Home and away
I suppose the Budget feels a bit old hat now.
You have probably all forgotten about it – or at least tried to. Certainly, neither I nor the market felt able to get too worked up about the Chancellor’s measures, initially, at any rate.
The overall impression does seem to have been favourable, even though most of the real excitement seems to be taking place outside of this little island of ours these days.
With the situation in Japan as yet unresolved and planes still flying over Libya, investors might reasonably expect markets to be unsettled but they appear remarkably calm.
In part, this reflects an improving economic situation, particularly in the US. But I suspect the underlying presence of inflation has more than a little to do with it. After all, modest inflation need not be bad for financial markets.
Our own inflation figures, published just ahead of the Budget last week, were higher than had been expected. Yet the effect on our market was minimal, if you exclude the rise in sterling as traders factored in higher interest rates from the Bank of England. We also saw disappointingly high borrowing figures from the Government, so it is looking increasingly likely that the Treasury is prepared to tolerate higher inflation to help devalue debt.
Accepting inflation as a way of life is hardly unknown but can be a dangerous game to play. Faced with rising bills for food and energy, workers could well demand higher wages. There is no sign of this happening at present but it would be unwise to dismiss such a development out of hand. Investors will need to keep an eye on wage settlements in the months ahead and hope that persistent high jobless numbers discourages industrial unrest.
As one of the participants in a Budget webinar I chaired on behalf of Cofunds last week said, Budgets are not what they used to be. Surprises are few these days, other than to stimulate favourable coverage afterwards, and the technical nature of what at best can be described as the tweaking of the economy is more likely to encourage yawns than positive comment.
Indeed, most of the questions emailed in were of a technical nature. One thing was certain, though, Budgets tend to be good for the adviser community, providing fresh reasons to contact clients and review action taken or proposed.
It did strike me that perhaps the best stimulus for business would be a change of Government every five years but I doubt that would do much for the successful running of the country.
Webcasts or webinars are featuring more frequently in my business life these days. Last week also saw me chairing a discussion – with questions again – on emerging markets on behalf of Aberdeen, BlackRock and JP Morgan.
I learned something most interesting from one of the panellists.
It was suggested that more money had been made out of emerging countries’ debt over the past decade than from the equity markets of these nations. Who would have thought it?
With the end of the tax year imminent, most involved in the business of advising private investors will have their heads down, ensuring all appropriate action has been taken.
For those of us without the tie – and the pressure – of talking to real people about their finances, it could be a good moment to take stock.
As I embark upon a stay in hospital, I shall be doing just that.
Brian Tora is an associate with investment managers JM Finn & Co