Reflecting on Recent Events: Budget, Elections, Economic Shifts and the Road Ahead

As we entered 2024, it was clear this year would be eventful. The United Nations Development Programme labelled it a “super year” for elections, and nearly half the world’s voters across 72 countries headed to the polls.

Closer to home, the UK saw a major political shift with Labour winning a strong majority, and, more recently, all eyes have been on the Autumn Budget. Meanwhile, the U.S. election has kept us on edge across the Atlantic with a close race, sparking speculation on its potential economic impact.

Autumn Budget Highlights

The Autumn Budget has stirred diverse opinions and raised several key questions, such as:

• National Insurance Hike for Employers: Will this additional business cost affect the UK's economic growth? And if so, what does that mean for the future?

• Inheritance Tax on Pensions: New rules imposing inheritance tax (IHT) on pensions (though managed by scheme trustees) will affect financial planning. However, the rules around beneficiaries pre- and post-75 seem to remain unchanged.

• Business Relief Adjustment: The new Business Relief allowance does not include AIM-listed investments, which may prompt significant changes. How could a potential AIM stock sell-off impact the market?

On a positive note, inflation has eased, and interest rates have begun to decline. UK stocks remain relatively cheap compared to their U.S. counterparts, which suggests a slight uptick in investor optimism could benefit UK markets.

Whether these factors signal smoother economic waters ahead or more turbulence will depend partly on the Budget’s impact. If effective, it may drive growth; otherwise, it could lead to recessionary pressure.

A Look Across the Atlantic

Turning to the U.S., speculation about the next president raised concerns. It seemed to be neck and neck throughout the campaign; however, in the end, Trump took a comfortable majority to return to the White House for a second term. 

Trump’s return to power presents a different economic landscape with higher inflation and interest rates. Historically, U.S. markets have shown resilience regardless of the party in power, as broader factors often play a larger role in performance.

One crucial element to watch is tariffs, which could have inflationary impacts on the U.S. and global economies, including emerging markets and Europe. Given the current high valuation of some U.S. stocks, history reminds us that market “heroes” of one decade may not be the standouts of the next.

In Summary

With major events like the UK Budget and the U.S. election mainly behind us, we can hope for a smoother path as we close out the year. The focus now is on how these developments will shape the months and years to come, both here in the UK and abroad.