What should advisers be telling their clients as we head into 2023?
Three of the senior team from Hargreaves Lansdown have pulled the cloth from over their Bristol ball (like a crystal ball, but based in Bristol) to highlight 10 things that investors ought to know.
1. Inflation is set to stay sticky
Susannah Streeter, senior investment and markets analyst, said: “Supersized rate hikes now appear to be in the rear-view mirror, as data filtering through indicates that the rate of price growth is slowing.
"But although inflation may have reached the peak, that doesn’t necessarily mean it’s a smooth downwards path from here. There is still the potential for plenty of pain ahead, as stubbornly high prices continue to cause severe headaches for the economy.
"Although a recession will dampen domestic demand, many of the inflationary pressures have been external, and as Russia’s offensive continues in Ukraine and energy prices stay unpredictable, it’s not certain how quickly prices will come down.
"The Bank of England has forecast that inflation will be around 5 per cent by the end of 2023, but as ever with forecasts, there are no guarantees.”
2. You’ll pay more tax
Sarah Coles, senior personal finance analyst for Hargreaves Lansdown, said the round of tax hikes in the Autumn Statement made for "miserable reading" but even before that, people in Britain were facing higher tax bills.
Coles said: “The freezing of the income tax thresholds means that wage rises will push more people into paying more tax – and push enormous numbers of people into higher tax bands.
"These kinds of stealth taxes tend to slip under the radar but can have a much bigger impact than a tax hike.
"The Institute of Fiscal Studies estimates that freezes to personal tax thresholds will cut household income by an average of £1,250 by 2025-26."
On top of that, the additional rate threshold was cut from £150,000 to £125,140.
She says: "For those who run their own business and pay themselves in dividends, and for investors with large portfolios outside an ISA or pension, there’s also the threat of more dividend tax as the allowance halves in April.
"For those investors there’s also the risk of capital gains tax after the allowance for this is halved in April too. When you add in higher council tax and the frozen inheritance tax bands, we’re being stung for more tax on all sides."
Energy prices to stay volatile
According to Streeter, uncertainty is "coming in waves in energy markets" as supply and demand push up the oil price but keep a lid on big gains.
She explains: "There are expectations that there will be less crude available to buy given the $60 cap on Russia oil which means it can’t be shipped using EU or G7 tankers, insurance or credit lines, unless it’s below that price limit.