News / Views

Investment Notes

Follow our regular updates to stay up-to-date with current financial planning and investment issues. We regularly publish press clippings, articles and thinkpieces that we think might be of interest to our clients.

During the last 15 years, the UK’s largest companies (constituents of the FTSE 100 index) have delivered significantly lower returns than medium-sized companies (in the FTSE 250 index). We believe that this trend will now reverse over the next few years and the largest companies will outperform the medium-sized companies.

In recent weeks the gap in opinion polls between those in favour and those against Scottish independence has narrowed from about 10% to about 5%. With some months of campaigning still to go, the vote on 18 September looks increasingly likely to be close. What are the likely political, economic and market implications of a Yes vote?

Since fears about the survival of the Eurozone and potential recessionary impact on the world economy reached a height in September 2011, stock markets around the world have performed strongly. For example, the MSCI World Equity Index has risen by 50% in US Dollar terms.

This was probably the most important Budget since 2011, which set in place the austerity strategy for this parliament. Its significance lies not so much in the economic or fiscal announcements but more in the area of personal financial planning, allowing investors aged over 55 full access to their Defined Contribution pension assets, and in simplifying and extending the ISA savings rules.

The outlook for returns from European shares for the next few years is not exciting, though the level of dividend yields is likely to support current prices, thereby limiting the downside risk in these markets.

Economic outlook

One of the themes emerging from the Chinese press in recent weeks has been their call for the world economy to become “de-Americanised”. This was especially apposite during the debt ceiling crisis when it appeared possible that the US might default on a repayment of Treasury debt, because Congress would not extend the debt ceiling.

Healthy banks are a critical ingredient in the economic infrastructure that underpins growth and equity market performance. Today the healthiest banks are found in Japan and Asia and the weakest in the Eurozone. Thus banks in Japan and Asia look best placed to support growth in their economies, whilst Eurozone banks appear worst-placed.

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