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Investment view

Having topped up the Tora tan in the middle of the Atlantic (well, pretty much the middle) I could not resist the opportunity to parade myself in front of IFAs in South-west England. The topic is my now familiar case to re-embrace the cult of the equity but go easy on the greed element. As you read this, I should be telling the good folk of Devon and Cornwall that things will get better but not necessarily easier. Prepare for a prolonged period of lower returns.

We all became too used to big stockmarket profits and the collapse of the technology market brought a much

needed dose of reality. My colleague Logie Cassells, manager of the Hallmark Portfolio Funds, has come up with an interesting analogy. He has likened the behaviour of the technology market to that of the US automobile industry in the period between the two world wars. Incredibly, there were more than 100 car makers in 1918 but, helped by the Depression, fewer than 40 remained by the end of the 1930s. Part of the reason was the growing penetration of the US consumer market by car manufacturers. It became more difficult to remain in what had become a competitive business unless you had something that marked you out from your peer group. I agree there are similarities with today&#39s

crowded market for personal computers.

What this proves is that there is nothing new under the sun. The errors we make are usually in believing this time things are different. I hold my hand up. That was certainly my view. In some ways, I still believe it to be true. This time is different but more in the speed at which adjustments take place than in the belief that any industry can buck cycles indefinitely. Moreover, it is different because governments are encouraging personal investment. That, at the very least, has to be good for markets.

We have seen better conditions recently, with markets on both sides of the Atlantic recovering from their early spring lows. Falling interest rates have undoubtedly helped. Even the European Central Bank bowed to pressure and joined the party. Yet almost immediately afterwards came confirmation that inflation is still a worry in the eurozone while forecasts for growth appear remarkably upbeat. Not so in the US, where the Federal Reserve Bank lopped yet another 50 basis points off interest rates. What does that tell you – that they put them up too far in the first place, perhaps? Still, US inflation does not look to be a problem.

Our own monetary policy committee will probably consider any change to interest rates ahead of the election politically incorrect. There is some justification for taking no action, with UK inflation looking rather more robust than many were expecting. In part, this is due to higher energy costs although utility charges are also up. Strip those out and an altogether more subdued picture emerges. I still do not think inflation will come back to haunt us too early.

It is surprising there are not more worries about inflation, given that labour market statistics published last week showed wage costs rising at their fastest rate for some time. Even there, you have to look through the bare statistics to realise that headline figures do not provide the full story. Employment is continuing to contract in the manufacturing industry, with strong sterling exacting a price from these sectors of the economy.

But greater stability in the stockmarket suggests investors are looking to better times ahead in the second half of the year. Whether these better times will extend across the whole range of businesses is another matter entirely. New econ- omy stocks may have bounced but the pressure is still there. Indeed, at the end of last week, the FTSE 100 index exc TMT was close to an all-time high. What a difference a year makes.


Equity release to help with LTC costs

Government equity-release schemes to help the elderly meet the cost of long-term care are on course to be introduced by October if Labour wins the election.The party&#39s manifesto confirms its commitment to the NHS Plan. While few details are given, it is bel-ieved to revolve around the concept of loans being provided by local authorities.The […]

Minor information

I ended last week&#39s article on what I thought was a fairly upbeat note, namely, that it is possible to plan tax-effectively for your children&#39s or grandchildren&#39s future.Renewed interest in planning for children has been triggered by the Government&#39s recent announcement on the proposed child&#39s trust fund. Admittedly, it is hard to beat Government funding […]

Raising the issue of standards

As the newly appointed project director for the Raising Standards initiative, I am always interested to get feedback on how the scheme is perceived.I was interested to read Lorna Bourke&#39s criticisms of the Raising Standards initiative (Money Marketing, May 10).The Raising Standards initiative has been developed with the intention of making a real difference to […]

Scottish Equitable International – UK Corporate Bond Fund

Monday, 21 May 2001.Type: Offshore life fund.Aim: Growth by investing in UK investment grade bonds.Minimum investment: £15,000.Place of registration: Luxemburg.Investment split: 100 per cent in UK investment grade bonds.Isa link: No.Charges: Annual 1 per cent.Commission: Initial 5.25 per cent.Tel: 0131 339 9191.

Guide cover

Guide: Johnson Fleming produces auto-enrolment checklist

For a job as big as managing the auto-enrolment changes, it’s important to know what has been completed and what still lies in front of you to give you the reassurance that everything is in hand. Getting the planning and project management right at the outset can help you see the path ahead and ensure everyone knows their roles and responsibilities. To help with this, Johnson Fleming has produced a checklist outlining every step that needs to be taken when preparing for auto-enrolment.


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