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8th January 2019 - The Markets and Economy

Markets would do well to heed the advice from World War II to ‘keep calm and carry on’, as they remain excitable about relatively little. There have been a succession of minor tribulations ranging from widespread uncertainty about the state of international trade, to slowing growth in China and the Italian government’s budget, but nothing to justify the wild movements witnessed.  

At times like this, it can be difficult to differentiate between the events that matter and the temporary distractions. As investment markets have headed south some investors are apparently worried that the Federal Reserve will tighten monetary policy in the United States, sending it into recession as the tit-for-tat exchanges between China and the United States drag the rest of the world into a slump. Similar stories of doom, gloom and misery abound but they all appear unnecessary.  

No-one knows what the future holds but it really does not matter very much because the vast majority of these feared events can quickly and easily be put right. For the avoidance of doubt, this is not a repeat of 2008 but simply a phase of market irrationality.  

Media in its widest sense thrives upon sensationalism and so there is almost no coverage when everything is going smoothly and the content in times of turbulence is neither balanced nor well informed. So let the facts be a reliable starting point.  

Last week the US published its monthly non-farms payroll data, showing that 312,000 extra jobs had been created in December. This was far ahead of market expectations and is anything but a sign of the US economy slowing down: quite the opposite. America is simply growing at its more usual 2% per year rather than the over-stimulated 4% that The Donald achieved last year through short-term tax-cuts and bribes to big business. 


Investors also seem to have forgotten, or simply discounted, the fact that Central Banks can intervene to reverse any slowdown. Each one has a duty to engineer some inflation into their domestic economy but not let it rise out of control. A resumption of QE in America is but a distant possibility because the Fed can cut interest rates by 2¼% before that might be considered, but it shows the extent of influence that the Fed has at its disposal.  

The introduction of new money into developed economies is also at historically benign levels: less than 2% a year in Britain according to the Bank of England, in the Eurozone it is 3.7% according to the ECB and in the United States the money supply is rising by less than 3.5% according to the Federal Reserve Bank of St Louis. This means that the inflation pipeline is neutral.  

International trade tensions will be dealt with very shortly. Both the US and China have moved on from the chest-puffing stage and deals can now be done. China must be the ultimate winner because it has a President for life rather than just another two or six years in Trump’s case. Xi can afford to make short-term concessions to overcome “local” resistance to their ‘Belt and Road’ policy. The very long-term financial ties that it creates for China are not universally welcomed across Asia and the continent is experiencing a reduction in trade as a result of the US tariff disputes. Conceding a little ground in the short-term will generate considerable pan-Asian goodwill towards China.

15th August 2018- The Markets and Economy



It was entertaining when that intellectual colossus, David Davis, tossed his dollies from the crib in a fit of pique. A report by the Financial Times established that the former head of our team had spent four whole hours in meetings with Michel Barnier so far in 2018. Four out of four thousand, five hundred and thirty six does not seem like very much for our brave musketeer by anyone’s standards. Of course, most negotiations happen at lower levels, but it is hard to understand how so little contact might have produced any meaningful progress at all – perhaps that is one reason why there has been none.


With time rushing headlong past the nation, Mrs May is to be congratulated for having wrought a Brexit proposal that pleased almost none of her cabinet but which did attract their support. Few would have thought it plausible given the polar opposites adopted by the two wings of her Party. Thankfully, a starting point has been settled upon for negotiations with the other 27 countries and the nation ought to be thankful that Mrs May has taken charge of the negotiations herself, because she clearly has the ability to negotiate the seemingly impossible.

No matter who starts fighting our corner for what, there are only four possible financial outcomes for Brexit as far as investment markets are concerned:


  • Remaining,
  • Soft Brexit,
  • Hard Brexit, or
  • You’re on your own sunshine.

Trying to stay apolitical here, if St Theresa decides against “the will of the people” and also keeps her job a) talk of miracles will be commonplace and b) the markets will be jubilant. A decision to remain that subsequently led to her losing office and a general election that would probably see Gezza in charge is an anathema to markets, but the further down that list of bullet-points the outcome sits, then the more negative the reaction from investment markets in the short-term.

The astounding achievement of Mrs May at the start of the month stacks the odds in favour of a Soft Brexit. Our Brexiteers are not so stupid as to resign en-masse and make an assault on the PM’s job just yet. That would court disaster for the government because an uncompromising stance on Brexit is opposed by half of their own party and most of the Opposition, so a lost election would be imminent for their putsch.

