Welcome to another panel session from the Sustain:Social Conference, featuring an all-star line-up of investment professionals: Stephen Porter of Scottish Widows, Nanne Tolsma of Satelligence, Kenneth Mackenzie of Target Fund Managers, Myron Jobson of Interactive Investors and Stephen Clapham of Behind the Balance Sheet.
Victoria Scholar, head of investment at Interactive Investor, talks to Simon Rose about the likely effects of US inflation hitting 7%, a forty-year high. With the labour market there tight, as in the UK, she considers what the Federal Reserve's response is likely to be, given that the problems are caused more by the supply side of the economy, rather than the demand side. And what will this mean for markets and the sort of tech stocks that have been riding so high?
Laith Khalaf of A J Bell explains to Simon Rose why US markets have reacted so badly to the minutes of the last Federal Reserve meeting that they shrugged off last month. He marks the rise of Apple to become the world's first $3 trillion company. Back in the UK, he sees early signs of optimism for the retail sector over the holidays.
Jonathan Davis, editor of the Investment Trusts Handbook, tells Simon Rose what makes investment trusts special and why investors should consider their merits. He explains the differences to other types of funds, including the premium and discount. He discusses the yields on alternative assets (including renewable energy and even music royalties) and how trusts can continue paying dividends even in bad years. The handbook, from Harriman House, is available in hardbook or free as an ebook (https://tinyurl.com/mt69fc24).
Russ Mould of A J Bell looks back at 2021, with record highs in the US, India and France and the UK doing creditably and with a decent yield. Oil rose 40% year on year and may yet surprise in 2022 while government bonds were disappointing. Gold surprised by doing little, despite the return of inflation. Looking ahead, Russ believes commodities and real assets may be the safest things, although the actions of central banks will still determine the state of the markets.
Join the Sustain:Social panel session in December '21, considering the outlook for investors in the wake of the COP26 in Glasgow. The panel comprises of - Chair: Rodney Hobson
Panel: Gervais Williams (Premier Miton Group); Jamie Broderick (Impact Investing Institute); Mohan Gundu (Sustainable Funds Group); Mike Appleby (Liontrust Sustainable Investment team); Gavin Oldham (The Share Foundation / Share Radio).
Russ Mould of A J Bell wonders if the Bank of England is behind the curve, raising interest rates from 0.1% to 0.25%. CPI inflation is 5.1% with RPI the highest in 30 years. He gives an example of a company already implementing double-digit price rises. If investors think inflation and interest rates are set to rise further, Russ offers advice. What's worked for the past decade and more may no longer be sensible in the future.
As a 12th company in the Footsie this year announces a special dividend, Russ Mould of A J Bell calculates that these, taken together with cashbacks and regular dividends, have amounted to payouts of £105bn, putting the FTSE on around a 5% yield. With fewer IPOs and placings than usual and dividend cover approaching 2, he feels this ought to be supportive of the market, even if some investors might baulk at the oils, banks and miners that are the big payers.
With markets roiled by the new Covid variant and the Fed Chairman admitting inflation may not be temporary after all, Russ Mould of A J Bell asks if we are finally seeing the Taper Tantrum central banks have been so nervous about. Quoting the US Misery Index and the Fear Index, he feels investors - to whom absolutely rather than relative return is most important – should not think that what has worked for 10 years will necessarily work in future. He has some suggestions for protecting private investors' portfolios.
Russ Mould of A J Bell looks at the shakeout in UK energy companies and casts his eye across the Atlantic where President Biden has been trying to talk down the oil price. Noting that price rises might have something to do with the $14 trillion pumped into the US economy since the pandemic began, he speculates on what will happen to the oil and gas price with new exploration so frowned upon.
He also looks at the second interest rate rise in New Zealand and, with 91 rises around the world so far this year, he wonders whether the Fed, BoE and ECB can continue to hold out.