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Investment view

So, farewell then 2001/02 – the tax year that is. If you had not taken out your Isa or balanced your CGT position by last Friday, you are too late. Let us hope the new tax year serves investors better than the one just ended. Few tears will be shed in memory of the second down tax year in a row – down, so far as markets are concerned.

Certainly, stockmarket activity was not much to write home about in the private investor community. According to a survey published last week by the Association of Private Client Investment Managers and Stockbrokers, trading volumes by retail investors fell by more than one-fifth during 2001. These are calendar year figures but it seems unlikely that the experience of the run-up to the end of this last tax year will be very different from a year ago. Indeed, if anything, activity was probably rather less this time around, given that the length of the bear market will have affected investors&#39 attitudes.

The perception of general disenchantment with the equity investment scene seems borne out by Isa sales. The indications are that few fund houses will have succeeded in beating the previous year&#39s sales numbers. Two years is a long time to wait for a profit in the stockmarket. There are clear signs that private investors are still on the sidelines.

The nature of this investment activity recession is spelt out in the detail contained within the Apcims survey. Execution-only trades fell by a quarter to 10.5 million deals. This appears to be a consequence of a significant fall in speculative activity. Of course, these figures are set against the previous year when the froth was finally blown off the technology market. Taking that into account, it is a wonder that the collapse in volumes was not even more dramatic. But it may take a little while before we see any recovery.

However, notwithstanding the diminished appetite for speculative trading, online dealing continues to make ground. By the end of 2001, almost one in three execution-only deals were carried out over the internet. This has become a commoditised market. There may not be much money to be made but it is taking hold for DIY investors.

Last week did feel slightly more comfortable for those directly involved in share trading, even though the background of markets locked in a narrow trading range hardly helped. Volumes improved massively in the run-up to the tax year end. It seems remarkable that there were gains to be sheltered but undoubtedly people were taking the opportunity to tidy up portfolios. Given that the same Apcims survey showed the value of portfolios managed on behalf of private investors to have fallen by rather less than the stockmarket during 2001, perhaps not all the news was bad.

But where do we go from here? The danger, as I pointed out last week, is that this gridlocked UK market will be left behind as shares recover elsewhere. Yet the recovery is proving slow to take off in other regions too. Markets usually anticipate better economic times and tend to react favourably to monetary easing. There has been little sign of either in America or Europe, even if the bounce from the post-September lows has been significant.

If you detect a degree of frustration in commenting on markets at present, you would be correct. It is hard to see what might jerk investors from their torpor. There are many unsettling influences lurking on the sidelines. The sharp rise in the price of oil, as an example, owes far more to the unrest in the Middle East than to a resurgence of economic activity. But if the rise were to continue, it could have an influence on inflation and hasten the monetary tightening that many now believe inevitable.

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