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The Financial Ironmonger Blog No 20/2017

The Financial Ironmonger Blog No 20/2017

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 20/2017–

The conclusion to last week’s blog, which was that America was being harmed by the relentlessly negative media coverage of the Donald, did not take long to manifest itself. The Dow Jones Index fell nearly 2% on Wednesday, its biggest fall in a long time. Investors are worried that promised reforms to the tax and healthcare system, together with infrastructure spending plans, are going to sink into the fabled swamp, along with the President.

There is, as yet, no evidence that he asked FBI Director Comey to downsize the investigation into Russian tampering in the election, or indeed, that he shared any confidential information with the Russian ambassador about terrorism. I would have thought it a good idea to cooperate on that issue, since it does not respect international borders.

It was naive to think that he could “drain the swamp” without major repercussions; anyone who has stood up to vested interests will tell you that they are unlikely to give up without a fight to the death. Whilst some claim that there is a direct comparison to Watergate, (a physical burglary replaced by an on-line version), I think it is far more reminiscent of when Margaret Thatcher came to power in 1979.

The vested interests of the trade unions had reduced the country to its knees, and she set out to defeat them. It was brutal, and long dragged out, but eventually she triumphed. Trump based his whole campaign on fighting for the same people against the establishment, and whilst those in DC might think they have him cornered, his support in the country will only increase.

This is a dilemma for the Republican party, which he notionally represents, now in control of both houses; they want to use the opportunity to drive through the programs mentioned above, before the mid-term elections at the end of next year, but they are nervous of supporting the Donald, who was never one of their tribe.

You would think that common sense might prevail, but I am not sure that you would want to risk money on that being the outcome. Now a special counsel has been appointed to oversee the Russian investigation, and it is important that this is carried out properly. For some reason, the Americans have a particular grudge with the Russians, but equally they have been accused of trying to rig the recent French elections.

It certainly argues against the introduction of any form of electronic voting, but as the global ransomware computer infection last weekend showed, the systems that we have come to rely on might be more fragile than we would care to think. Installing the software manufacturer’s upgrades might be a good starting point, you would imagine, but even that was beyond some NHS trusts.

Which brings me to the UK election, now in full swing, the manifestos having been published this week. I should diligently report on each one, but I think that I am suffering from some sort of election brain fade, and there is only going to be one outcome, so I will confine my thoughts to the Conservative one.

Or, more correctly, the May manifesto, since party branding has been dropped in favour of a more American style Presidential campaign. It makes sense; she polls far better than her party, whilst Corbyn polls far worse than his. This is fine, of course, for as long as it lasts, but offers little defence when things inevitably go wrong, as we are witnessing across the pond. There is also a worrying similarity in blaming others, but if you choose to act as a dictator, there is only one place that the buck stops.

Not that it will worry her; even the most left wing journals now reckon that the Conservatives will be in power for the next twenty five years, which probably tells you more about the desperation within the Labour party than the likely accuracy of their predictions. And you can see why. The plans include ideas that are very left of centre, (a cap on energy prices, a higher minimum wage, and workers on company boards), to mention a few. She has definitely parked her tank on their lawn.

You would think that there might be some kickback from the traditional right wing, and there will be once they work out the implications of her social care policy, but for now the assumption of greater power, and the destruction of any opposition, is what drives them.

 –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.