Danger lurks at every turn for our courageous PM. Her latest agreement should embolden her to press for a Soft Brexit even though the negotiated settlement must go back to Parliament for ratification. Her Eurosceptic colleagues may yet vote against her deal, gifting Labour the opportunity to vote it down, despite their preference for that Soft outcome, to win a vote of no-confidence and the resultant general election. As the mighty fashion guru, Gareth Southgate, might say – it would be wrong to underestimate the lust for power.

Change and change management have been rich sources of income to “Management Consultants” for decades, because change is frequently feared. The Commie President, as Trump surely must become known, seems to be lusting for the days when America was great. Having extended loans to much of the world to wage the World Wars of the last century and predominantly watched from the bleachers as Europe and the Middle East was destroyed, the world immediately afterwards was their omelette Rodney. Yankee businesses bought up competitors or established businesses in new lands on subsidised terms, creating an unassailable financial strength for several generations.

Russia went down a different but similar path, aggregating countries into its empire for more effective central control. 

Over the years though change has eroded those comfortable oligopolies, to the point where the leaders of neither country are content to let things carry on as they are.

When America provided the bulk of global manufacturing in the 1950s it was quite happy to allow other countries an equal voice and vote through NATO or the UN, but the current President does not like being the object of criticism by those organs. The US of A is also finding it harder to maintain the generosity it previously showered upon other nations in terms of their financial commitment to the planet; subsidising everyone else in the name of “the free world”.

From a Russian perspective, it is one thing to allow satellite countries or regions their independence but quite another when the result is them cosying-up to nations that Russia has long considered to be their foes.

The inescapable truth is that the world order is changing by virtue of the return of China to economic strength with many emerging nations flourishing in that Chinese wake. Both of the established super-powers are keen to divide and rule (hence The Donald’s nonsense about supporting Boris for PM and a Hard Brexit after suing the EU) because it would allow the current order to linger for longer, but it would only delay the inevitable.

More experienced diplomats across the planet are simply watching the US make a fool of itself, waiting to capitalise on their misadventures. New alliances will be forged with the next nations of influence – in the same way that the Commonwealth did when they were abandoned by Blighty in favour of the EU experiment – while the old guard struggle to come to terms with the new realities of economic life. 

Thankfully, businesses have no interest in nationalism. They simply seek the best return for the capital of their owners from whatever circumstances they perceive, and that will continue to be good news for all investors. What seems most likely is an enduring alliance between Europe and Asia, leaving Americans to pay more for their duty-laden imports. 

Not that Europe is Trump’s only target: he has the UN and NATO in his crossed-hairs too because they allow smaller countries to criticise American behaviour. Trump and his supporters don’t like that one little bit – no sirree. 

On the other side of the frozen wasteland though, Comrade Vladimir is exercised too because the European experiment has stretched its tentacles as far as the Ukraine. It is not hard to understand why Putin might see this as a threat. The more that Trump broadsides the world with his disconnected tariffs then the greater the likelihood of the rest of the world looking to the east for a stable economic partner. 

Future dominance in technology will be less likely to come from Silicon Valley than from Bangalore, Shenzhen or Bangkok. Few people drive Yankee metal nowadays but the Chinese seem certain to emulate and then trump the Japanese and Korean car manufacturers in the next twenty years. Neither Trump nor Putin will like it, but the global economy is changing in favour of something that is more exciting and dynamic; it may even be a jolly good thing too for those Nations seeking to cosy-up to others in a frantic search for replacement trading relationships……

Improved science and technology has been transformational in the mining sector, replacing inspired guesswork with near certainty in most cases. This is hardly surprising, because it simply confirms what has already happened and what is there but beyond the limits of our eyesight. Until Elon Musk or some acne-faced youth from the East cracks the space-time continuum and builds a Tardis though, the future is not ours to see and so financial markets remain beyond the immediate threat from automation. 


3rd July 2018 - The Markets and Economy

Equity markets in general have a narrow mind-set that is dominated by a herd mentality and an arrogance that can be staggering. It is therefore important to understand this mind-set, to which the Brexit vote was such a shock. Remaining in was in the interests of the City and so many there believed that it was the only possible outcome of the referendum, which is why the possibility of a vote to leave went into the ‘does not compute’ box.

