MarketMinder Europe 

MarketMinder Europe

MarketMinder Europe provides our perspective on current issues in financial markets, investing and economics. Our goal is to analyse key topics in an entertaining and easy to understand manner, helping you see the news of the day in a unique perspective.

Investing in financial markets involves the risk of loss and there is no guarantee that all or any capital invested will be repaid. Past performance neither guarantees nor reliably indicates future performance. The value of investments and the income from them will fluctuate with world financial markets and international currency exchange rates.

Late Retirement Planning

Most people hope to retire, but many are late—potentially age 50 or 60—before they start planning or building up their retirement savings. Although you may not be ready to retire just yet, you may be nearer than you think and planning late is better than never. As you approach retirement, you may still face many life changes. But these changes needn’t reduce your quality of living if you’ve done enough saving and planning. As you approach retirement, you can determine your required retirement savings, decide when to start taking pension withdrawals and identify an appropriate long-term investment strategy. This article provides helpful tips, suggestions and advice on how to navigate these important retirement-planning decisions.

Pension Considerations

Somewhat like Social Security in the United States, your country may offer some kind of State Pension, which may be a welcome source of income during retirement. However, you may need more income to make sure you can maintain your quality of life in retirement, and a diversified investment portfolio can an extremely helpful and potentially flexible source of income. Your pension payments may vary depending on the pension type and other circumstances. Some factors that can influence your pension payments are:

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5 Tips for Managing Money in Retirement

Retirement is an important stage of life and one that takes plenty of foresight and planning to make sure you have the necessary amount of retirement income. If you’ve got a healthy pension or other savings you’ve accumulated for retirement, that’s an important step! But your journey to a comfortable retirement may have just begun. To make sure you have sufficient retirement savings, retirement income and other income, you may need to invest and manage money in retirement to meet your goals.

Here are five important tips that may help you in your investing process.

Tip 1: Define Your Investing Goals

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Passive Investing—How Hard Can It Be?

Investors are often confused about what passive investing actually is. One of the most common misunderstandings is that passive means not making any active investing decisions—another misconception is that passive investing is easy for investors to do. But passive investing is more nuanced and harder to execute than some investors may think.

What is passive investing?

Before we begin to look at the merits, or otherwise, of passive investing, it is useful to define it clearly. To do this, let’s first look at an investing style that is considered its opposite—active investment management.

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Planning for a Meaningful and Happy Retirement

If you're near or in retirement, congratulations! Retirement is a new life chapter—full of opportunities, places to go, things to do and fulfilling ways to spend your time. It can be an exciting period, but planning for it can be daunting.

Some approach retirement planning primarily as a financial exercise. Have you been saving enough? What are your likely income needs? How far will your pension benefit go towards covering your expenses? Will it make sense to change your pension investments or take a pension distribution? How should you allocate investments outside your pension? These and questions like them are absolutely essential. And it can be almost impossible to really consider what you want to do when you retire if you don’t have a pretty clear sense of your financial situation. If you’re interested in more resources on planning for a financially comfortable retirement, you can find material on retirement planning and investing for your retirement on our website.

But if you focus solely on creating a financial plan, you may end up neglecting some other important aspects of retirement, such as safeguarding your health and living in a suitable home. In what follows we’ll offer some strategies and questions to help guide your planning for a meaningful, happy and long retirement.

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Measuring Wealth

Calculating your net worth today is important for your financial future because it can help you estimate your current wealth and what you might need in the future. Your net worth can also serve as a possible starting point for retirement planning.

Your current wealth can influence retirement planning as it can help you measure what you’ve saved and the amount of withdrawals and pension income you may be able to expect once your retire. Your current wealth can also influence tax planning, such as your ability to pay taxes on retirement income from pensions or other accounts. Measuring your wealth can also help you plan accordingly for your investment time horizon (how long you need your portfolio to last) and choose your portfolio’s asset allocation (the mix of stocks, bonds and other security types). For example, inflation could affect how far your money and income will go. Have you accounted for this additional cost? You could alternatively live long past your expectation or simple life tables might suggest. Will you be prepared in these scenarios? Asking these important questions when measuring your wealth can be a crucial step in that process.

