DIY Investor Magazine
/
March 2017
6
THE BIG PICTURE: MACRO VIEWS FROM
INVESTMENT COMPANIES BY QUOTEDDATA
Every month, here at investment trust analysts
QuotedData, we collate the insights on markets
and economics taken from the comments made by
Chairmen and managers of investment companies
across the globe. We organise these by region to
highlight what the sectors’ trusts believe are the factors
relevant to the performance of that particular geography.
The main message from the February’s views was that
inflation is coming, driven in part by fiscal stimulus and
caution is advised.
Jeroen Huysinga, of JPMorgan Global Income &
Growth, thinks politicians in the US and Europe have a
clear mandate to reflate their economies. Peter Moon,
of Scottish American is concerned about inflation,
especially if fiscal stimulus, which turned out to be
unnecessary, stokes wage inflation that is already
evident.
Ruffer worries that investors will fail to factor in inflation,
growth will lead to rising bond yields and index-linked
bonds will suffer. Lord Rothschild cautions that 70 years
of patiently crafted international cooperation is now
threatened.
He thinks that there could well be a period ahead of us
when the avoidance of risk is as high a priority as the
pursuit of gain. Mid Wynd believes that we are finally
seeing the end of artificially low interest rates.
UNITED KINGDOM
While a number of commentators draw attention to the
disruption caused by Brexit, Peter Jones, of Henderson
Opportunities, believes it is unwise to base investment
decisions on speculation about the consequences of
recent election results.
The managers of this trust caution that companies are
focusing on cash generation rather than investment and
this has knock-on effects on the domestic economy,
sentiment shared by Crispin Latymer of BlackRock
Throgmorton who said: ‘There remains concern that the
present lack of clarity on the terms of the UK’s exit may
deter investment in the short term.’
Strategic Equity Capital highlights the attractions of UK
corporates to overseas buyers given sterling’s weakness
and the managers of JPMorgan Mid Cap agree. The
manager said: ‘We will be surprised if we do not see the
re-emergence of M&A in the FTSE 250, given that the
decline in sterling has provided a significant incentive
for overseas purchasers to buy UK assets.’
Alastair Mundy, of Temple Bar, warned that if the three-
decade reduction in bond yields is now over, this crutch
to equity valuations may soon vanish. Harry Nimmo,
of Standard Life UK Smaller Companies, says that the
surprisingly good out-turn of smaller companies since
the Referendum on the EU may wilt if there is any sign of
real weakness in the UK economy.
Tim Russell, of Sanditon, thinks a hard Brexit is likely
but says this may be more damaging to the EU than
the UK in the long run. Dr EC Pohl, of Athelney, is
concerned that the chancellor will struggle to raise the
taxes he needs to balance the books. Rupert Barclay, of
Sanditon, believes a more rapid tightening of US interest
rates than expected is the biggest risk to equity markets
in 2017.
EUROPE
The managers of TR European Growth said: ‘In
Continental Europe we do not expect a populist revolt
similar to that seen in the UK and US. European equities
offer some very good value compared to their US
counterparts. In the UK and US, firms have already seen
massive margin progression since the financial crisis. In
Europe, by comparison, huge margin potential remains.’
