2. Welcome.
And here we are since our last edition in a post-Brexit bull market under a
new Prime Minister...did anyone forecast that?!
Technically, the FTSE 100 has entered bull territory, but it does not feel
any different with the various sectors yielding indifferent recent share
price performances. On the whole, markets have been resilient throughout
the summer and we, at Walker Crips, are experienced enough in our
102nd year to avoid getting fixated by short-term sentiment. Instead,
we look to find good outcomes for clients with patience underpinned by
strong fundamentals whilst acknowledging it is dangerous to ignore the
possibility of unpredictable jolts as we navigate our way out of the EU.
Our company continues to build on its expansion with assets under management/administration
steadily moving towards our stated milestone of £5 billion. A handful of Investment Managers and
Advisers have swelled our ranks further having joined us in recent months from larger competitors.
They come armed with good practices, inherently strong ethics and discipline, as well as a fine set
of values, all of which is recognised and appreciated by their clients and our colleagues. Together,
we continue to operate on your behalf with integrity and honesty, as we strive to achieve ever-
increasingly high standards.
Of course, we are also always monitoring and preventing business risks from having an adverse
impact on our clients, our market counterparties and other stakeholders. In doing so we have this
year detected an alarming growth in the number of attempts by fraudsters to extract assets or cash
from both our own and from our clients’ accounts. Along with many other organisations in financial
services, but also in other industries, we have tightened our controls and introduced new identity
checks and account verification procedures which will aim to mitigate the risk of financial loss. We
thank our clients for their understanding and co-operation in tackling the stream of sophisticated
attempts to make these attempted fraudulent payments and transactions. Working in conjunction
with you, we can make these well-nigh impossible from our systems.
I hope you enjoy this edition of Quoted in which our team of experts have made some excellent
topical contributions for your enlightenment. Find out more about Brexit, Gilts, EU banks, Trump vs
Clinton, and this summer’s rollercoaster ride of property funds.
Rodney FitzGerald
Chief Executive Officer
4
World Barometer
Global movements at a glance
7
11
MakeAmericaGreatAgain
A look at the two US Presidential candidates
14
Blogwatch
Russell Dobbs has an eye on what’s taking flight
16
Pausefor thought
Dominic Martin discusses recent property fund suspensions
8
“Democracy is being
allowed to vote for
the candidate you
dislike the least”
BrexitStageLeft
Mark Rushton appraises Britain’s finances post-Brexit
3
FallingShort
The latest view from Duncan Smart
What’sNext?
An insight from the experts
18
Robert Byrne
Author
Born: 1930
3. were also higher than June and the average for
the previous 6 months. Inflation has since
gone up, with the Consumer Prices Index
(CPI) rising to 0.6% in August, largely due to
higher fuel prices that are priced in dollars.
The strong correlation between the oil price
and inflation remains, with oil having
fluctuated at or above $45 recently. After
OPEC’s intention to cut output by 1.5%-3%,
inflation is likely to tick higher, and it remains
on track for continuing a gentle rise towards
its target of 2%. The UK’s manufacturing
sector has rebounded sharply and UK
industrial output grew 2.1% in Q2 vs Q1, its
fastest rate for 17 years, albeit perhaps slowing
month on month. UK Unemployment is
expected to be 5.0% in Q3 while GDP
growth is predicted to fall from 0.6% to
below 0.5% in Q3.
According to Nationwide, the annual house
price growth slowed to 5.3% in September
from 5.6% in August. Although this remains
Economically, prior to the referendum,
many foresaw a negative impact on the UK
economy, consumer confidence and business
investment if Leave won. To some extent, the
UK has brushed off the negative effects in the
short term and continued spending. The
Markit/CIPS Purchasing Managers’ Index
(PMI) for September showed UK activity rose
steeply from July to August and is now at 55.4
(50 = growth).
BREXIT
STAGE LEFT
Chief Investment Officer, Mark Rushton gives his
appraisal of the protagonists, plot and dramatic
potential as the act of midsummer 2016 plays out.
