In the news – Wealth

Your 2022 playlist

Research studies over the years have reinforced the idea that equity prices are not solely driven by analysis of a company’s prospects but also by outside factors which can impact investor mood. Correlation has been found between improved stock market performance on sunny days or poor performance after a country loses a vital football match, for example.

A novel measure of investor sentiment has been discovered by a recent study, which apparently captures actual sentiment rather than shocks to sentiment1. A significant correlation has been determined across 40 national stock markets between weekly equity returns and the emotional content of that week’s top 200 songs on Spotify. The findings suggest that stock markets perform better when a country is listening to happier songs – ‘In our main findings, we document a positive and significant relation between music sentiment and contemporaneous market returns, controlling for world market returns, seasonalities and macroeconomic variables. Music sentiment also predicts increases in net mutual fund flows and absolute sentiment precedes a rise in stock market volatility. Our study provides evidence that the actual sentiment of a country’s citizens significantly affects asset prices.’

Whatever’s on your playlist this year, you can rely on us to take the emotion out of your investment decisions.

Risk-on, risk-off

New research2 has shown that affluent to ultra-high-net-worth UK investors are more conservative when compared with their international counterparts, as 54% of UK respondents rate themselves as conservative in their approach to risk, with the lowest percentage of any nation surveyed (10%) saying they adopt an aggressive approach. In contrast, nearly half of respondents from China rated themselves aggressive in their approach to risk, with just 19% conservative. Potentially underpinning the lower risk, long-term mindset, the primary reason for 66% of UK respondents for saving and investing is for their retirement, with 35% citing future healthcare costs and 17% entrepreneurial activities.

£810m tax relief unclaimed

Recently released data3 has highlighted that during the 2018/19 tax year, an estimated £810m in tax relief was unclaimed by over 1.5 million of the UK’s highest earners. Higher rate taxpayers benefit from 40% tax relief, but eight in ten failed to use their Self-Assessment tax return to claim it. Similarly, 53% of additional rate taxpayers failed to claim the 45% tax relief for which they are eligible.

1The London Business School, 2021

2Avaloq, 2021

3Pension Bee, 2021

The value of investments and income from them may go down. You may not get back the original amount invested.