intended to state, indicate or imply that current or past results are indicative of future results or expectations. Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place or Wellesley Wealth Advisory.

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