Dissent is not welcome, which is why Neil Woodford and Jupiter Strategic Bond both get pilloried for daring to say that they think 180 degrees differently to everyone else at the moment: expecting a huge correction everywhere except in the UK domestic market.  The City, Wall Street, Tokyo and Frankfurt all believe that Central Banks are doing a brilliant job today, with no-one saying that the Fed is leading us into oblivion again through unduly hasty Qualitative Tightening. This coterie is especially cosy: growth is all around, inflation is benign and everyone is as happy as can be. Markets were doing very nicely thank you, so don’t upset the apple cart.

It is this City mindset that must change if “sustainability” is ever to become a world-changing ethos rather than a soundbite. Something more complex, engaging and rewarding than money is needed to motivate the entire business leadership team and their stockbrokers.  Plausible solutions on a postcard would be gratefully received and faithfully applied. Until then, there is no incentive to invest “for the world” when shareholders will approve a five-year earnings-based package to dole out wealth that even Croesus would have been embarrassed about. It could be a long wait.

The Fed continued its programme of Quantitative Tightening (by accepting the cash from maturing Treasury Bills to reduce national borrowings rather than buying replacement debt) and raised the cost of borrowing in America as expected in June. On the other side of the pond, the European Central Bank said that it will stop buying bonds at the end of this year. No surprises there, but liquidity is the essential requirement for the world economy and it is being removed. To use an engineering analogy, if there is no lubricant then the machinery is likely to seize-up, so this is a high-risk tightrope walk.

It began with $10bn per month in the last quarter of 2017 in America, then $20bn in Q1 of 2018, $30bn in Q2, $40bn in Q3 and from Q4 $50bn until all of the QE injected in the first place ($4,110bn) has been removed. That will take another ten years at this pace -  a programme that simply cannot be sustained if there is any faltering in US growth.

By way of explanation it is worth noting that an abundance of liquidity in the US Dollar is associated with strong global growth, a weak US Dollar, higher prices for commodities and buoyant equity markets. The converse is equally commonplace.

Commentators hope that this gradual resumption of what passes for normal will not cause investment markets to go “cold turkey”: a view bolstered by the repatriation of more than $400bn through Trump’s amnesty for corporate overseas cash hoards and the financial strength of US banks. So things still look OK for America, but the growing strength of the US Dollar is making life very difficult for those countries who had to borrow in greenbacks because no-one trusts their domestic currency / economy. This increases the cost of natural resources and forces weaker economies into huge interest rate hikes to lure depositors into buying their currency rather than yet more US Dollars.

Whilst American banks can lend money if they want to, essentially stepping into the role that the Fed had been playing, this is not the case in mainland Europe, Japan or China. Banks in Italy and Spain have not made the progress with balance-sheet strengthening that the UK has seen and so their economies are very vulnerable, as witnessed in the rapid fall in the momentum of their investment markets.
Equity market volatility is picking up everywhere. Daily movements of 1% or more are becoming more common. Whether the latest explanation is based upon Trump’s trade wars, the MPC’s quest to raise interest rates or something else, the outcome is the same. Falls and rebounds are getting larger: this frequently means ‘something’ is about to happen.

Well; what a waste of a month.  Everything was going swimmingly until The Donald decided that he could climb any mountain and ford any stream in pursuit of his dream. At the current rate of progress, his only friends might well appear to be his lawyers.

Corporate tax cuts and bribes / threats about repatriating overseas cash piles to the US can be claimed a BIG success, but not in the way that Captain Weetabix had hoped. Instead of stimulating corporate investment as a prelude to his plan for economic growth, the money fed straight back into the pockets of the senior managers of those businesses through share buy-backs that drove up the share price to qualify that same management for enormous “performance related pay” bonuses. Hopefully, a loose grasp of The Law of Unintended Consequences will come quickly to Mr Trump, because the Trade Wars he has embarked upon are likely to cause a more insular – and therefore less efficient – global economy.  The targeted responses by the developed world are hitting those regions and local economies that voted DT in to the Oval Office and pushing up the cost of living in the US.  With a Budget in a parlous state and mid-term elections on the horizon, Trump cannot afford to keep this nonsense up for very long.




6th February 2018 - The Markets and Economy

February has provided lots to write about! The month began with US employment data confirming that jobs are being created, the unemployment rate is very low and the resultant skills’ shortages are causing some wages to go up. Quelle surprise! It is fair to say that this could not have been the trigger for the American slide. 

