View more on these topics

Nuts in May

Having returned to these damp and cool shores from sunnier climes, there has been a lot to catch up with. It was a mixture of good news and bad news.

In the vanguard of the good news brigade has been the continuing flow of positive information from corporate Britain and the robust nature of stockmarkets on both sides of the Atlantic. Bids and deals continue to bring cheer to investors. May could yet prove to be the month to sell and go away but we have been mercifully free of the upsets that characterised this time last year.

Also supportive of the bulls has been the economic data that has been emerging – well, largely supportive anyway. Inflation has slipped back below 3 per cent. Perhaps the easing of inflationary pressures will remove the further increase everyone is expecting.

But the Bank of England governor all but said outright that another quarter-point rise this summer would be needed to bring inflation back to its target level. In a poll by Reuters (itself in the M&A news), the number of economists who believed a further rise is in prospect all but doubled as a direct consequence of Mervyn King’s comments.

On the other hand, economic growth in Europe has come in above expectations and comfortably ahead of the American numbers. At least there has been some reduction in expectations for inflation in the US and there has even been talk of the Fed bringing interest rates down in the not too distant future. With the US housing market in continuing disarray (the National Association of Home Builders said sentiment in the US housing industry was at a 15-year low), anything that takes pressure from hard-pressed homeowners will be very welcome.

Lombard Street Research considers that the trouble afflicting the US housing market is already cutting more than 1 per cent off American GDP. With the apparent bursting of a property bubble in Spain, and fears that unsustainable rises in the value of housing has been taking place elsewhere in Europe, there may still be problems ahead.

But they do not appear to be occurring here in the UK. Despite the recent rate rise and with residential property at historically high levels in terms of affordability, a survey from the Royal Institute of Chartered Surveyors last week concluded that house prices were continuing to rise.

We have an imbalance between supply and demand and the signs are that we are seeing more inward migration than the Government would have us believe. One of the biggest brakes on progress over recent years has been the falling birth rate and ageing population of the West. The fact that America continues to enjoy a positive influx of migrants has been a contributory factor to its continued – until recently, anyway – outpacing of Europe in the economic stakes. This has been one of the key planks behind the rapid economic growth of the Pacific region. It is here, though, that we find one of the concerns over the likely wellbeing of markets.

Concern is increasingly being expressed over the excessive exuberance within China’s A-share market. The fears are that a bubble is developing which will have unfortunate consequences if the government does not act to restrain activity in this market.

Raising interest rates would help, as would liberalising the choices available to a increasingly wealthy domestic population eager to join in the burgeoning capitalist scene. We might find any slump in shares has a greater effect than the last time this happened, nearly a decade ago. It was not very comfortable then. No wonder Anthony Bolton is counselling caution to his successor and warning that value is increasingly hard to detect.

Brian Tora ( is principal of The Tora Partnership.


Timms mooted as Pensions Secretary

The financial services industry is preparing for major changes in the reshuffle following Gordon Brown’s succession as Prime Minister on June 27.Cicero Consulting director Iain Anderson says he would not be surprised if Treasury chief secretary Stephen Timms replaces Work and Pensions Secretary John Hutton.Timms held the position of pensions minister in 1999 and then […]

Prince ascends the throne

Now special sits is settled, Fidelity needs to take a look at its other funds.

Practitioners fear review could dent public confidence

The Financial Services Practitioner Panel has warned the FSA that some of its comments on the retail distribution review risk undermining market confidence and prejudging the outcome.In its annual report for 2006/07, the panel says some of the initial comments made by the FSA about the review were not backed up by hard facts and […]

FSA alert over focused advice

Many advisers are unaware that they can offer focused rather than full advice for product-specific enquiries, causing advice gaps in areas such as with-profits, says the FSA.Insurance sector leader Sarah Wilson says some of the existing market deficiencies may be caused by advisers being uncertain about FSA rules.She says providers are sometimes unsure about the […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    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