View more on these topics

Brian Tora: Listless markets appear impervious to good news

Despite proof of continued economic growth and central bank support on both sides of the Atlantic, markets appear subdued.

Brian-Tora-MM-Peach-700x450.jpg

I should have realised I was tempting fate with my optimistic comments last week. Driven more by a lack of encouraging news and investor inertia, markets drifted back, leaving behind earlier highs.

Even when the news improved, there seemed a remarkable lack of enthusiasm amongst the movers and shakers of the investment world. True, better economic news from America and an upbeat autumn statement from the Chancellor stirred some interest but longer term doubts clearly remain.

Let’s reiterate some of the good news. US economic growth has been revised up – to a respectable 3.6 per cent annualised in the third quarter of this year. While still retaining a healthy degree of scepticism on statistics such as these – constantly revised over a growing period of time – you really should not sniff at that sort of a turnaround. After all, Brazil’s economy has started to shrink, despite the upcoming Olympic boost.

Then we have the Autumn Statement delivering the administration’s take on life this side of the pond. It was possible to detect a degree of smugness in Osborne’s delivery as he felt able to announce upward revisions of growth expectations for both this year and next. While we are hardly in runaway territory, next year we look capable of achieving close to trend growth numbers. Moreover, the Office of Budget Responsibility actually believes the public finances could move into surplus during the life of the next parliament.

As it happened, the measures announced trod a delicate path between easing the burden felt by an electorate hard pressed by continuing austerity and ensuring that spending remained under control and tax revenue was enhanced. The easy announcements – CGT on foreign property owners and more anti-tax avoidance measures – may not contribute significantly to the Treasury but are necessary if later retirement and other less palatable changes are to gain acceptance.

Overall, though, the message on both sides of the Atlantic is improving, yet markets remain subdued. There is, perhaps, a lack of confidence in governments following the financial crisis. In other words, many investors fear that action taken so far has more to do with gaining electoral credibility than with actually addressing the problems exposed by the credit crunch. And increased interference from our political masters has done little to add to comfort levels.

In a recent company statement, one of America’s business leaders said he believed that government policy was leading to either a deepening recession or a prolonged period of above trend inflation. His problem was that he did not know which was most likely. Of course, he was merely expressing his personal opinion but the fact that such a view might be shared more widely could explain current investor caution.

British and American economic resurgence is far from assured but behind the scenes conditions do seem to be improving. Both the Bank of England and the European Central Bank kept rates on hold last week, while a member of the Fed’s Open Markets Committee pointed out that tapering was not tightening, reassuring markets in the process. It looks as though cheap money will remain until the developed world can demonstrate a full head of steam.

Then there is the oil situation. While nothing that is influenced by events in the Middle East should ever be accorded absolute certainty, last week’s OPEC meeting must surely have reflected on how best to manage downward pressure on the price brought about by increased supply.

Not only is the US likely to become the world’s largest producer within two years, thanks to shale deposits, consumption there has been falling. And don’t forget Iran. Cheaper oil will help economic progress through cheaper transportation costs. Watching the oil price is crucial.

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

Recommended

Trap-Mousetrap-Mouse-Note-Pounds-700.png

Avoiding the pension IHT traps

Passing on any residual pension scheme benefits particularly when the scheme member is aware they are seriously ill, is an area littered with potential inheritance tax pitfalls. John Woolley points out some of the ways to avoid the tax traps.

Stockmarket-Stock-Market-FTSE-Performance-700x450.jpg

OneSavings Bank eyes stock market float

OneSavings Bank, the bank created out of a rescue deal for Kent Reliance Building Society, is preparing to float on the stock market next year. Sky News reports OneSavings Bank has begun talks with investment banks about a listing during 2014. OneSavings Bank was set up in August 2010 and is jointly owned by Kent […]

EU-Euro-Notes-European-Money-Currency-700x450.jpg

EU Commission fines six banks £1.4bn over Libor

The European Commission has fined six European banks €1.71bn (£1.4bn) over alleged rigging of Libor rates. Deutsche Bank has been fined the most at €725m while Société Générale has to pay €446m. The Royal Bank of Scotland has been fined €391m and JPMorgan has to pay €80m. Barclays and UBS have avoided fines for Euribor and […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com