Minutes after the release of the payrolls data last Friday, US Treasury bond yields rose a little and it was after that that the Dow Jones fell. That 2.5% drop gave birth to copycat falls across the globe and worse was to come on the Monday for America, which is still up almost a quarter in the last twelve months.

By way of comparison, the S&P 500 saw fifteen straight monthly rises up to the end of January – a feat it had never achieved before. Chartists (who only ever look at things backwards) note that the S&P was a staggering 13% above its 200-day moving average, with a Relative Strength Indicator of almost 87 (50 is average and the closer it gets to 100 the more Bullish everything appears to be). Although these are both technical terms that you may not have been familiar with, each of the measures were extreme and made this the most technically ‘over-bought’ American stock market for 30 years. This is hardly a surprise when you discover that an extra $100bn went into the US Equity market in January 2018 alone.

Whilst many believe that American equities had been ripe for a fall, it can be no coincidence that the market rattled its sabre on the last working day before Janet Yellen was succeeded at the Fed by “the President’s man”: Jerome Powell. Rising Treasury yields and simultaneously rising wages are traditional signals for pushing up interest rates more quickly – something that equity markets loathe, because it harms dividends, growth and consequently share prices. Janet had already told the world that another increase of 0.25% is coming in March – with two more along the same lines later in the year - and the equity traders seem to have been reminding JP that it could all turn to dust if he does anything precipitous.

That worry seems likely to persist until Wednesday night, but by Thursday the keen-eyed will already be picking up what they see as bargains and the merry-go-round is expected to resume its happy tune. The Bull run still appears to have a lot of life left in it and pauses like this after stellar growth are not unusual, so your confidence in the fund managers chosen for you remains well founded.


3rd October 2017 - The Markets and Economy

You cannot have missed the direct impact that Mark Carney's sabre-rattling had upon the FTSE. His overt goal has always been to keep inflation within outdated parameters and he has consistently failed to do so. This is a greater criticism of the goals than it is of Mr Carney, but his secondary objective is to look after Sterling.

The pound has been on a steady decline for several years and the decision to paddle our own economic canoe accelerated the process. Initially of the view that this was a temporary market over-reaction, the MPC decided to sit back and watch. Faced with the reality that international investors do not share their peachy view of the economic future for Britain he decided to go nuclear.

Reinstating the post-Brexit quarter point cut and raising bank rate to 0.5% really should be neither here nor there but it provided sufficient excitement for international investors to ignore the facts and gamble on the hope that his will be the first of many rises in quite quick succession. With the currency buoyed by that increased demand the FTSE naturally fell, for the identical reasons that investors had so recently profited through the weakness of Sterling.

Oscar Wilde famously wrote that ‘the only way to get rid of temptation is to yield to it' in what was supposed to be a waspish aside. The last ten years though has seen the world tying to cure its addiction to debt by yielding to the temptation of taking on even more, whether through QE or any other means. Rising interest rates must be worrying.

On the one hand, the BoE has to raise interest rates to give it some options other than QE to manage its affairs because there is virtually nowhere for them to go at the moment. Conversely, even a small rise in the interest rate cycle might tip this palpably fragile economy back into recession.

Closer study of the latest MPC Minutes revealed that they believe a lack of business confidence has led to underinvestment in capacity in the economy, with the result that even the low growth of late is rapidly taking up the available spare. This is a legitimate view but it is hard to see how raising interest rates will deal with both the expected inflation and perceived underinvestment. The economic brains on the MPC are amongst the best in the country but it does seem more likely that their voiced solution is only going to make everything worse. With any luck it will prove to be nothing but a bluff.

The Governor had hitherto been at pains to stress that the unwarranted weakness of Sterling was the sole cause of above target inflation. With the currency now at a post-Brexit high and approaching pre-referendum levels against the US dollar, that argument starts to run out of steam. A more probably bogeyman is less tangible and therefore much scarier: the output gap or, more accurately, the lack of one. Only political intervention from an astute Chancellor could address this and his Autumn Budget should have that topic as its focus. On a positive note, Hammond does not have the distraction suffered by the rest of the government: those all-consuming and angst-ridden but fruitless Brexit talks.

To the surprise of almost no-one Angela Merkel secured election for a fourth time and that political continuity is a very positive thing for our brave Brexiteers. Some common sense and deal making might now prevail, but it might prove a disaster from Germany's point of view that they did not find a replacement. Evidence from the UK suggests that the repetitive election of a Premier tends to be a bad thing for anyone, whether that was Thatcher, Blair or anyone else. The Founding Fathers deduced this more than 250 years ago and even the Russians adopted a constraining policy to prevent it - until Putin rewrote the rules.