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Putting Germany’s Q2 Contraction Into Perspective

-0.1%. 0.2%. 0.4%. -0.1%. These, in chronological order, are Germany’s real, quarter-over-quarter gross domestic product (GDP, a government-produced estimate of national economic output) growth rates in each of the past four quarters.[i] According to some headlines from financial publications we regularly review, Q2’s dip is a sign Germany’s “golden decade” is ending and recession is nigh. Never mind that when GDP shrank by the same percentage in Q3 2018, it snapped back and grew in each of the next two quarters. We think that should be your first clue that Q2’s wee contraction is neither predictive nor automatically the end of the line—for Germany’s economy, the world or equity markets.

A popular theme amongst news outlets we read is that German weakness results from Brexit dread and the US and China’s trade war. Pundits cite Germany’s export-heavy economy and claim these trade headwinds are severe threats, citing German exports’ -1.3% q/q decline in Q2, which the country’s federal statistics office described as the worst result in six years.[ii] Industry analysts we follow see falling car demand in China, connect it to the trade spat, and pen laments for Germany’s vaunted automakers. Some in our perusal of the financial press acknowledge Germany’s services sector is chugging along fine, but they warn weak manufacturing is a bellwether and malaise will soon befall the entire country. At first blush, household spending growth’s sharp slowdown from 0.8% q/q in Q1 to 0.1% q/q might seem to support this viewpoint.[iii] So might gross fixed capital formation’s -0.1% q/q decline, although negativity here was confined to the construction sector—investment in machinery and equipment and other products rose.[iv] With financial pundits widely considering Germany the eurozone’s pillar of strength, many presume it is only a matter of time before the broader eurozone economy gets sucked into the vortex.

Now, economic data are seldom black and white, and we think there are kernels of truth in some of these claims. German exports to the UK stumbled in Q2, a likely sign of Brexit uncertainty’s international reach.[v] Several reports have shown that when Brits thought Brexit would happen on 29 March and feared it could be a no-deal exit, they stockpiled goods—including finished goods and components from Germany and other eurozone trading partners. When Brexit got delayed, Brits could work through them without needing to send German suppliers new orders. This likely isn’t a long-term headwind, as events like this usually just pull demand forward temporarily, in our view, but it probably was a factor in Q2.

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Quick Hit: July UK and US Retail Sales

After recent market turbulence, UK and US consumers seemed to provide a reprieve. July retail sales for both countries rose, and some headlines heralded consumers as a bright spot in a stormy global economy—though pundits still fretted manufacturing weakness eventually spilling over. Whilst retail sales don’t capture all of consumer spending, we think the latest numbers add further evidence that the non-industrial parts of the UK and US economies, which happen to represent the majority of GDP, are faring fine.  

In the UK, July retail sales rose 0.2% m/m (3.3% y/y).[i] Across the Atlantic, they grew 0.7% m/m (3.5% y/y).[ii] Both beat expectations (for -0.3% in the UK, 0.3% in the US).[iii] Whilst headlines cheered the growthy July, these summertime figures aren’t out of line with retail sales’ expansionary 2019.

Exhibit 1: UK Retail Sales

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Italy’s Coalition Is Kaput

On Tuesday, Italy’s government collapsed when Prime Minister Giuseppe Conte resigned ahead of a looming no-confidence vote, ending the alliance between the anti-establishment Five Star Movement (M5S) and nationalist League. League leader Matteo Salvini called for the no-confidence vote 8 August, but opposition lawmakers delayed it in an effort to buy time to explore alternative alliances. In the coming days, we will likely find out whether they were successful—or whether the country will hold new elections, perhaps as soon as October. So for now, we think political uncertainty likely lingers. Longer term, however, the likelihood of an Italian government—regardless of who leads it—passing major, market-disrupting change appears low, in our view.

According to the coverage in news outlets we follow, Salvini triggered his own government’s fall because he wants new elections. Whilst the League currently has 91 fewer seats in the lower house than M5S, its poll numbers have soared since last year’s election. The latest poll averages give the League 36% and its would-be coalition partners, Silvio Berlusconi’s Forza Italia and the far-right Brothers of Italy, 6% and 7%, respectively.[i] M5S is down to 19%, and the PD has 23%.[ii] Striking whilst the iron is hot appears to be Salvini’s strategy.

