Weekly Client Update – 21st July 2023

Markets Overview

The global markets have been mixed this week. The U.S. stock markets have been volatile, with the Dow Jones Industrial Average and S&P 500 posting gains on Wednesday, but the Nasdaq Composite posting losses on all four days of the week. European and Asian markets have been mostly flat.

The ongoing war in Ukraine and rising inflation have been weighing on investor sentiment. The Federal Reserve’s interest rate hikes are also putting pressure on the stock markets. It is important to note that the global markets are volatile and can change quickly. It is always best to consult with a financial advisor before making any investment decisions.

The Dow Jones Industrial Average closed up 0.27% on Monday, down 0.52% on Tuesday, up 0.70% on Wednesday, and up 0.47% as of 08:07:50 PST on Thursday. The S&P 500 closed up 0.34% on Monday, down 0.92% on Tuesday, up 0.09% on Wednesday, and up 0.02% as of 08:07:50 PST on Thursday.
The Nasdaq Composite closed up 0.03% on Monday, down 1.54% on Tuesday, down 0.63% on Wednesday, and down 2.05% as of 08:07:50 PST on Thursday.


Inflation falls to 10.9% but housing prices continue to drive rising cost of living

Jersey’s inflation rate has dropped for the first time since 2021, latest figures published by Statistics Jersey show. However, prices continue to rise sharply, with housing still the largest contributor toward the annual rate of inflation at a 27.4% increase, driven by increases to the cost of mortgage interest payments. Food also remains the second largest contributor at a 15% increase in the twelve months from June 2022. These figures have been revealed in Statistics Jersey’s latest Retail Price Index (RPI) report, which shows that during the twelve months to June 2023 the RPI for Jersey increased by 10.9%. This marks a 1.8 percentage point decrease since last quarter, when RPI was 12.7% in the twelve months to March 2023. A key driver for the decrease in the annual rate of inflation was the motoring group, particularly the decrease in the petrol and oil section over the last twelve months. But the twelve month increase in the RPI to June 2023 was larger than a year ago, with 7.9% in June 2022. Other data also showed that RPI Pensioners and RPI Low Income – the rates affecting those demographics specifically – increased by 6.8% and 6.4% respectively, which were both falls from the previous quarter by 2.5 and 2.2 percentage points.


UK inflation rate slides to 7.9% in June, below expectations

Economists polled by Reuters had projected an annual rise in the headline consumer price index of 8.2%, following May’s hotter-than-expected 8.7% reading, but annualized price rises continue to run well above the bank of England’s 2% target. On a monthly basis, headline CPI increased by 0.1%, below a consensus forecast of 0.4%. Core inflation — which excludes volatile energy, food, alcohol and tobacco prices — remained sticky at an annualized 6.9%, but fell from a 31-year high of 7.1% in May. Falling prices for motor fuel made the largest downward contributions to the monthly change in the CPI annual rate, the Office for National Statistics said Wednesday. Food prices rose in June, but by less than in the same period of last year. “There were no large offsetting upward contributions to the change in the rate,” the ONS added. Chief Secretary to the Treasury John Glen told CNBC on Wednesday that the larger-than-expected decline in the inflation rate was “very encouraging.” “But there’s no complacency here in the Treasury,” he added. “We’re working closely in lockstep with the Bank of England as we try to halve it this year and get it down to its long term norm of 2%.”
Mortgage grace period rejected

A proposition which would have protected Islanders from having their homes repossessed for 12 months after missing a mortgage payment has been rejected. Reform Jersey Deputy Geoff Southern had called for Chief Minister Kristina Moore – in consultation with Treasury Minister Ian Gorst – to engage with local mortgage and credit providers to support those struggling to make repayments. Deputy Southern’s proposal came after UK Chancellor Jeremy Hunt reached an agreement with Britain’s biggest lenders to give homeowners a 12-month grace period if they fell behind on mortgage payments after the Bank of England raised interest rates to 5%. However, States Members voted 24 to 19 against the proposition.

