An in­vestors eye view of Bud­get 2018

Belfast Telegraph - Business Telegraph - - News -

In the wake of last Mon­day’s Bud­get, Jonathan Cun­ning­ham, part­ner at Cun­ning­ham Coates, Belfast’s longest stand­ing in­vest­ment man­age­ment firm which is this week mark­ing its 175th an­niver­sary, shares his thoughts on the Bud­get and the im­pli­ca­tions for in­vestors.

“Un­der­stand­ably all eyes were on last week’s Bud­get with Chan­cel­lor Philip Ham­mond promis­ing to end aus­ter­ity and pledg­ing a raft of mea­sures — rang­ing from the in­tro­duc­tion of a ‘dig­i­tal ser­vices tax’, aimed at tech­nol­ogy gi­ants, to in­come tax cuts and ex­tra spend­ing on the NHS. As Bud­gets go, this will likely be broadly well re­ceived, with the Of­fice for Bud­get Re­spon­si­bil­ity stat­ing that Mr Ham­mond’s spend­ing promises rep­re­sent the big­gest Bud­get give­away since the in­de­pen­dent fis­cal watch­dog was set up in 2010.

“Per­haps of more in­ter­est to those within the in­vest­ment world was the im­me­di­ate ef­fect that the an­nounce­ments might have on both the eq­uity and gilt mar­kets, and also on ster­ling.

“While the FTSE 100 ended Mon­day up 86 points at 7,026, it could be pointed out that it was ac­tu­ally fur­ther ahead — up 113 — when Mr Ham­mond stood up to speak. In fact, it might be sug­gested that the day’s rise was lit­tle to do with the Bud­get at all and much more a mod­est re­bound caused by in­creas­ing in­vestor ap­petite on the back of steady falls since May’s highs of 7,877.

“From our per­spec­tive, it is im­por­tant to view these de­vel­op­ments not only through a longer term lens, but also in the broader con­text of a global in­vest­ment port­fo­lio, diver­si­fied by ge­og­ra­phy as well as as­set class.

“Ob­vi­ously this was the last Bud­get be­fore the UK’S sched­uled exit from the EU. To UK in­vestors, Brexit, which is now less than five months away, might loom large, but the is­sue is not fore­most on the minds of in­vestors on a world­wide scale. Trump’s trade wars with China, Italy bring­ing down the Euro and US in­ter­est rates hav­ing much more of a bear­ing on global mar­kets, and thereby in­vest­ment port­fo­lios, over re­cent months.

“While events such as these cre­ate short term volatil­ity within in­vest­ment mar­kets, of much greater im­por­tance is the abil­ity to iden­tify long-term trends and po­si­tion port­fo­lios ac­cord­ingly. It is of­ten said that ‘time in the mar­ket’ is much more sig­nif­i­cant than ‘tim­ing the mar­ket’ — some­thing which has proven true across the nu­mer­ous in­vest­ment cy­cles we have seen through­out our 175 years in busi­ness.

“In­deed, this au­tumn marks the ten year an­niver­sary of the global fi­nan­cial cri­sis. The decade that has fol­lowed this has not been with­out con­cern, most no­tably from the Eu­ro­zone debt cri­sis in 2011, the QE ta­per tantrum in 2013 and the col­laps­ing oil price in 2015. How­ever, all things con­sid­ered, this pe­riod of ul­tra-low in­ter­est rates and un­con­ven­tional mon­e­tary pol­icy, cou­pled with gen­tly im­prov­ing eco­nomic growth, has been pos­i­tive for in­vestors. The old adage that stock mar­kets climb a ‘wall of worry’ is as rel­e­vant to­day as it ever was.

“The health of the global econ- omy is strongly in­flu­enced by the US, where growth re­cently ex­ceeded 4% for the first time since 2014*. US un­em­ploy­ment is near his­toric lows, with the econ­omy adding ap­prox­i­mately 200,000 jobs per month. Con­fi­dence among con­sumers and busi­nesses has been sup­ported by the re­cent tax cuts and dereg­u­la­tion — bod­ing well for con­tin­ued wealth cre­ation.

“As in­vest­ment man­agers, we have fol­lowed the same prin­ci­ples for the past 175 years. We op­er­ate a be­spoke ap­proach to sup­port­ing our clients and are al­ways avail­able, al­ways en­gaged and al­ways aim to keep abreast of mar­ket con­di­tions. We un­der­stand risk, fore­cast it, and aim to pro­tect our clients from it by build­ing well-diver­si­fied, be­spoke in­vest­ment port­fo­lios... what­ever the mar­ket brings.”

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