Taylor Patterson Investment Commitee economic review

Now that the election is out of the way, most of the legislation announced in the Queen’s Speech at the start of the new parliament was of a constitutional nature, which included comments in relation to the proposed EU referendum.

By Taylor Patterson.

These and other bills will have an impact on the economy, including measures to improve small business activity and further increases in the tax-free personal income threshold.

These reforms will also impact on an individual’s investment and pension portfolio and the strategy that is adopted.

What could impact on the UK economic recovery?

A vital area for the government to take control of is the UK housing market. The Conservatives plan to give tenants the right to buy housing association property and are aiming to develop 200,000 new homes a year by 2020.

Last year there were only about 140,000 new houses built. Research previously conducted, would indicate that around 250,000 new homes are required to be built to prevent spiraling house prices, however new house levels have nowhere near reached these levels. Restrictions remain tight but steps are being taken to release surplus public sector land.

Inflationary and interest rate concerns

The major central banks have either cut their policy rates or expanded their balance sheets, with others having informally loosened monetary policy so far this year. This global stimulus has been justified by widespread drops in inflation, as well as the failure of global economic activity to accelerate as expected in the first months of 2015.

The critical question now is whether central banks have done enough, or whether further easing measures will be necessary. This will be reviewed on a country by country proposition.

The first UK interest rate hike is not expected until 2016 because inflation is even lower than in the US and fiscal policy is likely to be tightened substantially over the next 12 months. Expectations are that when interest rates do eventually increase, they will do so gradually, as the governments are keen not to stall the recovery.

The main stockmarkets have continued to perform strongly since the start of 2015. There has, however been occasions of volatility which are expected to continue over the coming months. Issues surrounding Europe and the financial turbulence from the repayment programmes from the likes of Greece will continue to cause concerns. However new finance negotiations will be required over the second half of 2015 from Greece so that they can remain in the Eurozone.

What is the outlook from the Taylor Patterson Investment Committee?

Taylor Patterson currently favour the stock markets of developed economies such as UK, Europe and US to drive long term growth. This is due mainly to the prospect of recovering economic growth combined with continued support from loose monetary policy and the prospect of further quantitative easing in the case of Europe.

The prospect of monetary policy tightening, particularly in the US, would be a positive signal but may not be well received in the Emerging Markets.

Taylor Patterson continue to favour the UK commercial property sector, represented by UK Bricks & Mortar (also known as ‘direct’) fund investments. With a recovering economy and increased activity, commercial property continues to provide strong rental and capital growth prospects, together with non-correlation to the main asset classes of equities and fixed interest.

Whilst some of the emerging markets and Asia pacific economies continue to move forward at higher levels of growth than their developed economy counterparts (India, China), their growth is decelerating (as opposed to the UK and US, where growth is generally recovering and expanding) which is leading to increased levels of volatility, speculation and ultimately, portfolio risk.

The potential short term impact of continuing military tension in the Baltics and events in the Middle East also requires consideration.

There are concerns on the UK fixed interest market, which centre on the potential for the UK economy to move into an expansionary, inflationary phase which would likely lead to a rise in interest rates and an expected fall in bond prices.

How Taylor Patterson can help review your investments?

The options for managing wealth can be overwhelming. With constant changes in stockmarkets, tax and investment legislation it is often difficult to understand what is going on and even what questions to ask.

Carefully planning and reviewing an investment portfolio is essential in ensuring your wealth is managed in a way that fits your lifestyle, goals and attitude to risk.

The Taylor Patterson Investment Committee

The central body responsible for the firm’s investment strategy is our in-house Investment Committee.

The team is made up of highly qualified members who meet regularly to take a view on best practice on issues including portfolio construction, risk management, asset allocation and fund performance. Members of the Investment Committee use their high standards of qualification, experience and extensive knowledge of the market to: • ensure Taylor Patterson considers appropriate investments and their inclusion within portfolios • stay up-to-date with changes in the market • review the effectiveness of the business’s investment management strategy • maintain risk controls