In an emotive debate, which saw a split between Reform Jersey members and ministers, the party’s Deputy Carina Alves spoke about the number of constituents in her parish who were struggling with their mortgages. Meanwhile, St Clement Constable Marcus Troy described losing the ‘shirt on his back’ in the 1990s financial crash. During the debate, Deputy Southern said the proposition was an opportunity for the Assembly to ‘engage with local mortgage and credit providers’. ‘There’s no place for the government to get together with lenders and say to Islanders, “Come and see us if you have problems with your mortgage”,’ he said, adding that it was ‘nothing but well-intentioned’ and would ‘do no harm’. However, ministers said the proposition was ‘obsolete’, with Deputy Gorst adding that the government had already done what the proposal was asking and would continue to do it. He said that earlier this month Deputy Elaine Millar, Assistant Chief Minister with responsibility for financial services, wrote to mortgage lenders in Jersey asking them to honour the UK’s Mortgage Charter and commit to providing additional short-term support to residential mortgage holders who were struggling in the face of rising interest rates


States consider big changes to ‘high-net-worth’ scheme

Key votes in the States Assembly could lead to a major shake-up of Jersey’s 2(1)(e) scheme, which gives so-called ‘high-net-worths’ special residency and housing rights – plus preferential tax status. Treasury Minister Ian Gorst has brought forward a proposition to increase the minimum tax paid by new high-value residents (HVRs) to £250,000, potentially boosting public coffers by £1.2 million a year. Previously, those wishing to apply for high-value residency had to contribute a minimum of £170,000 in income tax. Deputy Gorst is also calling for the minimum property purchase price to rise to £3.5 million for houses and £1.75m for apartments – currently £2.5m and £1.25m respectively. Also up for debate is Deputy Lyndsay Feltham’s proposition, lodged last month, which calls for the suspension of the government scheme until their ‘unfair’ preferential tax rate is axed. Currently, HVRs pay 20% on their first £850,000 of income, and 1% on all worldwide income over £850,000.

A licensed resident, by contrast, would pay 20% across the board. Deputy Feltham has also asked that a ‘full and comprehensive cost-benefit review’ should be undertaken of the 2(1)(e) scheme. Ahead of the States vote, Chief Minister Kristina Moore has published a comments paper responding to Deputy Feltham’s proposal, saying that while the government was happy to increase the minimum tax requirement for HVRs, ministers felt removing the 1% tax provision as proposed by Deputy Feltham ‘would negatively impact revenues’, resulting in Jersey losing out to competing jurisdictions. Deputy Moore said: ‘Jersey has an enviable natural environment, a safe and vibrant community, given our size, excellent transport links to the United Kingdom, good public services and a critical mass in some of the key industries, notably wealth management, which attract many 2(1)(e) applicants. ‘This means we can operate at the higher end of the market in terms of tax, applying strong due diligence. However, there are limits to our attractiveness, and we must remain competitive overall.’ She added: ‘We should be positively welcoming and supportive of new migrants who move to Jersey wishing to become part of our community, including those who are wealthy.’Deputy Moore said while she agreed ‘all policies should be subject to ongoing review, assessing costs and benefits’, this ‘should not be at the cost of perpetual uncertainty’ and therefore she could not support another review.


Channel Islands American Express accounts ‘will stay open’

American Express has confirmed that there will be ‘no upcoming changes’ for existing Channel Islands customers amid confusion over changes in terms and conditions which suggested accounts not registered to a UK address could be closed. An email – marked as ‘important’ – was sent to customers this week outlining changes in the bank’s terms and conditions for account holders. One of the changes included in the email was that ‘your residential address for your account must be an address in the United Kingdom’. There was confusion among Islanders who attempted to contact American Express customer services and received mixed messages from staff members.

On an online customer support chat, one Islander was told that their ‘card account will be affected with these updates’, while another was told that ‘only new card members moving forward will be affected’. American Express subsequently issued a statement from a spokesperson which explained: ‘There are no upcoming changes for our existing card members living in the Crown Dependencies, who we will continue to support as usual. ’The confusion follows a similar error which caused panic among Barclaycard users in April, resulting in the bank issuing an apology to customers across the Channel Islands. Six months ago, the Jersey Consumer Council warned that credit-card companies were pulling out of Jersey because they could not check customers’ details on a central register – and that the trend could spread to mortgages, loans and other financial services.


