Financial Data for July 2016:
Redemption yields on short-dated gilts imply that interest rates will stay low for the next few years as concerns emerge about our economic recovery following the EU referendum. Over the same period we may see modest growth in the share market with continuing volatility. The outlook of a difficult employment market, limitations on mortgage lending and tax changes penalising buy-to-let investors may however impede further recovery in the residential property market.
Inflation has steadied with RPI at 1.40% and CPI at 0.30%. We remain concerned about the outlook for the UK fixed interest market which may show signs of weakness affecting gilts and investment grade corporate bonds. The redemption yield for long dated gilts has dropped further to 1.29% pa which is bad news for potential annuitants. This is due in part to quantitative easing and there is no guarantee the Bank of England will sell gilts back to the market, instead preferring to hold them to redemption, which could keep redemption yields low for a long time. The sale of commercial property assets following the EU referendum has led to some property fund suspensions to allow fair market disposal of property assets. The dividend yield on the UK FTSE All Share of 3.75% pa continues to exceed current gilt yields.
Of the fund manager house views this month European shares and Cash are most favoured. Ongoing concerns are levels of government debt in the UK and overseas, the impact of the EU referendum, the slowdown in the Chinese economy (is it a hard or soft landing) and the US election.
Fund Managers – Current House Views on Different Asset Classes
Data gathered as at 01 July 2016. All figures given to 2 decimal places. Participating fund managers: Standard Life, JP Morgan
DISCLAIMER: Please note, whilst every effort has been made to ensure the information contained in this document is correct, sometimes the information given to us by third parties is inaccurate. We cannot therefore be held responsible for the accuracy of this information and it should not be relied upon for making any decisions.