Super Mario faces a diametrically opposite problem and it will come to a head this week at the meeting of the European Central Bank. In their case the temptation will be to hint that it is time to reduce the extent of QE and stop buying quite so many bonds. Last month's Eurozone Flash PMI data saw manufacturers' confidence hit a dizzying 56.7%, but the euro is floating ever-higher on the expectation of just that step. With the Euro currently buying just under $1.20 or £0.90, the most since early 2015, he will be damned either way.

The shabby behaviour of Ryanair and demise of Monarch Airlines in the budget flight world were nasty surprises but of little consequence for investors. Footage from Spain though brought another dimension entirely. What sort of democracy is it where you get a sound thrashing from the police for voting within the EU While stock markets have shrugged the episode off it is hard to see how the Catalan situation is going to end well.

October is the month when the Federal Reserve switches from Quantitative Easing to Quantitative Tightening. Despite this certainty, markets appear not to care one iota. The message seems to be that they do not believe that the Fed will see it through when the economy slows again and QE resumes. The recent years of easy, risk-free money is an unsustainable fantasy which essentially discourages risk-taking and so something has to change.



9th June 2017 - UK Election 2017

It has taken a mere twenty eight years for there to be a less predictable outcome than when Sutton United took on Coventry City FC on 7th January 1989 and they emerged victors 2:1.  Nineteen months after winning the FA Cup, Coventry were still riding high in the Premiere League when the non-League amateurs beat them “at their own game”.  Now that was embarrassing and in this context the Conservative victory is OK really. 

Irrespective of the quality of the debate or campaigns the reality is that there is a hung Parliament in Britain and that shock brings more volatility to investment markets in the short term.  Sterling always loses international value in such conditions and while that means your overseas holidays become more expensive, it is good for the FTSE 100 because more than three-quarters of FTSE 100 profits are made overseas.  When those overseas profits get converted back into Sterling the dividend is higher and that pushes the share price up too.

Several positives have emerged from the result though:

  • A softer, less combative stance towards the EU is likely to help Sterling and reduce market uncertainty,

  • The nation voted overwhelmingly for the two parties that accept the “Leave” vote and so there won’t be another vote on whether the deal negotiated is wanted or not – GB is leaving the EU,

  • Our fellow citizens in Scotland do not want another referendum about possible independence from Britain any time soon, and

  • British businesses are even more attractive to overseas investors and so the pace of takeovers and mergers is likely to accelerate.

Political necessity will shape what happens next and so no changes should be made to your portfolio just now.  Whether Mrs May soldiers on with or without the DUP or is politically despatched in favour of another Leader, a Conservative led government seems certain.  Back in 2010 very similar things happened and over the ensuing year the short-term volatility had made no material impact upon investment markets.  There are no grounds to expect a different outcome on this occasion.

The UK already uses World Trade Organisation terms to great effect with much of the world and progress has already been made in expanding those relationships.  In the twenty-months or so left to conclude the terms of the GB departure from the EU any improvement beyond the WTO standard – which simply cannot be denied – constitutes a win for Britain. 

House prices and supercars are likely to get pushed higher still with the influx of foreign cash into the “bargain basement” of Britain if the Sterling weakness endures, but the message for Fixed Interest Securities is that there is even less likelihood of a Bank of England rate rise soon.  The summary position is that rates will “stay lower for longer” and so the possibility of falls in those asset values has diminished.

Please remember that your investment strategy has not changed overnight.  Brief storms do not determine the valuation of buildings, currencies or companies but rather the fundamentals of management.  The short-term noise is nothing more than a distraction and the best managers – each of whom have been hand-picked for your portfolios – will exploit the temporary distortions in market prices to your long-term advantage.

8th March 2017 Spring Statement from Philip Hammond

The last in the current series of Spring Budgets was no sombre affair, with our Chancellor displaying unexpected comedic talents.  Coming so swiftly after his first Budget, last Autumn, little had changed and so the content was necessarily limited to some light pruning as his focus shifted from one part of the economy to another.