Jersey school introduces facial recognition at lunchtime

Forget the days of fumbling around for loose change in the queue at the school canteen… Pupils at one Jersey college will soon only need one thing to pay for their dinner – their face. Jersey College for Girls ditched cash many moons ago and replaced it with a top-up card system, and is now set to bring a dash of Mission Impossible to the dining-room experience with the introduction of facial-recognition technology. The school has written to parents asking them, if they wish, to sign a consent form which would allow their child’s face to be used to create a ‘unique digital signature’ to give them access to their pre-paid catering account. If they decline, their child can continue to use the top-up card.

The school says that the new system will ‘streamline the cafeteria experience, enhance security and expedite payments processes’ for students and staff. In a letter to parents explaining how the system would work at dinner times, college bursar Julie Forsyth wrote: ‘When your child looks at the camera, the software reads key features (distance between facial features) and compares this against the database of registered users. ‘When it finds a match, it automatically opens your child’s cashless catering account, allowing the operator to complete the sale of their school meals.‘We have been assured of the accuracy and that the software works accurately, even with identical twins. However, we will closely monitor this. ’The school says that the consent provided by parents would remain valid for the duration of their child’s education at JCG, unless they chose to withdraw permission. In the letter, Ms Forsyth says that the system, run by cashless-catering provider CRB Cunningham and due to launch in the new school year, is safe and GDPR-secure and has been used by a large number of schools in the UK.


Humpback whales spotted in Channel Islands waters

A wildlife photographer has captured a once-in-a-lifetime shot of two humpback whales swimming through Channel Island waters. John Ovenden’s dream of seeing the huge animals came true while he was out on his boat between Jersey and Guernsey. The whales, which can grow to more than 55ft long, are common across the world but are rarely seen in local waters. ‘They were massive – much, much bigger than anything I have seen before,’ said Mr Ovenden, they were certainly bigger than my boat which is 26ft. The pair were first seen about half-way between Jersey and Guernsey, before heading close to the Guernsey coast and then towards Sark. ‘I have never seen humpback whales before and I don’t know of anyone who has photographed them in the Channel Islands. ‘I bought my first boat at the age of 17 and have been on the water ever since I was a little boy. I have spent thousands of hours at sea and I have always dreamt of seeing something like that but, to be honest, I never thought I would. It was amazing and such a privilege.’


Advisa Wealth Jersey Macmillan Charity Golf Day

Last Friday 14 July 2023 (Bastille Day) we held the Macmillan Jersey Charity Golf day at La Moye Golf club (26 teams (104 players) teed off at 8.30am to complete for the coveted prizes. Nearest the pin, Longest drive, Beat the Pro and overall best stableford team score were played for. The team event was won by the FCM team with a total of 92 points. The weather was kind and held out until after play had finished when the heavens opened. The charity lunch was preceded by speeches from Macmillan Jersey CEO, Steph Gibaut and Director of Governance Scott Le Fluer who shared his own personal experience as a user of the Macmillan Jersey Service. The lunch was followed by a raffle and Charity Auction and we were thrilled to raise over £33,000 for Macmillan Jersey. We would like to extend our sincere thanks to all the participants and guests for helping to make the day such a successful event. Also a special thank you to our sponsors, Advisa Wealth, The Polygon Group and Brooks Macdonald for their generous support.


Food festival to bring flavours of Spain to St Helier Harbour

Sangria, paella and churros will be on the menu this weekend when a Spanish food-and-drink festival takes place in St Helier. The event on the Albert Pier runs from today until Sunday, coinciding with the visit of the Spanish tall ship Nao Victoria. Built in 1991, Nao Victoria is a replica of a 16th century vessel – commanded by Juan Sebastian Elcano – which was the only survivor of five ships that set sail on Portuguese-born navigator Ferdinand Magellan’s global expedition from Spain in 1519. Islanders have the opportunity to look around the ship while it is moored in St Helier. The festival runs from midday to 8pm every day until Sunday. Tickets to go on board Nao Victoria are available via tickets.fundacionnaovictoria.org.