B R E X I T
4
UK retail sales
are still weak
post-Brexit.
££
The pound remains
down 10% from
pre-Brexit levels.
Politically, the dust has settled in UK as the
‘grown up’ in the Cabinet took over as PM.
Theresa May seems well equipped to deal with
the prevailing political challenges, the
post-Brexit hurdles and her 3 Brexit
Musketeers (Johnson, Fox and Davis). She has
been sensible by taking her time (not least
because of French and other European
elections to come), and only recently
announcing that Article 50 will be invoked by
March 2017.
Monetarily, the Bank of England’s cut in base
rates in August by 0.25%, from 0.5% to 0.25%,
a record low, represents its concern over the
potential for a technical recession whilst the
MPC has ‘hedged itself’ in case the economy
slipped, having backed itself into a corner
following Governor Carney’s doom-laden
comments before the referendum. Alongside
this, the extension of the BoE’s Quantitative
Easing programme by an extra £70bn, together
with a £100bn scheme to encourage banks to
share low interest rate benefits with
households and businesses has been positive.
Philip Hammond is increasing spending on
new homes, transport and innovation,
although he has kept some powder dry
ahead of his first budget statement on
23rd November.
The weaker pound remains down 14% from
pre-Brexit levels. At the time of writing, the
pound is still down 17% (EUR down 18%) on
a year ago at under $1.29 (EUR 1.18). Exports
and tourism are typical beneficiaries. There are
growing calls for a proposed fiscal stimulus
and positive noises from the UK Government
which, with the BoE, is keen to help prevent a
potential economic slow-down.
UK consumer Confidence also improved in
August, although it remains below pre-Brexit
vote levels, and consumer spending rose with
UK retail sales figures in July up 5.9% year on
year, fuelled by warmer weather and a weak
pound. The number of credit card transactions
5
4. 10 7
within the narrow range of 3% to 6% that has
prevailed since early 2015, these results were
accompanied by a 30 year low in housing
stocks and new mortgage numbers. Further
falls in activity and house prices are expected
by Royal Institution of Chartered Surveyors
(RICS) this quarter with price rises predicted
at 3.3% per annum over the next 5 years.
will take longer than previously forecast to get
near 2%. Concerns remain over the poorly
capitalised Italian Banks and Deutsche Bank’s
precarious position.
The likelihood of a Federal Reserve rate rise in
September had receded on the back of poor
US economic data, but markets are preparing
for a potential rise soon. SP has remained
above 2,150 since mid-July with valuations
still stretched.
FTSE 100 has finally broken the 7,000 barrier.
Overseas earners continue performing well,
but also still look stretched along with some of
the more robust defensive shares. FTSE 100 is
up 25% on pre-Brexit lows and up 18% on
immediately pre-Brexit level. FTSE 250, a
better indicator of UK domestic outlook, has
reached over 18,000 (18% above February lows
and 5% above pre-Brexit) after initial weakness
through lack of overseas earnings.
Global policy-makers must drive real growth,
whilst encouraging debt reduction and
fostering conditions for cooling, not collapsing
over-heated asset prices. It is a challenge which
requires fiscal, not monetary stimulus.
“The ‘grown up’ in
the Cabinet took over as
Prime Minister”
The construction industry still labours after a
small contraction, but the Markit/CIPS UK
Construction Purchasing Managers’ Index
rose to 49.2 from 45.9 in July.
