Following 2008, which was a disastrous year for most investments, we wrote in December 2008 that 2009 would be a year to keep our perspective. As we look forward to 2010 let us also consider what we said at this time last year about 2009. “Nevertheless it is vital that we maintain our perspective at such times. One of the things that history shows time and time again is that really productive periods in life for both individuals and countries often follow times of crisis. With the right attitude 2009 could be a really productive year.” [Arch Guide: 2009 – A year To Keep Our Perspective]

We quoted from a number of people in our Guide at that time and all are worth repeating but one will suffice: “The most common cause of low prices is pessimism. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It’s optimism that is the enemy of the rational buyer. Most people get interested in markets when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.” [Warren Edward Buffett, American investor, businessman and philanthropist] 

We tried to encourage our clients to see the bigger picture but we were not always successful and many simply left their assets on deposit awaiting better times. Looking back at 2009 we can see how well those investors did who overcame their natural fear of loss and continued to invest for the future rather than holding too much on deposit. In fact only one of the 31 investment sectors listed by www.trustnet.co.uk fared worse than the return from deposit accounts in the year to 29 December 2009, and that was gilts with an average loss of 1.5%. Two thirds of the investment sectors produced returns in excess of 20% during 2009 and many sectors more than doubled that.

A copy of our Guide: Investment Outlook for 2010 is available via the front page of our website at www.arch-fp.co.uk.

May we take this opportunity of wishing all Arch Blogg readers a Very Happy New Year, one in which you prosper not only financially but in all your endeavours and relationships.

Please note that this information does not constitute personal advice and should not be treated as a substitute for specific advice based on your circumstances. If you are in any doubt as to whether your investment portfolio is making the best use of the available assets, then you should discuss the matter with a suitably qualified independent financial adviser such as ourselves. An investment into any of the assets mentioned in our Guide is intended as a long-term investment. It is important that you are aware that the value of units in a collective investment scheme, as well as any income which they generate, can fall as well as rise. Where past performance is mentioned please note that the past is not necessarily a guide to future performance.

If you would like to discus a new investment or review your existing investments please ask your usual Arch adviser, telephone 01483 204600 or email enquiries@arch-fp.co.uk.

Chancellor Alistair Darling has delivered his Pre-Budget Report: Securing the recovery: growth and opportunity. His main theme was the halving of the level of public borrowing to 5.5% of GDP in 2013/14 (although it is currently 12.6%), while continuing to invest in frontline public services.

For a summary of the Pre-Budget Report as it affects investments and funding for pensions please visit our website where you will be able to access our pdf Guide: Pre Budget Report 2009.

The UK economy is forecast to shrink 4.75% in 2009, which is worse than the 3.5% forecast in the 2009 Budget earlier this year.

The government expects the recession to have ended by the time we celebrate the New Year. Of course this just means that there will be positive GDP growth not that ‘normality’ will return.

The Chancellor predicts CPI (Consumer Prices Index) will rise to 3% during next year, before falling again. He says the Bank of England expects inflation to be at 1.5% by the end of the year, 0.5% below target.

Whichever Government is in power after May 2010 may feel it is in its interest to allow inflation to rise by more than 3%. For further comments on this and particularly its implications for fixed interest investments see our previous blog.

Please note that this information does not constitute personal advice and should not be treated as a substitute for specific advice based on your circumstances. The information given in this blogg and in our Guide relating to income tax and pensions legislation etc is based on our understanding of the intentions of the Chancellor as outlined in the Pre-Budget Report 2009. Whilst we believe our interpretation to be correct in these areas, we cannot be responsible for the effects of any future legislation or any change in interpretation or treatment. In particular these proposals could be altered by the time the Finance Act is passed.

If you would like to discuss the implications of the Chancellor’s proposals on your financial planning please ask your usual Arch adviser, telephone 01483 204600 or email enquiries@arch-fp.co.uk.