All politicians colour their messages to their own liking and this was no exception.  The Office for Budgetary Responsibility (OBR) revised its forecasts of changes in the nation's Gross Domestic Product (what the country "earns") to show annual increases of 2% in 2018, 1.6% in 2019, 1.7% in 2020, 1.9% in 2021 and 2% again in 2022.  Sadly the same august organ also forecasts increases in the Retail Prices Index of 3% this year, 2.3% in 2018 and 2% in 2018 i.e. the nation is going backwards rather than growing, but this was portrayed as being a success story.


Hopes of balancing the budget during this Parliament also faded away, but at least the OBR confirmed its hope that the national debt will "only" rise from 86.6% of GDP this year to 88.8% in 2018 before falling progressively to 79.8% by the end of 2022.  Just forty more years of austerity to go then and the public sector debt will have been paid off.  Maybe.


Previous tax announcements were repeated but there was a sting in the tail as far as the self-employed and dividend recipients are concerned.  Over the next two years the self-employed will pay 22% more National Insurance Contributions on the same profits as the rate rises from 9% to 11% and the tax-exemption on dividend income was cut by 60% from £5,000 per year to £2,000 instead.  The change to NICs has fuelled a great deal of adverse comment from the government back benches, let alone other sources, but the logic of the argument put forward by the Chancellor is hard to argue with even if it does fly in the face of their last Manifesto.


One very positive tax hike was the imposition of a 25% levy on all pension funds being moved into any non-EU QROP - an offshore type of pension that has become popular amongst those "advisers" involved in illegal pension liberation scams.


Most of the window-dressing was quite ephemeral, with £113m going to Midlands and "the North" of England to be spent on road "pinch-points" (even though the potholes cost many times more than that to fix every year) and £216m over the next three years to repair existing school buildings in England: a sum that would barely cover the outstanding work for Warwickshire let alone the country as a whole.


With the nation desperately short of GPs it was also good to discover that £110m of capital has been earmarked for the next six months to employ more GPs in triage units at the A&E departments of hospitals.  No mention was made of where they might be coming from, but immigration seems the only possible solution.


A welcome announcement though was that the April NS&I bond will pay 2.2% interest on balances up to £3,000: a highly competitive rate that should become part of everyone's cash resources.


24th November 2016


Autumn Statement 2016 from Philip Hammond


A budget by any other name, the November speech delivered both bitter and sweet news for the nation.  Much of the content was eminently sensible and to be applauded whilst other elements appear at odds with his stated aims of addressing the:

- Poor productivity record that Britain has become famous for,

- Gap between demand and supply of housing, and

- Growing imbalance in prosperity from one region to another.


Bringing the annual Budget forward to the Autumn from 2017 is welcome news, giving everyone time to consider how best to organise their affairs before the tax system changes the following April.  Responding each March to the Budget feedback generated by the Office for Budgetary Responsibility is also a good idea, keeping the financial plans all within the same tax-year; so full marks for originality of thought.


Much of the content simply repeated previous annoucements although his confirmation that the current tax road-map for business would remain in place for the remainder of this Parliament bring the stability and reassurance that all businesses need.


Several spending initiatives were created or enhanced, including:-

- A £23bn budget over the next five years for the National Productivity Investment Fund, which is partly earmarked for -

   - Research, Development and Innovation using £2bn to grow our brightest ideas into valuable businesses rather than allow them to be snapped-up by overseas investors,

   - An extra £0.9bn for the existing Homebuilders' Fund to acclerate the construction of 100,000 homes in areas of highest demand (that is just £9,000 per property and so seems likely to allow developers to make an extra £9,000 profit,

   - Another £1.4bn into the Homebuilders' Fund to get 40,000 more affordable homes built (£35,000 apiece in this instance, so the assumption is that these units will be flats),

- Unspecified extra funds to encourage tenants to exercise their Right to Buy from Housing Associations,

- Unspecified support for the Help To Buy mortgage loan schemes and also the Help tp Buy ISA for first time buyers,

- £220m to address traffic pinch-points in England,

- £450m for digital railway signals and £80m for smart ticketing in England,

- £390m to encourage the purchase and use of low-emission vehicles in England, renewaable fuels and Connected & Autonomous Vehicles (CAVs).


His wish to make the UK the "5G world-leader" is a aludable one, but Japan and many other developed countries already have 5G-specification fibre optic connections into their homes and wirelessly across their entire territory: not just 4G to a box somewhere nearby, as is the case for over 85% of the UK.  Many had hoped for a vast increase in the capital devoted to improved Internet speeds and capacity, but the £500m (if matched by the same amount of private capital) committed over the next five years falls far short of those dreams.


