2014 Third Quarter Update

Following on from the first day of trading for 2014 when the FTSE 100 stood at 6730, the FTSE 100 fell to its lowest at 6449 on the 3rd February 2014 and at the time of writing stands at 6623. So as we look back over the third quarter of 2014, what has happened?

After months of intense campaigning, Scotland has voted not to leave the United Kingdom. The news came as a relief for investors and financial markets which reflected in a bounce in the FTSE 100 reaching 6878. In last couple of weeks we have seen the FTSE 100 drop partly due to the continued slide of Tesco after it revealed it overstated its first half profits by £250m. Investors were also bracing for the end of the Federal Reserve’s quantitative easing programme in October, which some feel may pave the way for future interest rate rises.

In the US the labour market continues to strengthen and with housing affordability high (the latest numbers point to an improving picture, with mortgage demand surging and credit standards easing further), consumer and business confidence remains high.

Also Mark Carney, Governor of the Bank of England has stated again that we are getting nearer to raising interest rates and therefore creating expectations of monetary tightening in Britain. This was prompted by the strong UK recovery so far this year, with improvement in the labour market and a booming housing sector.

The Euro recovery is lagging behind with Italy slipping into recession and Germany contracting. Amidst generally weak data from Europe, there has been some encouraging survey evidence from the ECB pointing to recent easing in credit standards to both corporate and households which could support consumption and activity going forward.

The impact of the sales tax hike in Japan had resulted in a more negative impact than expected. In contrast after China’s disappointing start to the year, growth has been on the upswing driven by the mini-stimulus throughout the summer.

In other news, Chancellor George Osborne announced on 29th September that he is abolishing the 55% inheritance tax that applies to defined contribution pension pots left by those aged 75 or over and to pensions in drawdown. Beneficiaries will only have to pay their marginal income tax rate at the point they take money out of the pension. Access to pension pots of those who die under 75 will be tax-free, including if the pension is in drawdown. The changes will come into effect for payments made from next April.

Skandia changed their name on 22nd September to Old Mutual Wealth. Old Mutual Wealth is part of the Old Mutual group.  Old Mutual was founded in 1845 and is an international financial services group with its headquarters in London.  As a FTSE® 100 Company, Old Mutual plc is one of the 100 largest companies listed on the London Stock Exchange. Unlike more traditional insurance companies, Old Mutual group rarely rely on borrowing and have very limited exposure (under 0.25) to with-profit and guaranteed products which greatly reduces solvency risk from market declines.

Old Mutual Wealth has won more Financial Adviser magazine 5 Star Service Awards than any other investment provider. In 2013 Old Mutual has won various awards including the Best Personal Pension Provider from Moneywise; Gold-rated provider for Income Drawdown, Unwrapped Mutual Funds and Investment Bonds from Money Marketing; Company of the Year and 5 Stars Life & Pensions Provider from FT Adviser.com; Best Wrap Platform from Professional Adviser and Best Wrap or Platform from Money Marketing.


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