In August, Eurozone economic activity was at
its highest level for seven months and the ECB
held rates at zero. The ECB decided not to
prolong its two-year bond-buying stimulus
scheme of €80bn a month. Inflation remains
low at 0.2% despite €1 trillion in freshly
printed money in the last 15 months; and it
UK US Europe
Asia
(ex China/
Japan)
Australia China Japan
Geo-Political
Situation
Economic Cycle
Position
Consensus
Forecast for GDP
Growth
Current Inflation
Rate
10-year
Benchmark Bond
Yield
Currency
vs.GBP
Beneficiary of
current oil price
Beneficiary of
current metal
prices
89.20% Low (Varies) 229.20%104.2% 90.70% 36.80%
1.89% 2.40% 1.51% 6.40% 2.47% 6.49% 0.49%
0.60% 0.80% 0.20% 1.00%-0.7% 1.30% -0.4%
0.87% 1.67% 0.00% 2.80%2.11% -0.04%3.50%
1.32 1.18 1.80 1.76 8.81 134.66
ü ü û ü üüü
4.90% 2.1% 4.05% 3.00%10.1% 5.60%4.90%
Unemployment
Rate
ü ü üüü ü û
43.90%
Net Debt
to GDP
DisinflationDisinflation/
Recovery
Disinflation/
Recovery
Disinflation/
Recovery
Disinflation/
Recovery
Disinflation/
Recovery
Recovery
World BarometerAs at 16th September 2016
Data sourced from: tradingeconomics.com, FactSet, IMF “World Economic Outlook“
and WCG Senate opinion.
5. PAUSE FOR THOUGHT
C O M M E R C I A L P R O P E R T Y
Over £18 billion of property fund assets were frozen
following the BREXIT decision, echoing events of the global
financial crisis. Dominic Martin discusses why.
Asuncertaintyincreasedinthelead-uptotheEU
referendum,sotoodidinvestorredemptionsin
Commercialpropertyfunds.Nervousinvestors
movedtopulltheircashastheybecameuncertain
ofpropertyvalues,especiallyinLondonCityand
theWestEnd.ThisledtoseverallargeUKproperty
fundssuspendingtrading,whileothersimposeda
pricecutonsharestodiscourageinvestorsfrom
encashingcommercialpropertyfundholdings.
Whypropertyfundssuspendedtrading
‘BricksMortar’Propertyfundsarenotliquidin
thesamewayasequityandfixedincomefundsare.
Commercialpropertiescannotbesoldonadaily
basisduetotheinabilitytoobtainfullmarketvalue
intheshortterm(fallbacksinclude‘firesale’
propertyvalues,stampdutyandhighlegalfees).
Inaddition,fundsholdaliquiditybuffertosatisfy
redemptionrequests,andwhenthisbufferbecomes
lowtheyneedtoselloffproperty.Theaverage
liquidityin‘normaltimes’isapproximately15%.
Followingthe‘Leave’decision,propertyfundswere
overwhelmedwithredemptionrequests,andsome
fundsmadethedecisiontotemporarilysuspend
trading.Byfreezingtheirassets,propertyfundswere
thenabletotaketheirtimetosellpropertiesatagood
priceandthereforemaintainthevalueoftheirfund.
Thisinturnprotectsexistinginvestors
inthefund.
Howlongcanpropertyfundsstayclosed?
Thereisnotimelimitonhowlongapropertyfundcan
suspenditstradingfor,howeverfundsmustreview
theirsituationevery28days.Fundsarebeginningto
removetheirsuspensions,althoughsomearestill
imposingapriceadjustment.
9
INVESTORS RUSH
TO GET OUT
In the lead-up to the EU referendum,
commercial property investors grow nervous
and begin to request withdrawals.
Brexit outcome
announced
Withdrawal requests
snowball.
Trading
suspended
Some of the UK’s biggest properties funds
suspend trading whilst they sell
properties to meet withdrawal demands.
Funds begin to
resume trading
Some funds leave a price adjustment in place
to discourage withdrawals.