Our Chancellor highlighted the huge disparity in wealth between the South and the North of our Kingdom - he said it was the most extreme divergance in any developed country - before stating his intention to address it.  Whilst the Northern Powerhouse continues to be a topic for discussion, hopes for a Midlands Engine strategy were announced just after confirming funding of £27m and the go-ahead for the Oxford to Milton Keynes to Cambridge Expressway.  Presumably the wealth imbalance can wait a little longer.


Changes to the Barnet Formula see more money flowing to the local authorities responsible for the extremeties of our Kingdom: £250m to Northern Ireland, £400M to Wales and £800m to Scotland.


An additional £400m of Income Tax Relief for investors into Venture Capital Funds will translate into an extra £1bn of finance for new technology companies - an act aimed squarely at "patient capital" needs.  This was accompanied by another £50m per year to help FinTech specialist businesses to aid growth and £13m per year for businesses who wish to train their Board and management "the Sir Charlie Mayfield way" to improve productivity.  Hopefully great oaks my grow from these tiny financial acorns.


Largesse amounting to £542m will be spread amongst the Midlands Local Enterprise Partnerships to financially prime businesses with the potenential to generate growth, bringing access to extra capital where and when it is needed most.  The South got a further £683m in the same way.


The austerity measures imposed upon most Government Departments is not being watered down, but those which succeed in finding the desired efficiences will be rewarded from a pot of £1bn for targeted areas of expenditure that were not announced.  Excused from these financial exigencies is the Ministry of Justice, whose immediate goal is to cope with the burgeoning prison population in order to bring safely for both inmates and staff.


An existing commitment to preserve the "triple-lock" on the State Pension to April 2020 was ratified, as indeed was the plan to reduce Corporation Tax by anothr 1% to 17% by 2020.  Other taxation announcements included:

- Discounts for business Rates,

- Harmonising the starting point for National Insurance Contributions at £157 per week: adding £8 per year per qualifying employee to the costs for every business,

- Insurance Premium Tax being increased by 20% from next June to 12% in all - please talk to your insurance adviser about the change Corrigans can offer you to reduce the growing impact this tax has upon your business,

- Salary Sacrifice confirmed as being approved for pension contributions and advice, childcare, cycle to work schemes and ulta-low emission vehicles but worthless for aggressive tax-avoidance schemes such as cars, accommodation, school fees, Private Medical Insurance or Life Assurance premiums and the like from next April or April 2018.

- Cutting the annual pension contributions allowed from £10,000 to just £4,000 for anyone using Flexi Access Drawdown Accounts (FADA).  This does not apply if you have only taken "tax-free-cash" from your pension but please contact your adviser about your circumstances, and

- Increasing the ISA allowance next April from £15,240 to £20,000 per person.


Increases in Personal Allowances against Income Tax remain as currently planned: £11,500 each from next April and rising to £12,500 by April 2020, at which point the 40% threshold will be £50,000.


Next April sees the National Living Wage rise from £7.20 to £7.50 per hour and free childcare for working families doubles from 15 to 30 hours per week progressively in 2017.  At the same time the rules on Universal Credit change to allow claimaints to keep 37% rather than the current 35% of their Benefits whilst working - a direct measure to financially incentivise work as a culture.


Savers were also rewarded with news of a new Bond to be issued by National Savings next April, offering 2.2% pa gross for a three-year deposit.


All in all it appears to be a very sensible Budget (sorry, Autumn Statement) but quite how it meets his stated aims of improving productivity, bridging the housing gap and reducing the diverence in prosperty from South to North is unclear.  


9th November 2016

America has shown that it is not immune to reactionary politics in making their latest choice of President. Widespread disillusionment at the gulf between those who have done well out of the latest Banking Crisis and the vast majority has stoked the appetite for change in Britain, Germany and now in America too. The die seems to be cast for France, Spain and Italy as their Referenda and elections take place in the coming months. For investors there will be the same knee-jerk reaction seen post-Brexit, with a sharp sell-off in Equity Markets and a weakening of the US Dollar. That shock will not last though because there are constraining measures to limit the ambitions of any President which have been in place since the first Independence Day.

