COLDPLAY SUSTAINABILITY

Coldplay kicked off the sold-out Dublin leg of its ‘Music of the Spheres’ tour in Croke Park last night. Many of you will no doubt be attending the show over the weekend. However, what many aren’t aware of is the band’s impressive sustainability commitments. When the tour was initially announced back in 2021, Coldplay pledged to reduce its direct carbon emissions (from show production, travel and freight) by at least 50%. In fact, on a show-by-show basis the first two years of the tour has resulted in 59% less direct emissions than its prior tour in 2016-17, with 7 million trees planted, one per each concert goer.

The nearly famous concert LED wristbands that audiences use are made from 100% compostable plant based materials. The band’s impressive sustainability initiatives also include powering the show with 100% renewable energy. For example, in the lead up to gigs solar PV panels are positioned behind each show stage to charge batteries to power the concert. These batteries are made from recycled BMW i3 EV batteries. Our personal favourites are the use of stationary bikes and the use of kinetic floors around venues where fans cycling and dancing can be converted into energy to power the show. What will they think of next?

Source: sustainability.coldplay.com

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Market Volatility

This past week has been tumultuous for pension/investment markets. However, it is important to not lose sight of long-term pension/investment objectives. Market timing is extremely difficult. Time in the market and not timing the market is what matters. It is imperative to stay invested. Volatility is part of the journey to achieving long term retirement goals.

 

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Paris Olympics

The Olympics is in full flow and the investment industry loves sport analogies, so here we are right on cue. Running events of different distances are impacted by extreme heat: in a nutshell, the longer the distance the more the heat is not your friend. A common refrain is that “investing is a marathon, not a sprint”. However, while heat is not the friend of the long-distance runner, time is the friend of the long-distance investor. The longer your time horizon, the greater the probability of generating a positive return.

 

source: Goodbody

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Investing & Mortgage Interest Rates

March was another strong month for global equities with the MSCI World index rising by 3.4% in euro terms, bringing its total return for Q1/2024 to 11.3%.

Meanwhile, the ECB confirmed that it needs to see further disinflationary data before cutting interest rates. Again, it noted the importance of the wage inflation data that is due to be released before its meeting in June.

 

source: Goodbody Asset Management.

warning: The value of your investment can go up and down. 

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Mortgage Interest Rates

Over the past several weeks, there has been a notable convergence between the markets expectations for interest rate cuts in 2024 and the Fed’s guidance. At the beginning of the year the market was pricing in roughly six 0.25% interest rate cuts in 2024, while the US Fed implied just three 0.25% interest rate cuts.

Stronger US economic data, specifically in employment and inflation, has led the market to significantly dampen down its expectations for the coming year. Today, the market is close to agreeing with the Fed, with little over three 0.25% cuts expected, with the first beginning in either June or July.

Closer to home, the market has followed a similar path, with the ECB expected to cut less than four times, with the first cut coming in June.

 

 

Source: Bloomberg / Goodbody Asset Management.

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Interest Rates and Inflation

Despite concerns of slowing economic growth, Q1/2023 earnings season began with the major US banks posting better than anticipated results. Several of the major technology and consumer discretionary names, including Microsoft and Alphabet, also reported better than expected results, leading their respective share prices to rise.

On the economic data front, US and European headline inflation data declined to 5.0% and 6.9% respectively. However, core inflation in both regions remained stubbornly high. The continued crises in US regional banks led the market to revise its expectation for interest rates lower with the Fed now forecast to deliver its final hike of 0.25% in May.

 

source: Goodbody

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Mortgage Interest Rate Expectations – Financial Markets v Central Banks

The market has begun to interpret the reducing inflation levels to mean central banks can begin to cut interest rates. In the US, there is an expectation that interest rates will peak at around 4.9%. In the eurozone, the equivalent number is about 3.5%.

The opening days of February saw the US Fed increase interest rates by 0.25%, while the ECB and Bank of England raised rates by 0.5%. The US Fed Chairman indicated at his February press conference that the “disinflation process has started” indicating that the increased interest rates were having the desired effect.

What’s noteworthy is that the market now expects the US Fed to start cutting interest rates in the second half of the year (and by something like 0.5%) and there’s a small possibility of the ECB doing likewise late in the year. However, Central banks disagree.

Despite the recognition of progress on inflation, the US Fed continues to push back against lowering rates too soon, indicating that more increases will be needed to reach 2% inflation levels.

To judge by the comments from ECB President in which she has overtly stated the market has it wrong, there remains considerable tension between how the market views EU interest rates and how the ECB view the matter.

 

Source: Bloomberg 01.02.23 (post Fed & pre ECB announcement).

Warning: Past performance is not a reliable guide to future performance

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PRSA Changes

The Finance Act of 2022 introduced a number of taxation changes to pension contributions, as detailed below:

  • Employer contributions to a PRSA on behalf of an employee are no longer considered a benefit in kind for the employee. 
  • There is no limit to the level of contributions that an employer can make to a PRSA on behalf of an employee*.

So, if your company has surplus a cash flow, rather than let it sit in a bank account earning nothing, invest it in a PRSA, claim tax relief and benefit from a pension at retirement!

 

 

*subject to revenue rules. Max funding limit of €2m applies. Values can fall as well as rise. If you invest in these funds you may lose some or all of your investment.

 

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Premier League Money !

The annual Deloitte Football Money League report was published yesterday. Total revenue for the top 20 highest revenue generating soccer clubs in 2021/22 stood at €9.2bn, +13% y/y and only marginally below pre-pandemic levels. Manchester City retained its position at the top of the Money League and for the second time the club generated the highest revenue in world football. As a reminder City only broke into the top five in 2015/16. Unlike the legacy top English teams – Liverpool and Manchester United, who’s matchday income contributes 16% and 18% of total revenue, City’s revenue is largely commercial in nature representing 91% of total revenue. Interestingly, Premier League teams dominated the top of the charts with 11 of 20 top clubs coming from England. The cumulative revenue base of these clubs was €4.9bn, +19% y/y.

 

Source: Deloitte Football Money League 2023

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BUDGET 2023 SUMMARY

Key Points from the Budget 2023 Speech:

  • The standard rate income tax band for a single person for 2023 will be increased by €3,200 to €40,000, with corresponding increases for married couples, and the main tax credits by €75.
  • A new €500 tax credit is being introduced from 2022 for those paying rent for their principal private residence who are not receiving any other State housing support.
  • The Help to Buy scheme for first time buyers extended to end of 2024 at current rates and terms.
  • A Vacant Home Tax is being introduced at 3 times the Local Property Tax.
  • The 2% USC band will be increased in 2023 from €9,283 to €10,908 with the 4.5% band reduced from €48,749 to €47,124.
  • No change in pension tax relief, the €115k NRE limit, or the €2m Standard Fund Threshold limit
  • No change in the insurance levies
  • No change in DIRT or life assurance exit tax rates
  • No change in CGT or CAT rates. The CAT Thresholds remains as before.
  • No change in PRSI rates, apart from a minor change related to the increase in the minimum wage.
  • State Pension & Social Welfare rates for 2023:
  • An increase of €12 pw in the maximum personal rate
  • An increase of €2pw for the qualified child increase.
  • There will be a double weekly payment of social welfare benefits in October in addition to the normal Christmas double payment in early December 2021.

However, it is possible that other taxation changes not announced in the Budget and not outlined above could be introduced in the Finance Bill 2022 when it is published around the end of October.

 

source: Brokers Ireland

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