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NatWest Premier Banking

Your investment outlook for the second half of 2022

What to look out for over the rest the year

It feels a bit like we’ve jumped out the frying pan and into the fire. Just as the worst of pandemic seemingly passed, new crises emerged. Russia’s invasion of Ukraine has put even more pressure on prices, with inflation rocketing to a 40-year high. While a slowing economy has had to deal with the withdrawal of the Covid financial stimulus, increase in National Insurance contributions, and a rise in interest rates. We also saw the UK Prime Minister resign in July. But although that’s big political news, and could potentially affect the government’s economic policy, we wouldn’t expect it to have a large impact on global markets.

So, what next for the UK economy, and what can you do to make sure you are managing your money in the best way possible?

Pressure on prices continues into autumn

While some of the supply-chain bottlenecks have eased, a mix of higher energy costs, tax increases and post-Brexit trade issues mean prices are still likely to rise in the UK over the next couple of months.

Food and Drink

6.7% rise in food and drink over the last year.

Energy Prices

£800 expected increase in typical energy bill in October.

Cars

30% increase in used car prices since start of 2021.

The interest rate conundrum

The Bank of England faces a delicate balance, concerned that raising the interest rate may harm economic growth, while not doing so could leave inflation unchecked.

This doesn’t mean it will abandon rate increases. Instead, as the UK’s central bank, it may raise rates more slowly while remaining sensitive to the impact.

What’s happening in the stock market?

It’s been a volatile year for the stock market. The war in Ukraine, rising inflation, and threat of a recession have all prompted falls.

From a sector standpoint, the story of 2022 has been the rise of energy companies and the fall of technology stocks. Tech, the golden goose of the last couple of years, has suffered with the tech heavy NASDAQ 100 down around 28% as at mid-June this year. In the current economic environment, quality companies with strong balance sheets and solid earnings will hold up better, as will companies in healthcare and those providing consumer staples. We also expect energy companies to continue to perform given the inflation environment. 

How have we managed your investments?

NatWest Premier clients’ investments are managed by the Coutts Asset Management team. Before the market drop, they had already decided to reduce holdings in smaller companies such as small and mid-capitalisation stock as they can be riskier. They increased UK equity holdings meaning they added to ‘value’ stocks such as finance and healthcare. Portfolios didn’t have a large exposure to the high-risk technology sector as they had considered these overvalued for some time.

Your investments will continue to be diversified and monitored to mitigate risks and to take advantage of opportunities.

Staying calm in a crisis – look at the long-term gains

We understand that markets may appear riskier at the moment and that every investor has their own goals. However, the best way to mitigate losses could be to remain invested. This is because, historically, markets are most likely to recover and see growth beyond their last high point within 12 months. The below chart shows this through the worst recent crises. 

Source: Refinitiv. MSCI UK £ used for Equity, Bloomberg gilt index used for Bonds, Gold Bullion price used for Gold, UK Sterling 3M deposit used for Cash. Returns include total returns and assume dividends reinvested, Data to 31 December 2021. Past performance should not be taken as a guide to future performance. The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your original investment.

Taking money out during a dip makes it extremely difficult see gains if you are buying back in once asset prices rise again.

We completely understand that markets and investing can be confusing. Our Premier banking team is here to help you with any questions you might have and to help you plan in the best way possible for your future.

The value of investments, and the income from them, can fall as well as rise and you may not get back what you put in. Past performance should not be taken as a guide to future performance. You should continue to hold cash for your short-term goals.

Investing for good

All your investments are made with purpose as well as profit in mind. We use a strict ESG (environmental, social and governance) criteria, to ensure money is used to affect real change in net zero transitions and in promoting good, socially minded, governance in companies. 

You can find out more about our sustainable approach to investing here – Responsible Investing.

Learn more about investments

Whether you’re an experienced investor or just finding out what investing is, we’ve got a range of articles to help you understand more about investing.

We regularly update our articles depending on what’s happening in the market so check back for future updates.

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