Although there is likely to be a clean-sweep of Republicans from the Oval Office through to the Senate and House of Representatives, the views of the next President are not universally shared by his party. He will find progress frustratingly slow when compared against the outcomes he is accustomed to through the nimble team that helps him to run his business empire. With no experience of how the organs of government work there will be heavy reliance upon an extended chain of bureaucrats who, in a real-life parody of "Yes Minister", will accelerate or hinder policies according to their collective, unwritten but very-long-term, agenda. In short, little will change in practice.

The common factors in each of these votes has been increasing isolationism and a desire for self-protection, neither of which might be considered positive factors for the UK as it seeks to renew its outward-looking business relationship with the rest of the world. Thankfully though the dead-hand of the civil service in each country will limit the progress that their political leaders can make towards these extreme policies. Business as usual beckons.

In America the stock-market was pushing towards the top end of its value-range in October and so the short-term sell-off represents an opportunity to buy the market. Much had been made in the campaign of the wish to redirect the US military budget back into America rather than protecting the rest of the world, on the basis that local problems should be resolved locally. Of all the countries that want to do business with America the UK is therefore in the best possible place, having played a full part in all the US fields of military battle.

Two months of negotiation now ensues as a new team is identified by Mr Trump to support him over the next four years. Their identity and credentials will be scrutinised closely by many, of course, but the growing military, computing and political confidence within Russia and China may take this signal as an opportunity to "grab territory" or renegotiate trade terms with weaker nations.

Interesting times such as these are best faced with a portfolio of investments that are actively managed and have the right asset allocation for you. The short-term turbulence that follows another unexpected political outcome is just a distraction in the long-term journey towards your goals, but please contact your adviser if you have specific concerns.

7th October 2016

After any period of sustained market rises there is an inevitable moment of the jitters and that is no bad thing. It often feels though that the fate of the financial world rests in the hands of a tiny clutch of politically appointed bureaucrats. The leaders of the central banks posess extraordinary powers to set the trajectory for the global economy and its stock markets. Not underlike the Democratic system at play in the UK, leaving important stuff to long-term and un-elected workers is probably better than entrusting such things to short-term but elected politicians of any hue.

Over the Summer there were several rumblings from the Mandarins that market volatility was lower than expected post-Brexit.  The Conservative Government has got off to a marvellous start under Mrs May though and that has given investors greater confidence: uncertainty being the worst thing possible for investment markets.  To make matters even better for British investors though the UK has achieved what every developed nation has yearned for since the most recent Banking Crisis - devaluation.  A 13% drop in value relative to all major currencies since that surprise vote is no mean feat and that translates directly into higher share prices in the UK.  This is because London and Switzerland are unusual stock markets.  The rest are all "domestic", with the constituent businesses being local to that stock market and earning their profits in the same market.  One benefit of our former Empire is that 85% or more of the profits made by UK listed companies arise overseas.  When those foreign profits are brought back to the UK to be paid out as Dividends they are worth more in Sterling than they used to be because of that devaluation.  Those higher Dividends lead directly to higher share prices without any smoke or mirrors.

Japan has stated that it is targetting zero "interest" on its borrowings for the next ten years: something they can achieve through Quantitative Easing, and this volume of purchases forces the price of all national debt higher with the terrible result that the "interest" paid on it gets lower and lower.  Investors are therefore flocking into other assets because high-quality companies that pay 3.4% dividends year-in and year-out offer a more compelling solution to anyone looking for an income in life beyond work.

Meanwhile on the other side of the Atlantic a frightening game of bluff and counter-bluff is under way.  One of the two least-loved Candidates in a long time will become President though and in the meantime Syria, rather than Rome, burns.  It puts all this into perspective really.

14th April 2016

The economic situation in China continues to influence the UK Stock Market.  China has thankfully lowered its GDP growth target range for the year to 6.5%-7%, but what does that mean  At the bottom of this range it would amount to an extra $706bn: the same amount as 9.4% growth would have created in 2012.  It is also the equivalent to the annual GDP of Switzerland, or half that of Spain, or even a third of the GDP of Italy - the 8th largest economy in the world. 

It is a massive sum and it screams confirmation that China is not imploding.  The United States is growing nicely and deflation is currently an exclusive phenomenon of the geopolitics associated with the engergy industry.  Negative bond yields are an abberation of seemingly misguided and outdated monetary policy with the result that the world is a much more normal place than is commonly portrayed. 

Brent crude oil spent part of the month above $40 per barrel and other commodity prices rushed up in adoration. 

Inflation is a-coming and markets are terriby happy again. 





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