Monthly sales of UK property funds
Source: The Investment Association
500-5000-2000
Jul‘16
£-2000m
£-500m
£500m
0
Jul ‘15
£-1000m
£-1500m
Jun‘16
May‘16
Apr‘16
Mar‘16
Feb‘16Jan‘16
Dec‘15Nov‘15Oct‘15Sep‘15Aug‘15
6. Funds with suspensions still in place
Atthetimeofwriting,thefollowingpropertyfunds
wereyettolifttheirtradingsuspensions:
2.83%
Jun 16 Sept 16
0.0%
10.0%
-10.0%
-5.0%
5.0%
-0.26%
-2.94%
-3.68%
-5.78%
-8.58%
Jul 16 Aug 16Vote
Total return of major property funds as at 29th
September 2016 (GBP)1
Premier - Pan European Property C Acc
Aberdeen - Property Share ACC
Threadneedle - UK Property AIF Inst Acc
Henderson - UK Property PAIF Feeder Acc
Aviva Inv - Property Trust 2 Acc
Kames - Property Income Feeder Acc B
1
Data takes no account of charges.
01/06/2016 - 29/09/2016 Data from FE 2016
• Aviva Investors Property Trusts
• MG Property Portfolio
• Henderson (will resume trading on
14th October 2016)
• Standard Life (to resume trading from
17th October 2016)
Tragedy Trumps
It’s hard to believe in a country of 300 million
people that the USA has ended up with 2 of
the most unsuitable candidates EVER for
President. Surely there were “just two” better
candidates than Trump and Clinton? The
inconvenient truth is, Trump appeals to an
awful lot of voters. Why? America’s middle
class or what Lenin used to call, “the
aristocracy of Labour”, the skilled workers,
truck drivers and junior managers are fed up
with mainstream politics. Their disposable
income has been falling for years.
Gilded Gilts
The Bank of England is buying up an extra £52
million of gilts this year to keep its £60 billion
money printing plans on track. The problem for
the old lady of Threadneedle Street is that when
it is doing these auctions, it is not managing to
hit its targets. Pension funds are reluctant to sell,
as they need these gilts to back their rising
pension liabilities. It is becoming a vicious circle
– the lower gilt yields go (and the higher prices
rise), the bigger the pension deficits become.
Pension schemes are then told to cut risks
because of their deficit and buy more gilts, whilst
companies are told to put more into their
employee pension schemes. So, whilst the Bank
of England is trying to stimulate the economy
with its quantative easing program, all it is doing
is weakening company balance sheets and
driving up pension deficits. As far as I can see,
the only beneficiaries are a happy band of 2055
gilt holders and a few hedge funds who have
jumped on the B of E bandwagon buying up
bonds and gilts that the B of E will eventually
overpay to buy back.
As you can see, I am far from convinced that the
biggest financial experiment in history is going
to succeed – in any way, shape or form!
Indeed things are now so bad that what is
called financial fragility has boomed. In a
survey in 2014 only 38% of Americans could
cover an unforseen medical or car bill of
$1,000 from savings. It’s shocking how bad
things have got. Meanwhile, the well-off have
recovered, the millionaires are becoming
billionaires and politicians continue to have
their noses in the corporate trough, so to speak.
FALLING SHORT
T H E S M A R T V I E W
MissingPensionTargets,America’spoorpresidential
candidatesandtroubleunderthesurfacefortheEU.
DuncanSmart’sfeelingalittlepessimistic.
“It’s shocking how bad
things have got”
0nly 38% ofAmericans could
cover an unforeseen bill of
$1,000 from savings.
10 11
Whatnow?
FollowingBREXIT,abenefitcanbeseenin
reducingexposuretoCommercialpropertyand
investinginInfrastructurefunds.Thiscanadd
furtherdiversificationtoportfolios,while
avoidingthepotentialpitfallsof suspensions
andpenaltiesinthefuture.
7. 12
INSIGHTS FOR THIS QUARTER
RPC have wrapped up the purchase of British Polythene. They have correctly
identified that plastic containers, rather than tins and jars are the way forward for
consumer goods, and so there is huge scope for consolidation in the sector. RPC
already supplies L’Oréal and Unilever and will in future add Tesco and the NHS to
their growing list of customers. The shares are no longer cheap, but holdable @ 870p.
