It’s often said that economic figures and stock market performance don’t always line up. Last week, the UK provided a good example of this. Newly released figures revealed that the economy shrank by 0.3% between October and December 2023. This followed a smaller contraction in the previous quarter, meaning the UK has entered a recession. Despite this, the FTSE 100 rose over the week.

The Office for National Statistics (ONS) highlighted several causes for the slowdown. Among them was a fall in consumer spending on food, beverages, and retail trade. The fall in consumer spending could be interpreted as a sign that the Bank of England’s attempts to slow down the British economy to help reduce inflationary pressures is working.

Overall, the UK economy grew by just 0.1% over the course of the entire year. That said, the ONS’s figures are still subject to revision.

From an investment point of view, it’s worth remembering that the majority of FTSE 100 revenue comes from outside the UK. It’s possible for many FTSE companies to flourish, even if the UK economy is struggling.

There was also encouraging news on the inflationary front last week, as the ONS also revealed inflation was flat at 4% in January. It had generally been expected to rise slightly, so the figures helped encourage markets, as the FTSE 100 ended the week up 1.8%.

Hetal Mehta, our Head of Economic Research, said: “UK inflation moved sideways in January. Whilst the uptick that economists were expecting was avoided, it still remains at double the Bank of England’s 2% target. What will still be concerning the Bank of England is the stickiness of services inflation, especially as it comes on the back of strong wage growth. But compared to big upside surprise in US inflation, today’s UK numbers come as slight relief in relative terms.”

Inflation in the US remains lower than the UK. However, January’s US inflation figure came in at 3.1% compared to expectations of a sub-3% figure. This shock helped cause a drop in US equities the day the stats were released. The higher-than-expected inflation data suggests the long-awaited interest rate cut might be further away than expected.

On the back of this news, the S&P 500 declined by 0.4% in dollar terms, having reached a record high a week earlier, whilst the NASDAQ retreated by 1.3%. In what has become a rare occurrence in recent months, value shares outperformed growth shares, whilst smaller companies also enjoyed a solid week.

Like the UK, the Japanese economy entered a recession at the end of 2023. And like the FTSE, the Japanese Nikkei Index also had a positive week. This was partly thanks to weakness in the yen, alongside a series of strong company results.

The Chinese mainland markets were closed last week. However, Hong Kong companies began trading midweek. Chinese equities have been rather volatile in recent months but our Head of Asia & Middle East Investment Advisory & Comms, Martin Hennecke, noted that Chinese share buybacks in January reached their highest levels since 2021, when the data was first compiled, as companies increasingly look to take advantage of historically low valuations.

Many people only start thinking about inheritance when they are writing their Will. Deciding who gets what, and how much, certainly focuses your mind. But there is real value and tax-efficiency in financial planning that considers retirement and inheritance as part of the same long-term, family financial plan.

Your pension savings might be one of the biggest legacies you can leave, apart from property, after you’re gone – so it makes sense to think about whether you’ll need it for your retirement.

Passing on a pension could empower your children to realise their own life goals, for example by paying off a mortgage early, sending your grandchildren to a great university, or launching a new business. What’s more, a pension doesn’t have to be earmarked for children or even relatives; you can leave it to anyone. It’s becoming more common to skip a generation and leave pensions to grandchildren.

It’s worth remembering that you can’t pass on your State Pension. Also, you can’t pass on a Final Salary or Defined Benefit pension in the same way as a Defined Contribution pension. Those Defined Benefit pensions often pay out to a spouse or your nominated beneficiary if you die before them.

Sometimes, you can transfer these Defined Benefit pensions into a pot of money held in a Defined Contribution scheme. You can pass that on to an heir. If you want to do this, however, you must take professional advice if the pension transfer value is more than £30,000.

Passing on a Defined Contribution pension may depend on the type of scheme it is, your age when you die, and whether you’ve already accessed some of the money. So always speak to your financial adviser before making any decisions. You don’t want to leave your loved ones with a large tax bill, instead of a great inheritance.

If you would like to talk about retirement and planning family finances, do get in touch with us now.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

“There have been countless Marys throughout history who have never had the chance to wear a beautiful gown and stand on this stage here in London. Telling her story is a responsibility I do not take lightly.”

Da’Vine Joy Randolph celebrates winning the BAFTA for Best Supporting Actress for her role in The Holdovers.