We find ourselves now in May 2021, in springtime, thankfully very close to the end of the tunnel and with the opportunity for life to move back towards a more normal existence. Given the events of the last year, normal will be very different from the life we experienced previously.
We are now heading towards a world that would have been unthinkable on 31st December 2019. Covid has made unprecedented alterations to our lives and has both changed our past and significantly reshaped our future. Developments have been seen in areas that would have been unimaginable prior to the pandemic, some unwelcome and some beneficial to mankind and the environment.
Who would have thought back in February 2020 that, within six months, face masks would become the norm, home baking and home cooking would have taken off, and we would be encouraged to have an extended walk at least once a day? Very few people have experienced anything reminiscent of the current circumstances.
Perhaps through relatives that lived through WWII, we will have heard how things were different in post-war Britain. Regardless of the overhang of rationing and other hardships, optimism and a can-do attitude prevailed. Some of our most remarkable advances were made, most notably of course, the founding of the NHS. With a predicted bounce back when pubs, restaurants, theatres and cinemas start to re-open, there is likely to be a similar scenario again. I personally think there will be a huge release of emotion when restrictions are fully eased and I expect a very vibrant UK, especially for the next 18 months.
The investment markets agree and have already recovered significantly from the lows of March 2020, notwithstanding the turmoil and false dawns. There has also been much comment regarding people accumulating savings over the last year. These savings need spending or investing with interest rates remaining low and the prospect of inflation on the horizon.
Investors now demand more than profit
The world experienced a significant shutdown in manufacturing and travel during the pandemic, which, for all its economic damage, has had a beneficial impact on the climate.
Despite scepticism about measures in the Kyoto Protocol and other central initiatives to cut emissions, the pandemic has proved, albeit at significant cost, that this is possible. Many cities have experienced the best climatic conditions in decades. This has coincided with changes in consumer demands where calls for a faster move to electric vehicles and changes to the way our homes are heated are no longer considered radical or eccentric. Wind farms on our hillsides and solar panels on our roofs are becoming the norm.
The changes in public attitudes towards the environment and social awareness have been met with a huge change in the investment arena too. Investors are now asking searching questions about the activities of the companies that their money is invested in and making positive choices to back those with good environmental and social records, and notably avoiding those that don’t.
At present, there are degrees to which businesses meet such criteria, but there is a growing worldwide trend, backed by legislation, for them to up their game. As a result, the structure of many investment funds is going to alter. Fund managers will now be expected to consider environmental and social governance in their asset selection, which in turn, will put an emphasis on the companies themselves to adopt better procedures and processes. I predict that many firms will find themselves flourishing when they fully meet these requirements, creating a virtuous circle and proving the wonderful transformative power of investor pressure.
Environmental Social Governance, or ESG as it is commonly referred to, is a huge wind of change for all parts of the investment industry and will change investment philosophies for decades. If this is important to you, it is something to discuss with your adviser.
The Property Market
Astoundingly, following the lockdown of 20th March 2020 the UK housing market has remained not only resilient, but has experienced a huge upturn in both activity and valuations, assisted in part by the March 2020 Budget, which provided a reduction in stamp duty across the board for all buyers.
Initially planned to run until March 2021, the Stamp Duty Holiday was extended to June 2021. This has incentivised many people to move property, either using online viewing or with social distancing measures in place to choose their new home. This has been at a time when interest rates have remained historically low and mortgage repayments have been particularly affordable, especially in comparison with rents. My wife and I managed to move property ourselves between June and August in a relatively smooth, albeit somewhat unusual, way.
When talking with clients, property is often their main concern, consuming their thoughts for both now and the future. I have always been an advocate of the importance of moving properties at a time when you feel in control of such a move, which means planning for those strategic times when a move might be advantageous or inevitable. I do appreciate that this is not always easy. We all tend to get emotionally attached to our properties, which, of course, form such an important part of our lives. Talking to an adviser can help.
Changing thoughts on retirement
The last year is likely to have seen many people rethinking their retirement, which is something I touched upon in the middle of the first lock down when we were probably expecting it to last no longer than 3 months (you can read it here).
People are likely to be much more polarised in relation to what they want to do with their retirement now. Some will have enjoyed the freedom of the last year with no commuting or driving, while others will be more determined than ever to carry on working to remain feeling relevant and engaged.
When to retire, how to retire and how to live the best life that we can with the assets that we can accumulate are all matters for careful consideration as we emerge from lockdown. You might be surprised at what is possible when you place your situation in front of an experienced and qualified adviser.
As ever, if there is anything in this article that affects you and you would like to discuss it, please do not hesitate to contact us.