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The Financial Ironmonger Blog No 45

The Financial Ironmonger Blog No 45

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 45–

My flight back from Washington landed 45 minutes early, on Tuesday morning, and clearly Manchester airport was not expecting it, since there was nowhere to park the thing, or people to unload the bags etc. Having built a second runway some years ago, there is plenty of capacity, albeit for aircraft movements, rather than processing passengers. Both runways are built above a motorway feeder road, hardly sensational, but news to the developers of Heathrow, apparently.

There has to be a better way of increasing capacity in the south east than the third runway “solution”; the existing setup is already in breach of air quality regulations, and the new proposals only work if we are all driving electric cars by the time the thing is built. But the decision sends a clear message that the UK is open for business, albeit that there will be turbulence along the way.

Nissan, having said that Brexit would be very bad for them, have decided to build two new models in their Sunderland plant, a massive fillip for an area still reeling from the loss of their traditional industries. In time, we will learn what promises they extracted from the government, but however big, it is a massive vote of confidence. Even the wretched Governor of the Bank of England has been forced to concede that his dire predictions may have been premature, having backed the wrong horse. Not so the BBC, which seems to have abandoned any pretence at impartiality; maybe it is an age thing, but I actually caught myself shouting at the television earlier in the week. God help them when, not if, Mrs. May secures a decent majority.

Much the same sort of thing is happening in America, as the election looms. There seems to be absolutely no focus on the policies of either candidate, or their likely impact on the country, as a whole. Perhaps this is just an acknowledgement that the system is designed to block any President; one article that I read last week suggested that, by dint of executive order, all that Obama has achieved in the last eight years, could be rescinded in thirty minutes.

Amidst the fog of battle, it is clear that things are never going to be the same, whoever wins. The Republican party, long regarded as the establishment in power, has lost touch with the voters, such as bankers, “the country-club crowd”, and Wall Street. Trump has brilliantly exploited this, speaking for the retired, small business people, and blue collar workers. Hillary Clinton has raised more money in Wall Street than Donald Trump, pointing to a realignment. Voting records show that 74 of the poorest 100 counties voted Republican in 2012; the party is very different from the leaders.

It is extraordinary to think that when he entered the race, in June 2015, his support, nationally, was just 4%, which he has built to some 43%. Contrast this with the French president, Hollande, who is going the other way, with just 4% of support left. It is unlikely that he will make the first cut, for the elections, unique in recent history. One can only conclude that voting intentions are moving quicker than politicians realise, or care to acknowledge.

Most of the polls are indicating a Clinton win, albeit that they now come with more caveats than an investment management agreement, (which is going some), but quite what this means for markets is unclear. Both candidates have promised to spend more on infrastructure, and Clinton wants to lift the minimum wage, which will impact agriculture, hospitality and retail. Trump will act on illegal immigration, which will have much the same effect.

His program is the more radical of the two, insofar as it has been fleshed out. His tax cuts would cost some $6 trillion over the next decade, which together with the plan to spend $500 billion on infrastructure, would lift Federal debt to 127% of GDP, compared to 86% on current proposals. This could be financed by issuing long dated bonds, where interest rates are minimal. Some sectors are therefore going to be impacted, whoever wins, but a Trump victory is likely to have a short term, negative, impact on equities, but a positive boost for the dollar.

Whilst odds of 4/1 on Trump winning seem impossibly generous in a two horse race, I am mindful that the last time that a Republican was elected President without either a Nixon, or a Bush, on the ticket, was in 1928. However, the proceeds will help reimburse me for the cost of my Trump commemorative mug that cost $8.95 at the airport.

Turns out it was made in Thailand; authenticity is skin deep.

–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.