This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Find out more here.
X
Money Marketing Cover
Categories:Investments,Other

Crop rotation

  • Print
  • Comment

 

Tempting as it was to buy some more pharmaceutical shares based on the quantity of pills thrust down my throat while in hospital, I took the opportunity to take a more measured look at what was going on in the wider world. The stockmarket has proved remarkably resilient, given the continuing flow of indifferent news from North Africa, Japan and the Middle East.

And there has been little to set the champagne corks popping closer to home, with Irish debt back in the news and Portugal careering towards a bailout. Even the economic runes are hard to read, despite a modest upward revision of GDP growth. But one story is refusing to go away – the resurgence of inflation as a factor in our lives.

The rising cost of living is an obvious consequence of growing wealth and aspirations in the Third World. One outcome of the rise of China is that imported deflation has evaporated.

Inflation remained so low for so long as manufacturing was steadily moving to China, driving down the cost of goods and removing pricing power from business. This process is now largely complete. Meanwhile, the Chinese themselves are better off and more demanding in what they earn and consume. This is most likely to be felt in agricultural products.

We have been warned of a population explosion towards the middle of this century that will demand an increase in the output of foodstuffs of around 70 per cent. The problems are compounded by a wealthier world seeking a richer diet.

There will be upward pressure on commodity prices elsewhere. Oil seems unlikely ever to return to the levels enjoyed less than a decade ago. But food? There is little real discretion in its consumption from our point of view.

Efficiencies that have driven food prices down may be more difficult to achieve on the same scale in the future. Investment in and focus on agriculture looks to be a continuing feature for some time.

Last month, I interviewed Barings’ Jonathan Blake, head of global resources and manager of the global agriculture fund. I expect managers to talk their own book but his enthusiasm for what has been viewed until now as a relatively pedestrian asset class knew few bounds.

And it is not just in agriculture that inflation will demand a rethink of investment strategy. Bonds, which enjoyed a resurgence in the flight to safety accompanying recent events, are vulnerable to rising living costs.

The passing of the old tax year is a good time to review investment strategy anyway. One of my abiding concerns is why investors wait until the end of the tax year before subscribing to an Isa. If they are worth doing at all, surely they are worth doing early.

Perhaps investors should be looking at how portfolios should be rejigged for a higher inflation world and put the new investments in an Isa.

Brian Tora is an associate with investment managers, JM Finn & Co

  • Print
  • Comment

Daily Email Updates
If you enjoyed this article, sign up to receive the latest news and analysis from Money Marketing.

The Money Marketing CPD Centre
Build your annual CPD - you can log and plan your CPD hours for free with The Money Marketing CPD Centre.

Taxbriefs Advantage
Advantage is a digital reference source giving unbiased, independent, answers to your technical queries. Subscribe to Taxbriefs Advantage.

Have your sayEdit my profile/screen name

You must sign in to make a comment

Fund Data

Editor's Pick



Poll

Do you agree with calls for a flat 30% rate of pensions tax relief?

Job of the week

Latest jobs

View all jobs

Most recent comments

View more comments