Contact us
Client and adviser portal
Log in

Unlocking the triple lock

Weekly update
  • Weekly market update
  • 5 minute read

A good week for

  • Japanese equities advanced 3.7% in sterling terms
  • Emerging market stocks also rallied, adding 2.4%

A bad week for

  • European and US stocks weakened in sterling terms
  • Bonds outside the US also fell modestly

UK fiscal policy

The UK government confirmed that it would instigate new revenue raising measures to bolster financing for the NHS and social care in the wake of the pandemic. Policy measures include overturning the “triple lock” on pensions, which guarantees that the state pension will increase in line with whichever is the highest of inflation, earnings or 2.5%. Changes to the makeup of the workforce, anniversary effects, and the end of the furlough scheme have caused artificially high wage growth readings, which would have prompted a large increase in the cost of state pensions. Income will instead increase by inflation or 2.5%. The government also announced plans for a 2.5% increase to national insurance, split across employers and employees. Pensioners will also contribute to this “health and social care levy”, which should raise c. £36bn over three years, £25bn of which will go to the NHS.

China regulation

China’s regime of regulatory tightening continued, with technology and media sectors once again in the firing line. Beijing officials imposed new rules limiting the time minors are allowed to play video games, in order to “effectively protect the physical and mental health of minors”. Children under 18 may play online games only between 8pm and 9pm on Fridays, Saturdays, Sundays and public holidays. Children are already limited to 90 minutes of gaming a day, with a curfew between 10pm and 8am. The share prices of China’s biggest game companies dipped modestly, reflecting the low percentage of revenue generated from underage gamers. However, the edict may presage further regulations to come, which could impact overseas game makers selling into China.

US labour

Last week’s US jobs report illustrated the toll taken by the Delta variant on the US hospitality sector. Analysts expected the US economy to add over 700,000 jobs in August, after a strong print in July. However, companies hired only 235,000 workers in August, with the hospitality sector flat month-on-month as bars and restaurants cut staff. In construction, there was evidence that labour shortages were the cause of slow job growth. Overall, the employment picture is improving, with unemployment falling to 5.2% and a 190k increase in the labour force. Average hourly earnings also rose by 0.5%. However, the weakness of this labour report and healthcare risks give the Fed reasons to wait until November or later to taper.

Global economy

A second week of Purchasing Managers’ Index (PMI) data signalled softening in global economic activity. China’s Services PMI fell to 46.7 in August from 54.9 in July, due to the health risk of the Delta variant of Covid-19 and measures to contain it. Chinese authorities introduced mass testing and travel restrictions in August, which weighed on catering, transportation, accommodation and entertainment industries. China’s Manufacturing PMI also experienced a sharp fall, dipping below 50, signalling contraction - mirrored across Vietnam, Thailand, Mexico, Russia, the Philippines, Indonesia, and Malaysia. Services continue to suffer in Japan, Australia and Russia.

US monetary policy

Progressive members of the US Democrat party are calling on President Biden to appoint a new chair of the Federal Reserve Open Markets Committee. Incumbent chair, Jerome Powell, was originally appointed by Republican Donald Trump. While the Fed has increased its focus on inclusive employment, some Democrats feel it is not enough, urging Biden to “re-imagine a Federal Reserve focused on eliminating climate risk and advancing racial and economic justice.” Re-prioritising central bank objectives could result in changes to the monetary policy response.

 

Important information
The information contained in this article is believed to be correct but cannot be guaranteed. Past performance is not a reliable indicator of future results. The value of investments and the income from them may fall as well as rise and is not guaranteed. An investor may not get back the original amount invested. Opinions constitute our judgment as at the date shown and are subject to change without notice. This article is not intended as an offer or solicitation to buy or sell securities, nor does it constitute a personal recommendation. Where links to third party websites are provided, Close Brothers Asset Management accepts no responsibility for the content of such websites nor the services, products or items offered through such websites.

!

Before you invest, make sure you feel comfortable with the level of risk you take. Investments aim to grow your money, but they might lose it too.

