We’re crowdfunding on Crowdcube! Learn more

Pension performance update: February 2023

  •  By
  •  Murray Humphrey

Stock markets around the world had differing results during February. The UK and Europe saw a better than expected performance, but the US had a hard time dealing with ongoing inflation.

The big banks, like the Federal Reserve, the European Central Bank, and the Bank of England, all raised their interest rates. As a result, the prices of government bonds went down, and the yields went up.

Now, let's take a look at what happened in the main markets, and see how well Penfold's pension funds did in the past month.

US: a mild downturn recorded

During the last month, US stocks lost some of the gains they made in January, with the S&P 500 (a stock market index that includes the 500 largest corporations in the United States) losing 2.4% in February.

Line chart showing S&P500 performance in February 2023

The combination of ongoing inflation and surprisingly positive economic news led financial experts to revise their predictions for interest rates, raising them higher than previously expected. Inflation and higher interest rates tend to negatively affect earnings and stock prices. Investors reacted badly as a result, seeking more stable investments away from the stock market.

Prior to the Silicon Valley Bank collapse in March, tech companies were performing better along with smaller companies, measured by the Russell 2000 index, which had a lower decline compared to S&P 500, decreasing only 1.7% during the month.

UK: FTSE100 rises

Despite market volatility, UK equities managed to maintain their strength and stability over the past month, with the FTSE 100 index closing February 1.6% higher than in January.

Line chart showing FTSE100 performance in February 2023

In fact, the UK market has been more resilient than expected, with the latest GDP data from the Office for National Statistics revealing that the economy had not contracted in Q4 2022 as previously forecasted.

The Bank of England is still expecting a recession for 2023, but now thinks it is likely to be milder than predicted. This is partly due to energy prices (which have fallen considerably in the last few months) and overall inflation slowing down.

Europe and emerging markets: mixed fortunes

In February, stocks in the Eurozone did well, especially financial companies, communication services, and industrials.

The European Central Bank raised interest rates by 0.5% to guard against high inflation, which remains. Yet, the outlook for the EU economy is good, with data indicating the most vigorous expansion of business activity since May of the previous year.

Things were not as good for emerging markets, as their stocks did poorly compared to Europe and the UK. Tensions between the US and China got worse, which hurt the performance of those emerging markets stocks, as did an increase in the value of the US dollar.

How our pension plans performed

Following a very positive January, our pension plans had a modest decline in February, with an average decrease in value between 1 and 2 percentage points. However, as the chart beneath shows, there are signs of stabilisation after a tough 2022. So far, the pension funds' performance for this year remains positive.

Line chart showing Penfold's plans performance up to February 2023

The tax year draws to a close on 5th April, so if you’re looking to reduce your tax liability you can do this by adding to your pension pot before then.

Savers receive a 25% government top-up on their pension contributions. This means, for every £1000 you add to your pension before 5th April, the government adds another £250. Taxpayers with higher rates can also claim even more back by paying into their pension before the tax year ends.

Limited company owners can optimise their profit and corporation tax as well, by making pension contributions during this month, with March 31st being the financial year-end for many companies. For easy to understand information on how to do any of these things, visit our 2022/23 Tax Year End Guide.

With investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice and past performance is not a reliable indicator of future performance.

A photo of Murray Humphrey

Murray Humphrey

Penfold

Get in touch

Call our support team

020 8003 5908

7:00am — 4:00pm Monday to Friday

Chat live with us
Loading...