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The Financial Ironmonger Blog No 27/2019

The Financial Ironmonger Blog No 27/2019

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 27/2019–

Quotes for Swiss shares disappeared from our screens on Monday morning as it became a criminal offence to trade them anywhere but Switzerland itself. The long running row with the EU thus came to a head as it sought to formalise more than 120 bilateral treaties, including requiring Switzerland to automatically adopt some laws.

The plan is to make a sovereign state no more than a client country, but the Swiss have been pressured like this many times before in history. Perhaps it was meant as a warning to London, and the rest of the UK about what might happen under a no-deal exit, but if that was the intention, it seriously misfired with the Swiss index up by close to 1% at lunchtime, in line with other major markets.

London is the second most important financial market in the world, just behind New York, whilst Zurich ranks 8th, according to the Global Financial Centres Index. Once the UK leave, Zurich will be bigger than all the other EU states put together, and if London/Zurich granted each other full equivalence, it would be a world beater.

Curious, then, that Brussels would act against its own interests, but in line with an increasingly protectionist stance that will ultimately be self-defeating. We shall know soon enough as both Conservative party leadership contenders are promising an exit on October 31st, absent a Remain organised coup.

The impression I get is that people just want the thing resolved, and there is no doubt that economic activity is slowing in the meantime, as figures from the construction sector showed this week. In a way, this is self-fulfilling. Forecasts from the Bank of England, the IMF and the OECD suggest a deep UK recession with a decline in GDP of more than 5% in the 12 months following an untimely exit, which, whether correct or not, is bound to have a chilling effect.

There are, of course, trends within trends at work here, which have been mentioned before; the rise of the internet being the most obvious. However, something as simple as the recent changes in the betting rules has forced the closure of 700 shops by William Hill, with Ladbrokes and Coral thought to be closing another 1000. Some might see this as a positive for society, but these places provide employment, and the activity itself is likely to get diverted elsewhere, rather than cease.

Similarly, a change in fashion or habit can radically alter an industry, or market, as car manufacturers can attest with the demonization of diesel engines. Likewise, the drinks market has seen radical change with sales of beer falling by more than a third over the last twelve years, whilst wine and gin, for instance, have benefited from “premiumisation” as drinkers have fewer, but more expensive experiences.

Or, they have given up drinking alcohol, with 10% of the 18-24-year age group not bothering. This has seen a sharp rise in demand for alcohol-free products, up 30% since 2016, and a new market for brewers to supply. It has also meant that the quality and range of products has increased in line with demand and is probably a far more enduring market than designer gin, and exotic mixers.

–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.