“The economy, stupid!” So read the sign on the wall of Bill Clinton’s presidential campaign headquarters, reminding his team what mattered most to voters.

It worked for him in 1992. In 2022, Liz Truss has been taught a harsh lesson in what happens if you don’t get your messaging right.

Another tumultuous week in UK politics ended with chancellor Kwasi Kwarteng going straight from arrivals to departures, replaced by Jeremy Hunt, and the prime minister confirming yet another huge policy U-turn.

Her announcement on Friday that UK corporation tax will rise to 25% from April next year – reversing the mini-budget decision to freeze it at 19% – had been anticipated by markets. But government borrowing costs rose following the news, suggesting that markets were unconvinced it would restore confidence in the UK government.

On Monday, Hunt went further, announcing that nearly all of the measures Kwarteng previously announced would be reversed. This included no longer cutting the basic rate on income tax. He also announced the freeze to energy bills would now only last until April. Markets responded positively to the news, with the pound strengthening, and yields on Government bonds dropping in the immediate aftermath. Click here for a full breakdown of the details of what was announced.

These improvements will be welcomed by pension funds. After purchasing £19.3 billion of UK government bonds to prop up the pensions industry in the aftermath of the infamous mini-budget, the Bank of England announced that it would conclude its intervention last Friday. Governor Andrew Bailey had bluntly told pensions funds they had “three days left now and you’ve got to sort it out”.

Over the weekend, Bailey reported that his first discussions with Jeremy Hunt had been “a very clear and immediate meeting of minds.” Initial market reactions to Hunt’s statement suggest their agreement on “the importance of fiscal sustainability” was already having the desired effect.

The International Monetary Fund (IMF) downgraded its global growth forecasts for 2023 last week, and said it expected more than a third of the world’s economy to contract, citing the pressures of the war in Ukraine, high energy and food prices, and sharply higher interest rates.

But the IMF also singled out the UK government’s tax cuts for criticism, saying they would “complicate the fight” against soaring prices. Unexpected news that the UK economy shrank by 0.3% in August strengthened predictions that it will fall into recession.

Even with the reversal of the tax cuts, the UK is facing intense inflationary pressures. Mark Dowding, Chief Investment Officer at BlueBay Asset Management, estimates that two million households are set to see mortgage costs double in the next 12 months. In the South-East, mortgage costs account for 40% of wages. He believes that the risks to the financial system of defaults and falling house prices will mean the Bank of England is obliged to raise interest rates much more modestly. As a result, the UK will be forced into an outcome where inflation is allowed to remain higher for longer.

Elsewhere, the much-awaited US inflation figures did little to encourage investors last week. Prices rose 8.2% in the year to September, down only slightly on the 8.3% rise in August and confirming that the inflation fight in the world’s largest economy is far from over.

The inflation figures prompted a wild ride on Wall Street on Thursday. The S&P 500 index dropped 2.4% shortly after opening but ended the day 2.6% higher, although the bounce was attributed largely to short-term hedging activity. It was the fifth largest intraday reversal in the history of the S&P 500.

Markets are now pricing in a 98% likelihood of a fourth straight jumbo 0.75% rate rise from the Federal Reserve at its 1-2 November meeting.

There were suggestions that the failure of markets to sell off more sharply was an indication that investors still believed a mild recession was possible. That’s certainly the very least that President Joe Biden is hoping for. “I don’t think there will be a recession. If there is, it’ll be a very slight recession,” he said in an interview last week.

With the midterm elections looming on 8 November, Biden has argued that the slowdown in economic activity is a healthy shift from the growth surge that followed the pandemic. Investors can perhaps take encouragement from analysis by Deutsche Bank which showed that the S&P 500 has been higher a year after every one of the 19 midterm elections since World War Two.

But there is no doubting that 2022 has been a rocky year.

Attention will next turn to the third-quarter corporate earnings season and whether it will provide more clarity about the likely performance of the US economy in the months to come.

If there’s one thing you can be certain of, it’s that life doesn’t stand still for long.

Although you may well have a long-term financial plan, you’ll invariably encounter some ups and downs along the way.

Just as your investments will rise and fall over time, so too will your disposable income. There may be times when you come into unexpected cash, but also periods when you need to be more careful.

An unexpected lump sum presents lots of exciting financial-planning opportunities and can go a long way towards helping you achieve your financial goals. The right option for you will depend on a whole host of factors, but we’ll help you work out what will make the most sense in the short and long term.

For example, if you’re yet to buy your own home or want to give the younger generation a leg up, your lump sum can help with a deposit.

Investing the money may not be ideal if you’ll need it in the short term. But, rather than leaving it in a bank account with a below-inflation interest rate, we can introduce you to the SJP Cash Deposit Service, powered by Flagstone. This secure digital cash platform offers access to up to 50 different savings accounts and helps your money to earn as much interest as it can with the access you need (minimum deposit £50,000).

Alternatively, if that goal is already ticked off, you might benefit from putting your money towards your retirement. You can pay it into a private pension yourself or, if it’s a work bonus, ask your employer to contribute into your workplace pension.

Paying into your pension can be a wise move as, subject to certain limitations, your contribution will also be topped up by tax relief equivalent to the rate of Income Tax that you pay on the basis that any tax relief over the basic rate is claimed via your annual tax return. This means that if you choose to pay this additional tax relief into your pension, it is also benefiting from the tax you would have paid on that income. If you’re wondering how tax relief works or you don’t know if you’re getting the rate of tax relief you’re entitled to, talk to us.

When you come into money, you might worry about how to make the most of it. We can empower you to make the right decisions for you and your loved ones, and help improve your financial wellbeing now and in the future.

It’s a big honour to do the job that I’ve been asked to do by the prime minister, but I want to be honest with people: we have some very difficult decisions ahead.

UK Chancellor Jeremy Hunt on his new role.