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The Financial Ironmonger Blog No 48

The Financial Ironmonger Blog No 48

Every week our guest blogger, David Oakes of Mosaic Money Management (aka The Financial Ironmonger), shares with us his take on some of the major UK and overseas macro and political events that shaped the previous week.

Please be reminded the value of investments, and the income from them, may fall or rise. The views expressed in this article are those of the author at the date of publication and not necessarily those of Chelverton Asset Management Limited or Mosaic Money Management. The contents of this article are not intended as investment or tax advice and will not be updated after publication unless otherwise stated.

–THE FINANCIAL IRONMONGER BLOG NO 48–

The general wailing and gnashing of teeth from those on the left of the political spectrum seems to have abated somewhat this week as people realise that not only had they better get used to it, but a continuation of such activities would only enrich dentists. But across that particular spectrum, there is profound disbelief that America could have elected Trump, and once you start to delve in to the underlying statistics of who voted, in which way, you can see why.

If you are in to this sort of detail, (I am, so that you do not have to be), the question is did Trump win, or Clinton lose, this election? The obvious answer is both, but with different candidates, would the outcome have altered? In the end, Republicans voted for Trump because they loathed Clinton, whilst the Democrats found it more difficult to vote for such an establishment figure as she. Whilst she won the most votes, the founding fathers built a system, (the electoral college), that ensured that the very large states, such as California, could not swamp it.

You would have to conclude that this was her election to lose, which she achieved, and that Trump was fortunate to have her as an opponent. His relentless focus on the economy, and those who have lost out from globalisation, stuck a chord, as it did when Bill Clinton campaigned on the same theme in 1992. Apparently, he advised the same tack this time, but was rebuffed as “old hat”. Thus, having blown north of $500mn on her campaign, she has become the latest, and highest profile victim, of globalisation.

Everyone else is to blame, not least the misogynists, but there is little evidence of this. Whatever your politics, there are some very impressive women out there such as Angela Merkel, whilst our own Theresa May will soon get off the nursery slopes. In the past, one can think of Indira Ghandi, Margaret Thatcher, and Golda Meyer. The Queen, who is above politics, is the outstanding example. So, it is not an issue with female leaders, (as Michelle Obama could easily prove in 2020), but one of authenticity with the Clinton brand. Sadly, she does not get it; expectation, nay entitlement, is not a message that voters want to hear, whatever their supposed allegiance.

Here in the UK, the new Chancellor will make his first autumn statement next Wednesday; during the Brexit campaign, we were warned that the whole country would have turned in to an economic wasteland by now, with 500,000 jobs lost, negative growth of 6.4% of GDP, and a £40bn cut in government spending. In fact 37,000 jobs were created in the three months to September, taking the unemployment rate down from 4.9 to 4.8%, with the numbers actually employed the highest ever. GDP growth in Q3 was 0.5%, and whilst hardly exciting, it was better than the 0.2% achieved by France and Germany.

The widely predicted hike in inflation has yet to appear, with average store prices 0.7% lower in October compared to a year ago. At some point, this has to reverse due to the fall in the currency, but for now, consumers are happy, spending nearly 27% more online compared to October 2015.

For the time being, at least until Brexit actually happens, the economy looks to be in good shape, good news for small and mid-cap stocks. After Brexit, it is anybody’s guess, but Europe might look profoundly different by then.

Across the point, stock market indices are hitting all-time highs, as investors contemplate the beneficial impact of Trump’s spending plans. He also wants to reduce personal and corporation taxes, whilst encouraging companies to repatriate trillions of dollars of overseas earnings. Should that happen, most of the money is likely to end up in shareholders pockets, either through buybacks, or special dividends, both of which will drive equity markets higher.

Bond markets, on the other hand, have taken fright at his spending plans, and yields have backed up. Whether this proves to be the end of the extraordinary bull run that has lasted thirty five years remains to be seen, but the days of negative yields looks to be over. It might be the start of rising interest rates, and a return to some sort of normality, certainly if Trump can get the economy growing at 4 to 5%.

Suddenly, the outlook seems a whole lot brighter than just a few months ago; amazing what can happen now that the third way has been consigned to the history books.

–MORE ABOUT OUR GUEST BLOGGER, DAVID OAKES–

David joined Manchester stockbroker Henry Cooke, Lumsden in 1977 and after becoming a member of the London Stock Exchange in 1984 held a number of senior positions within the firm including Managing Director of the in-house fund management company and member of the Executive Committee.

After senior appointments at Cazenove Fund Management and latterly Mercater Capital Management, David joined Mosaic Money Management in 2013. He has successfully managed private client and fund portfolios for over thirty years and has particular expertise in providing a multi manager service to his loyal client base.

The Financial Ironmonger is a hat-tip to Ironmonger Lane, the location of Chelverton’s London office.