What to look out for in a year of change - Partners Wealth Management

The last year was eventful; from the rapid progress of AI to the fast-changing global energy resource map. The UK economy continued to confront the challenges of persistent inflation and subdued growth prospects, a scenario reflected further afield in economies including the US and Europe. As the year came to a close, hopes were rising that inflation was coming under control and investors started looking forward to 2024.

Now it’s time to refocus for 2024

As we enter 2024, we consider the outlook for the year ahead and some areas which may impact your financial planning.

Interest rates

In December 2023, the Bank of England’s (BoE’s) Monetary Policy Committee (MPC) voted by a six to three majority to retain the Bank Rate at 5.25%. With the Base Rate currently residing at a 15-year high, Andrew Bailey BoE Governor said that it’s “too early” to speculate about when UK interest rates will be cut, adding, “I don’t think that we can say definitively that interest rates have peaked. I hope that we are at the top of the cycle.” Although encouraged by the efforts made to cool inflation in the UK so far, Mr Bailey said there is still a “persistent element” to inflation which “we have got to take out.”

The market however has started to price in interest rate falls and treasury yields have already fallen from their peak in anticipation.

Inflation goes in the right direction

Against expectations, the UK’s inflation rate reduced to 3.9% in November, the lowest level since September 2021. From an inflationary perspective, the MPC’s December summary outlines that Consumer Prices Index (CPI) inflation is expected to stay close to its current rate at the start of 2024, with a temporary increase in service price inflation expected this month.

Falling inflation will likely a key determining factor in how the base rate is set during the coming year. This is not a predetermined outcome however, with competing domestic and global factors likely to continue to influence the UK’s CPI figure.

March Budget

The Government announced the Spring Budget 2024 will be held on 6 March 2024, with Chancellor Jeremy Hunt commissioning the Office for Budget Responsibility (OBR) to prepare a fiscal and economic forecast to be presented alongside his announcement. Likely to be the Government’s final fiscal event prior to the General Election, expectations are mounting that further tax cuts could be employed to gain voters, including Inheritance Tax (IHT) and Income Tax. We will, of course, be monitoring the Budget announcements and how they may affect your financial planning.

Positive outlook

We believe that investors’ have good reason to be confident as we enter 2024. Our overall outlook on markets is generally positive, driven by the attractive valuation of long-term fundamentals.

As ever there may be bumps in the road, so positioning portfolios to meet your personal needs and time horizons remains essential. Diversifying portfolios will bring resilience in different market conditions and interest rates being higher than recent years warrant consideration. It is important to ensure you have a solid financial plan and we will continue to provide suitable strategies and financial plans that support near term needs and can adjust to changing circumstances in order to meet longer term objectives.

Now it’s time to refocus for 2024

Interest rates

Inflation goes in the right direction

March Budget

Positive outlook

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