Close Brothers Asset Management Logo

Important compliance information for institutional investors and FCA authorised intermediaries

For use by institutional investors, FCA authorised intermediaries and connected persons only – it must not to be relied upon by retail clients. If you are a retail client please return to the main part of the website.

Please read this page before proceeding, as it explains certain restrictions imposed by law on the distribution of this information and the countries in which our funds are authorised for sale. It is your responsibility to be aware of and to observe all applicable laws and regulations of any relevant jurisdiction.

This part of the Close Brothers website is for information purposes only. It is not intended to be relied upon to make any investment decision. Although the information herein has been obtained from sources believed to be reliable, neither Close Brothers Asset Management or any of its employees guarantee its accuracy, completeness or fairness. The most recent data has been used where possible. Except in so far as liability under any statute cannot be excluded, no member of Close Brothers Asset Management accepts liability (whether arising in contract, tort or negligence) for any error or omission in this document. 

The information contained on these pages is believed to be correct but cannot be guaranteed where data is sourced from third parties. Opinions constitute our judgment as at the date shown and are subject to change without notice. The information on this website is not intended as an offer or solicitation to buy or sell securities, nor does it constitute a personal recommendation. This does not constitute an offer or solicitation to sell shares in any of the funds referred to on this site, by anyone in any jurisdiction in which such offer, solicitation or distribution would be unlawful or in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation. 

Applications to invest in any fund referred to on this site, must only be made on the basis of the offer document relating to the specific investment (e.g. prospectus, simplified prospectus or other applicable terms and conditions). 

As a result of money laundering regulations, additional documentation for identification purposes may be required when you make any investment. Details are contained in the relevant Prospectus or other constitutional document. 

If you are unsure about the meaning of any information provided please consult your Close Brothers contact, financial or other professional adviser. 

The information contained on this site is subject to copyright with all rights reserved. It must not be reproduced, copied or redistributed in whole or in part. 

We may source data from reputable third party data providers, however, we accept no responsibility or liability for the accuracy of such data. 

We accept no liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. 

You acknowledge and agree that it is your responsibility to keep secure and confidential any passwords that we issue to you and your authorised employees and not to let such password(s) become public knowledge. If any password(s) become known by someone other than you and your authorised employees, you must change those particular password(s) immediately using the function available for this purpose on the Website. 

On accessing the Close Brothers Asset Management website, you are aware of the following investment risks applicable to all Close Funds: 

PAST PERFORMANCE RISK-Past performance, though extensively used in analyzing investments, is not a reliable indicator of future returns. 

RISK OF PERMANENT CAPITAL LOSS-The risk that investments may fall in value permanently with little or no expectation of recovery, including the possibility of total loss of the amount invested. Typically, this applies to individual securities. 

RISK OF REDUCED INCOME-The risk that income derived from investments falls significantly and no longer fulfils its objective in a portfolio with a corresponding fall in the capital value if realised. 

VOLATILITY RISK-The risk of a decline in the value of a group of investments due to market fluctuations. Typically investors measure this risk over short timescales. 

INFLATION RISK-The risk that the growth of investments does not keep pace with inflation over the longer term, i.e. a reduction in the real purchasing power of one's capital. 

LIQUIDITY RISK-The risk that an investor cannot gain immediate access to capital. 

TAX RISK-The risk that the tax regime generally affecting returns, a particular asset or a specific tax efficient scheme may change or be removed with consequent impact on investment returns and strategies. 

CURRENCY RISK-The risk that movement in rates of foreign exchange may cause the value of investments and/or income derived from them to fluctuate independently of the value of the underlying asset and may amplify losses or impact gains when translated into the investor’s base currency. 

BENCHMARK RISK-The risk that investments do not beat a specific benchmark over the longer term, e.g. the failure to match the returns of a given equity index, bond index, or a blend of these. 

This site is operated by Close Asset Management Limited (Company No. 1644127) which is registered in England and Wales, is authorised and regulated by the Financial Conduct Authority and is a subsidiary of Close Brothers Group plc. Close Asset Management Limited is a member of the Close Asset Management group and uses the trading name Close Brothers Asset Management. Registered office at 10 Crown Place, London EC2A 4FT. VAT Registration No 245 5013 86.