Aviva have hiked their dividend by 10% after good first half year figures - strong
growth in its life division helped push up profits by 13% to £1.3billion. A potential buy @
425p for a dividend yield of 5%. Hastings, the motor insurance group, have reported
a strong set of figures for the first half of this year. The shares were placed @ 160p
one year ago and are finally showing signs of life. Holdable @ 215p.
Standard Life has enjoyed the “fruits of its efforts” to diversify by
reporting profits up 18% to £341 million. Assets under administration
rose 7% to £328 billion and thanks to more people saving for
retirement through workplace pensions, £2.8 billion of new
money went into Standard Life’s products. Attractive @ 360p
for a 6% yield.
Which brings me onto Hillary Clinton
– damaged goods indeed. The email scandal
just will not go away and rightly so – how can
it be right that over half the people who met
her outside of government, when she was
Secretary of State, gave money to the Clinton
Foundation, either personally or via their
businesses. No amount of spin can justify this
massive conflict of interest. As the US press
have said, you pay to play. Trump has also
questioned why Wall Street and the
pharmaceutical industry need to make such
MA RKET N OT ES
Duncan Smart’s
13
massive donations to Congressman’s
campaigns, as he would – he doesn’t need
anybody’s money! You might not like some of
his policies, but making friends with Russia
could be a clever move. Russia is no longer
America’s no1 enemy. Islamic
fundamentalism is, and with Obama’s foreign
policy over the last 8 years, viewed by most as
a disaster and Trump’s priority to do whatever
he needs to do to make America great again,
you can now see why he is viewed as a breath
of fresh air by a lot of Americans.
Belowthesurface
Europe’s banks have been stress tested and with
the exception of a few smaller banks, have all
passed. However, there is a certain degree of deja
vu here. I remember a couple of years ago, writing
in ‘My View’ about the EU bank stress tests being
pitched at a level to ensure most passed and just a
few failed. Fast forward to 2016, dig below the
surface and you will see that all is not well.
Deutsche Bank and Commerzbank shares are
trading at 2 year lows. DB shares have collapsed
90% in the past decade and Commerzbank
shares have halved this year – is all still well?
The EU’s banks remain under intense pressure.
They have not been lending recklessly, quite the
opposite, but they do have a huge mountain of
bad debts going back 15 years. The Italian
economy is still 8% smaller than it was in 2008.
In Germany, massive trade surpluses are being
recycled to bankrupt EU economies and these
share prices are telling us to expect some nasty
surprises. The problem for the EU is that any type
of financial rescue for the banks in Italy and
Germany will painfully expose the flaws of the
Eurozone. You cannot allow the Greek and
Cypriot banks to fail, but then support the Italian
and German banks. No doubt allowing any big
Italian or German banks to fail will be a step too
far for the EU to consider, but if they do bail them
out, any creditability they had left will finally
disappear in a puff of smoke.
Keep an eye on the Libor rate (the rate at which
banks lend to each other). It has spiked to rates not
seen since 2009. Not a good omen.
14
Iceberg ahead?
Below the surface
all is not well...
8. MAKE AMERICA GREAT AGAIN
U N I T E D S T A T E S
WiththeUSelectionfastapproachingDamianTestilooksat
America’scandidatesandtheirpotentialeffectonitsincome.
15
US politics is bearing a striking resemblance to
slapstick comedy “Bedtime for Bonzo” where
Ronald Reagan’s character attempts to teach
human morals to a chimpanzee. As Reagan moved
from acting to politics, he coined the slogan “Make
America great again”. Roll on to 2016 where
history repeats itself with Trump is using the
slogan as his own.
Trump is pretty consistent on three key themes:
raise barriers to immigration, impose large tariffs
on goods from China and Mexico as well as enact
large tax cuts. Clinton is rather more cautious with
her agenda: offers a measure of change, without
stretching the existing system, one might say pretty
much “Obama extended”.
