“Everything is contingent, and there is also chaos” – Spalding Gray
Uncertainty is part of life, however, the last two and a half years has been more tumultuous for both businesses and individuals than recent years. The recession was a constant challenge for the construction industry – but in one way, it was consistent. Consistently tough. In contrast, the past three years (a “hard” Brexit and Covid-19), has not only been a daily challenge, but new obstacles to success appear and disrupt whatever headway many of us had made – ongoing war in Ukraine, inflation and spiraling energy costs.
While we are unable to prevent these obstacles from appearing, knowledge is power. It can help you navigate obstacles in a more informed manner and ensure your decisions are informed by logic, as opposed to a reactionary panic.
In early August, Darragh Hogan sat down with David Walls in Zurich Life Assurance to help clients understand what is going on in the markets currently and what the economic outlook is. This exclusive content for our clients is part of our ongoing commitment to them – ensuring the information they have is the most current and the advice they receive is informed.
We can share some of the points that were raised during the session. If you would like to learn more, you can get in touch with Darragh in Milestone Advisory directly.
- Market Overview: As expected, it is a difficult period again in the markets. The Central Bank’s aggressive policy aims to fight inflation. This is against a backdrop of global growth concerns and ongoing war in Ukraine. This weighs on investor sentiment in the markets. Volatility in equity markets is expected to continue in the short term but most of the bad news has been priced into the market. Having said that, (when taking a five-year view), the long-term growth estimates remain positive. Both equities and bonds are being hit at the same time, which is unusual. The main cause is inflation and while some inflation is ok for equities, the rates we are seeing (greater than 4 – 5%), are not good. Inflation is also bad for bonds as they are fixed payments into the future with capital repayment in X number of years.
- Inflation: It was supposed to be transitory but now inflation looks like it will be higher over the next few years than recent times. It has however likely peaked and will come down into 2023 but the 3-4% range could be around for a time yet. We have experienced inflation before, but not in this way. The current inflationary pressures are unusual and causing the severe inflation spike as there are both demand and supply issues. Demand for goods and especially services is much stronger than anticipated. Supply side issues such as war (affecting energy and food supplies) and Covid-19 are still causing supply chain challenges in Asia. There are signs this may have peaked as China reopens, but setbacks are still likely. Looking West to the largest market, the US is effectively in recession. However, full employment in US and the consumer is in relatively good financial shape so any recession is likely to be relatively mild.
What should you do now?
David Walls explained that Zurich is currently positive about the state of equities going forward. In Zurich’s most popular multi-asset funds, they are at the mid-upper end range of equities and remain their preferred asset class. Clients should take a long-term investment view and stay disciplined. Portfolios should be diversified with suitable asset allocation depending on client’s attitude to risk. It is a very difficult to time the markets but make a plan with your financial adviser and stick with it.
Consider the value of time on your money. Invest cash wisely, take an appropriate amount of investment risk in your pension, and inflation proof your savings, by investing them in funds rather than a low or no interest paying bank account.
Here to help you navigate your way to financial security.
The Milestone Advisory team are qualified financial services consultants. We specialise in helping professionals in the construction sector and related industries. Our team will work with you to review your finances, explaining your options in clear English.
No jargon – just the facts. For further information please contact Darragh Hogan or phone: (01) 406 8020.
Milestone Advisory DAC t/a Milestone Advisory is regulated by the Central Bank of Ireland.
Warning: The value of your investment may go down as well as up.