But Salvini doesn’t get to call new elections. That power rests with President Sergio Mattarella. Whether he calls them will likely depend on whether M5S and the centre-left Democratic Party (PD) can form a stable government and convince Mattarella of their staying power. This isn’t outside the realm of possibility. Together, they have 327 seats in the 630-seat lower house, enough for a small majority. Unlike M5S and the League, they look like they are more ideologically aligned. But until last week, they had a public record as bitter rivals. Their potential rapprochement—if consummated—would probably be a marriage of convenience to keep Salvini from getting his way. That was apparently enough to get them to join forces to block his no-confidence vote when he first submitted it two weeks ago, but whether it gets them to agree on a governing programme is likely another matter.

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Global Investment Management

There are a seemingly endless number of financial professionals willing to help manage your money. So where should you start when it comes to deciding whom to choose for your asset management? This can be a difficult decision and not all professionals have the same characteristics, experience and qualifications. For instance, having a local manager may be convenient, but if that manager doesn’t have experience managing money through multiple market environments, is that manager the best choice for you? When determining who has the best qualities to manage your money, there are many factors you should consider to ensure that you can meet as many of your long-term financial goals as possible.

Global Investing

One factor we believe investors should consider is a global investing approach. Some managers may not invest beyond securities that can be found in their part of the world, or perhaps even in their country. This approach can introduce their clients to concentration risk. Concentration risk is the risk of having too much of your portfolio concentrated in one part of the market, reducing diversification and potentially increasing the risk of volatility.

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Brexit’s Next Act Seems Cast, but the Script Still Looks Missing

Tuesday morning, one tiny piece of UK politics seems a touch clearer: Boris Johnson (or “BoJo” for short)—former Foreign Secretary and London mayor—took 66% of the vote in the Conservative Party’s leadership contest, meaning he will replace Theresa May as Prime Minister. Whilst this sheds a little light on the cast of characters in Brexit’s next act, we don’t think it adds much clarity beyond that. How the UK/EU relationship will look post-Brexit remains unknowable, in our view. Many in our news surveys speculate his victory means no-deal is more likely, but we think this is a vast oversimplification. Though we wish his election cleared the Brexit fog, it doesn’t, in our view.

Johnson was one of Brexit’s chief flagbearers prior to 2016’s referendum and is generally considered a staunch eurosceptic in publications we read regularly. He touted a “do or die” approach to Brexit whilst campaigning, claiming 31 October would be the final date Britain is in the EU—deal or no. Johnson even hinted at doing an end-run around Parliament to accomplish this.[i] Naturally, given the hyper-focus in Europe on Brexit amongst media we follow, this stole most headlines tied to the campaign.

But this speculation overrates political rhetoric by a wide margin, in our view. For one, Johnson said a lot of things on the campaign trail. Yes, he seemed to occasionally toe a hard line on the EU—which was likely necessary for him to win eurosceptic Tories’ support. He also said he thought the odds of a no-deal Brexit were “a million-to-one against” in late June. Perhaps that is also politicking. (It was also when Johnson’s opponent, Jeremy Hunt, said similarly contradictory things on Brexit.)[ii] As the old joke goes: How do you know when a politician is lying? Simple—their lips are moving.

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Investing in financial markets involves the risk of loss and there is no guarantee that all or any capital invested will be repaid. Past performance neither guarantees nor reliably indicates future performance. The value of investments and the income from them will fluctuate with world financial markets and international currency exchange rates.

This article reflects the opinions, viewpoints and commentary of Fisher Investments MarketMinder editorial staff, which is subject to change at any time without notice. Market Information is provided for illustrative and informational purposes only. Nothing in this article constitutes investment advice or any recommendation to buy or sell any particular security or that a particular transaction or investment strategy is suitable for any specific person.

Fisher Investments Europe Limited, trading as Fisher Investments UK, is authorised and regulated by the UK Financial Conduct Authority (FCA Number 191609) and is registered in England (Company Number 3850593). Fisher Investments Europe Limited Headquarters: 2nd Floor, 6-10 Whitfield Street, London, W1T 2RE, United Kingdom. Fisher Investments Europe Limited’s parent company, Fisher Asset Management, LLC, trading under the name Fisher Investments, is established in the USA and regulated by the US Securities and Exchange Commission. Investment management services are provided by Fisher Investments.