A world of choice for Isas
AFTER a tough few years global stock markets are suddenly hitting all-time highs but this puts stocks and shares Isa investors in a tough position as they race to use their allowance before the April 6 deadline.
While the rally is a much-needed boost to confidence, many will be wary of investing at the top of the market in case it crashes soon after.
Every UK adult can invest up to £20,000 in an Isa, putting their money either into cash or equities, with all returns free of tax for life.
If they fail to use this year’s allowance before midnight on April 5 they will lose it for good, although they do get a new one next day.
Share prices crashed in 2022 due to war in Ukraine, the energy shock and soaring inflation, but the US S&P 500 and Nasdaq markets rallied last year.
However, the recovery was driven by a group of tech stocks dubbed the Magnificent Seven – Amazon, Apple, Google-owner Alphabet, Facebook-owner Meta, Microsoft, chipmaker Nvidia and Elon Musk’s Tesla. The S&P 500 soared 28 per cent in a year and got another huge boost last Thursday when Nvidia shares surged 16.4 per cent, adding $277billion (£219billion) to its market value.
That is the biggest ever one-day increase in the value of any company, as Nvidia’s computer chips are driving the artificial intelligence revolution.
Fidelity investment director Tom Stevenson said these are not the only stocks doing well, as Europe, Japan and India are breaking records too. “The US bull market is going viral.”
Japan’s Nikkei 225 has finally beaten its record high of 39,000, set 34 years ago before the country’s property and stock market bubbles burst. It is up more than 40 per cent over the last year and Stevenson said: “Optimists believe there is further to go despite its sluggish economy.”
The Indian stock market is buoyant as the country’s growing middle class embraces equities and the number of quoted companies rockets.
The Euro Stoxx 50 index is up 15 per cent in a year but the UK is a laggard, with the FTSE 100 falling 3.5 per cent over the last 12 months. Laith Khalaf, head of investment analysis at AJ Bell, said this is part of a long-term trend. “Over the last decade the UK stock market has been outshone by its US, European and Japanese counterparts.”
UK shares look good value as a result but may struggle to recover. Even domestic investors are reluctant to invest in UK shares via their Isa.
For a stocks and shares Isa, it is vital to get a spread of countries and sectors, rather than just chasing last year’s winners. The US is impossible to ignore, with Legal & General US Index and Baillie Gifford American popular among Isa investors.
Fundsmith Equity, Legal & General Global Technology and Fidelity Index World are also in demand.
The Jupiter India fund has climbed 60 per cent over 12 months, while Lazard Japanese Strategic Equity is up 20 per cent and BlackRock European Dynamic up 12 per cent.
The UK could be due a comeback and investment platform FundCalibre tips AXA Framlington UK Mid Cap, Fidelity Special Values and JOHCM UK Dynamic.