The clearest contrast between the two candidates is
that Clinton targets renewable energy while
Trump seeks to revitalise the flagging US oil and
gas sector.
“I will build a wall”
-Trump
One point of note that they both agree on (of
which I think all global governments should take
note) is the capacity to expand infrastructure and
rebuild the nation’s manufacturing sector.
According to the non-partisan Tax Policy
Center, Trump’s plan would reduce the amount
of income the government takes in by $9.5
Trillion over the next decade. Clinton’s plan
would add $1.1 Trillion in revenue over the next
10 years.
The 8th November will be the 58th quadrennial
US presidential election and is likely to be a lot
closer than many expected. Could the slogan
“Make America Great Again” lead Donald
Trump to victory, stranger things have
happened with the ripple of Brexit still
fresh in peoples’ minds.
+$1.1
Trillion
-$9.5
Trillion
How do the candidates compare?
Trumpwantsto:
• raiseImmigrationBarriers
• imposeimporttariffs
• maketaxcuts
Trump’s plan would reduce
Government income by
$9.5 Trillion over the
next decade.
Clintonwantsto:
• enforceTaxesonwealthy
• reformcriminaljustice
• focusonracialequality
Clinton’s plan would add
$1.1 Trillion to Government
income over the next decade.
The Combination of a Democratic President and a
Republican Congress has produced the best historical
returns from 1961-2010 on average for the stock market.
Source: MFS Investment Management, 2016.
9. Phoenix Group – Deals and dividends
Hot on the heels of the AXA purchase, which
is on track and due to complete in November,
Phoenix this week announced a second
acquisition, that of Abbey Life from the
struggling Deutsche Bank. The £935m
consideration will make a small dent in
Deutsche’s much publicised problems but it
represents an extremely attractive price for
Phoenix. The purchase will add £10bn to
assets under management, add £0.5bn to cash
generation between 2016 and 2020 and £1.1bn
thereafter. The consideration represents 77% of
Embedded Value (Net Asset Value in layman’s
terms), very close to Phoenix’s own ratio.
The AXA deal will facilitate a 5% increase in
the dividend and management say the Abbey
purchase will enable a further 5% increase
from 2017 onwards as the cash generation is
stepped up once again. So at the current 868p
the shares now offer a prospective yield of
6.8%. However, the cash consideration is
mainly being raised by a 7 for 12 rights issue at
508p so, at the current 868p that equates to an
ex rights price of 735p. In other words buying
them now and taking up your rights allocation
gets you in at an average 735p and at that level
the yield comes out at a whopping 8%.
The terms look attractive and the rights issue,
which should occur mid-October, is cleverly
priced. Already an attractive income stock,
this deal propels Phoenix’s attractions to
another level.
Who says an ill wind blows nobody any good?
The turbulence around Deutsche has blown a
great deal in Phoenix’s direction.
A tale of two airports
Talking of ill winds, perhaps they were a
phenomenon our Department for
International Development should have
considered before it provided a short £300m or
IS IT A BIRD, IS IT A PLANE?
No, it’s a blog. Russell Dobbs discusses Phoenix
group and the limitations of a new airport.
B L O G W A T C H
The trouble’s yet to
blow over...
so to build a brand new airport on St Helena, a
remote part of the British Overseas Territory
with about 4,000 inhabitants, five days sailing
from Cape Town in the middle of the Atlantic.
The superb modern development to facilitate
the island opening up to the tourist industry
would have been a wonderful idea if only
aircraft were able to land there. Unfortunately,
due to the considerable winds created by an
adjacent mountain, landing is impossible so
the airport, though complete, remains closed.
Suggested solutions include cutting the top off
the mountain. I kid you not!
It was back in 1993 that the vision of a possible
third runway at Heathrow was raised in a
study into Runway Capacity in South East
England. Twenty three years later, including
concerted arguments lasting for at least the
last decade and a three year £20m Airports
Commission study, there is still no decision on
if and where the much needed runway will be.
