The tension and speculation is building, and in some quarters, so is the fear as we approach the UK Budget on the 30th of this month and the US election on the 5th November. I’ll refrain from the obvious analogies re the date!
There’s a lot to cover in this update, so you’ll be pleased to learn that each section will be, for the most part, a series of bullet points.
Investment markets are relatively steady, although we’ve seen some increased volatility over the last few days, and we note that US Treasury yields have risen as the markets are reflecting on their fairly bullish outlook for US interest rates. This was expected after the recent elevation of markets. Some indices are sat at year highs which makes them vulnerable to short-term market sentiment.
Rather than selling down (although some have in the UK for assets which may have sat in tax environments which are exposed to a possible increase in Capital Gains Tax), diversification away from the US has been unfolding across our investment strategies. This has been gradually happening throughout the year within certain portfolios, although we are also guarded about being too extreme with our positioning as the US is the biggest economy in the world and harbours some great companies.
One of the recipients of increased diversification is Emerging Markets which have largely underperformed their developed economy counterparts in recent years. One has to be careful of a broad-brush investment approach in this asset class though.
In the UK, the Institute of Fiscal Studies (IFS) has warned about the challenges to the UK economy and has encouraged a complete reform of the Capital Gains Tax (CGT) regime. The International Monetary Fund (IMF) on the other hand, has delivered a more upbeat note for the UK and let’s hope that the messaging is indeed positive and we start attracting some serious international investment again onto these shores.
On our agenda today:
- Inflation is cooling quickly
- UK finances near breaking point
- “The whole design of CGT is flawed”
- The IMF upgrades its forecasts for the UK
- Emerging markets benefitting
- Chinese buybacks reach record highs
- The Trump trade
- Tesla shares surge
- Volatility expected to rise
- Summary
Inflation is cooling
- The Bank of England (BoE) has reported that inflation is falling more quickly than it anticipated. This increased the chances of another interest rate reduction next month.
- Another rate reduction also looks likely by the European Central Bank (ECB) before the end of the year, partly due to a slowdown in the region’s inflation but mainly because there are concerns over a sluggish Eurozone economy.
Continues…
Want to get this in your inbox?
Our CEO, Gary Neild, writes engaging Market Commentaries every week. If you would like to receive the full version straight to your inbox every Friday, please join our communications list.
Risk warning
Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.