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The Financial Ironmonger Blog No 16/2017

The Financial Ironmonger Blog No 16/2017

Every week our guest blogger, David Oakes of Mosaic Money Management (aka The Financial Ironmonger), shares with us his take on some of the major UK and overseas macro and political events that shaped the previous week.

Please be reminded the value of investments, and the income from them, may fall or rise. The views expressed in this article are those of the author at the date of publication and not necessarily those of Chelverton Asset Management Limited or Mosaic Money Management. The contents of this article are not intended as investment or tax advice and will not be updated after publication unless otherwise stated.

–THE FINANCIAL IRONMONGER BLOG NO 16/2017–

Whilst walking in mountains has always been dangerous, (hence the need for mountain rescue teams), it is very unlikely that this caused the epiphany that struck the Prime Minister over Easter, in North Wales. This election has clearly been in the planning for many months, evidenced by how the Conservatives were all over the media with briefing lines, as soon as the starting gun was fired.

Many say that it is a risk, but surely the bigger one was not to go now, given the stunning lead in the polls, which I suspect underplays her true advantage. There are many conseqences. It will dilute the influence of her more rabid backbenchers, rid the party, and more importantly the manifesto, of any trace of Cameron, and leave her totally dominant. An elected dictatorship, modelled on the German Chancellor, Angela Merkel, solid, dependable, reliable and steadfast.

Merkel blew this by letting in untold numbers of Syrian refugees, (the electors will give their verdict in September), and the question is whether May has trashed her brand by performing this U-turn. I doubt it. A YouGov poll taken on Tuesday shows that by 49% to 17%, the public think that it is right to have an early election, with people from all parties agreeing.

The Conservatives are the obvious benefactors in England and Wales, and may even deflate the SNP balloon in Scotland, where nearly 40% of the population voted to leave the EU, many of them who also wanted to remain in the UK. It is also a lifeline for the LibDems, who were thrashing around without purpose, and may add a few MP’s to their small tally.

It is going to be very hard for UKIP, given that the Conservatives are rebranding themselves as the sensible leave party; they no longer have a purpose. Many defectors will return, now that Cameron, and his elite chums, have been replaced by the vicar’s daughter. And if you take a longer term view, as we are all encouraged to do, the biggest winner is the Labour party, although at the time of writing a dozen of their MP’s have thrown in the towel.

Had the parliament gone to full term, the next election would be in May 2020, by which time Corbyn, and his Momentum supporters, would have had time to change the rules for choosing a leader, in their favour, whilst swamping the local parties with their own, and then deselecting incumbent MP’s. Thus a perfect party would be formed, albeit unelectable, but that seems secondary to those on a mission. So, Theresa has probably saved them from extinction, and they will live to fight another day, albeit a couple of decades on from here.

Meanwhile, “decimation” awaits, which I always understood to be a scorched earth outcome, but it actually means the death of one in ten, a result that Labour will happily settle for. And to be fair, they have set out on this challenge with all guns blazing, albeit that they have little ammunition, and no central message. The Leader, burnished by so many protest rallies, (even if he did not know the cause he was fighting for), has adopted the campaigning style of the Donald, where everything is “rigged” against him.

Skim reading a couple of books on the subject does not make you an expert, as we shall see, and neither the Guardian, or the New Statesmen, the core publications of the Left, can raise a cheer for him. The secret of why Donald beat Hillary was the ability of his team to analyse core data on voters’ intentions, and then react to it. He won three key states by 100/- votes in each, and that in the last few days of the campaign. She stayed home, whilst her team had that data, but could not process it. It is a million miles from Corbyn’s effort, in terms of both resource, and funding.

Financial markets are still trying to work out what this means, but there is no doubt that the global economy is looking in much better shape, with the IMF declaring an end to five years of austerity. I thought it had been ten, but whatever. France goes to the polls on Sunday, and then again on May 7th, and I suspect that, if that goes with the polling predictions, equity markets will take off, given how cheap they are to America, on a relative basis.

On which note, the blog after next will be posted from America, providing that the lap top escapes the attention of their lovely border control people. Amongst other things, I want to see if the “Trump rally” in markets has had any carry through, and what the mood on the ground is in Pennsylvania, one of his key swing states. I suspect that being in power has been much more difficult than being an outsider, so maybe he will need Theresa to hold his hand, again in 2019, and show him how to, truly, become an elected dictator.

–MORE ABOUT OUR GUEST BLOGGER, DAVID OAKES–

David joined Manchester stockbroker Henry Cooke, Lumsden in 1977 and after becoming a member of the London Stock Exchange in 1984 held a number of senior positions within the firm including Managing Director of the in-house fund management company and member of the Executive Committee.

After senior appointments at Cazenove Fund Management and latterly Mercater Capital Management, David joined Mosaic Money Management in 2013. He has successfully managed private client and fund portfolios for over thirty years and has particular expertise in providing a multi manager service to his loyal client base.

The Financial Ironmonger is a hat-tip to Ironmonger Lane, the location of Chelverton’s London office.