The Heathrow expansion proposal costs are
now estimated at around £18bn of which the
runway is about half, give or take a billion.
Two extreme examples perhaps of why our
infrastructure is in such a mess. We must hope
4km
Saint Helena:
A remote British territory
island. It is only accessible
via a four day journey by
sea on the Royal Mail Ship from
Cape Town.
Population: 4,534
Fact Corner
At 12km2
HeathrowAirport would only fit in St Helena 10 times!
that when Philip Hammond produces his
Autumn statement, the modernisation and
upgrading of our entire infrastructure sits
right at its heart. Infrastructure Funds have
been a solid investment in recent years,
providing, in the main, a solid inflation linked
income stream and modest asset growth.
However, in the never ending quest for income
in our almost zero interest rate society, most of
these funds have moved to substantial
premiums to their net asset values, detracting
considerably from their long term attractions.
It has reached the point, I feel, where better
value might be found amongst the contractors
that carry out the infrastructure work rather
than the funds that invest in them. John Laing
Group has been a hybrid of the two and has
proved a very successful investment. This is
one area I think will provide some attractive
opportunities.
On average
205,400
People fly from
Heathrow every day.
That’s over
45
times the population
of Saint Helena
A return ticket costs roughly
£1,200
17
10. We ask the experts what they see ahead
“ The US election is now only a month away. With
Hillary Clinton’s health throwing up further doubts
about both her stamina and, in many voters’ eyes,
her honesty, Trump’s fading star has begun to flare
again. There is, of course, a big difference between the
perception of the Donald in office and how he might
actually perform, but I cannot believe markets will take
to him initially.
Trump has had a blast at the Federal Open Market
Committee, saying it has become politicised (surely
not) and, as such, will not raise interest rates before the
election even though the economy needs it. I doubt
he’ll get a reaction from the Fed, least of all because
lack of action could equally be seen as the non-political
course, but if markets are convinced he’s right about
the timing that will be one thing they can put off
worrying about for a while. However, I think all the
big risks are on the downside for the moment and still
think it wise to retain reasonable cash levels. ”
Russell Dobbs, Chartered Wealth Manager
WHAT’S NEXT?
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“ We would expect the fluctuations in GBP/USD rates to continue to be the most significant driver of
performance for the FTSE 100 post the European referendum. We believe companies with big overseas
earnings, particularly in North America are likely to continue to outperform the UK domestic names in the
short term. Currency moves are also likely to be a catalyst for MA with the UK 15-20% cheaper than it
was last year for USD buyers and nearly 30% cheaper for Japanese buyers. Arm Holdings and Poundland are
high profile recent examples and we are likely to see many more over the next 12 months. ”
Bill Newton, Investment Director
“ I expect the markets to be extremely volatile
in the next couple of quarters as the world
adapts to the policies/personas of the new
US President. Europe remains committed to
retaining its Ostrich like philosophy to economic
woes, which are only likely to get worse once
they decide to realise there is a UK shaped
hole in its budget finances. They have yet
to announce how this will be filled. I would
imagine the already stretched finances of the
Italian and Spanish Governments will not wish
to contribute further (although they may have
to for the “good of the whole”). The Italians are
due to voice their opinion in a constitutional
December referendum, which may create
further uncertainty.
2017 also looks set to be an interesting time, as
France Germany head to the ballot boxes, with
extreme positioned parties (Anti-immigration
etc) likely to gain significant amounts of seats
in formerly stable countries. We will also have
the UK’s commitment to trigger Article 50 exit
negotiations before March 2017 to contend with
and the revised acceptance of an economic Hard
Exit. Attention is therefore drawn to Emerging/
Frontier economies for future growth potential. ”
Simon Lambert, Manager Private Clients
T H E F O R E C A S T
“ We are all on Brexit watch. However,
whatever happens to our economy it
won’t be bad news for all stocks and
there are plenty of opportunities to
benefit the optimists. ”
Jeremy Inskip, Investment Manager
