Audience Selected - Individual
Audience Selected - Intermediary
Audience Selected - Institutional

Monday Espresso Podcast: Autumn Statement Special Edition

In this special episode of the Monday Espresso podcast, Sheldon MacDonald and Nathan Sweeney discuss how the Autumn Statement has impacted equity and fixed income markets.


Espresso Podcast: Autumn Statement Special Edition


[00:00:00] Sheldon MacDonald: This is a special edition of our Marlborough Espresso podcast.

[00:00:04] We just thought we'd try and share our thoughts around the autumn statement that was just released earlier. Nathan, a couple of interesting points, but nothing really groundbreaking. Perhaps more notable for what wasn't there in the statement than, than what was.

[00:00:21] Nathan Sweeney: Yeah, I suppose. Let's start with the initial, so market reaction.

[00:00:24] So interestingly, you're right, there was nothing ground breaking in there. So there's no real reaction in the market. We didn't see much movement in equity markets or bond markets or even currency markets from that perspective.

[00:00:36] I think from an investment perspective, a lot of people were looking for changes on ISA's, so there was an expectation that something might be announced there, but fundamentally, nothing was really announced on the day.

[00:00:49] And what we're seeing is there's a consultation to look at providing wider investment powers to ISA's, so ultimately allowing them to invest in things like property funds, which are less liquid, and we'll just have to wait and see what that looks like when the news of that is actually released.

[00:01:07] Sheldon MacDonald: Yes, as we said, no real surprise, perhaps that's in part due to the fact that a lot of the content that we have seen was leaked beforehand, really, you know, the, the drop in national insurance rates and the ongoing or the continuation of the relief for companies that are investing into IT machinery and equipment and so on.

[00:01:26] I guess most listeners of this podcast would probably know better than us the implications at a personal finance level, so we'll leave that to the experts.

[00:01:35] Really our focus as you've jumped into is the investment side of things.

[00:01:39] Let's just stop for a second and think from an economic perspective though, and again, we'll leave aside the politics of what's going on here.

[00:01:47] From an economic perspective, I think this is a recognition that the government does need to do something on the fiscal side, to stimulate and support the economy.

[00:01:57] Of course, within the statement was a recognition that the growth rate for next year is likely to be significantly lower than we'd previously expected so 0.7% GDP growth expected next year, previously 1.8% so that's come down by more than half.

[00:02:13] So there's a limit to the amount of stimulus that can be pushed ,through on the monetary side, so interest rate cuts and so on so the fiscal stimulus needs to push through and that's what this is is a recognition of that.

[00:02:24] Nathan Sweeney: Yeah, so interestingly If we look at UK debt, there'll be no real increase in UK debt as a result of these changes.

[00:02:31] And I do think that's quite important today because ultimately there's a bigger focus on debt and debt levels and ultimately bond markets can react to that.

[00:02:40] You know, so as governments need to raise finances, there would be big question marks on their ability to repay those finances because we've got higher interest rates.

[00:02:51] So if you do look at UK debt and you compare it to G7 nations, the UK has one of the lowest levels of debt, actually the second lowest after Germany. So again, it's just good to kind of maintain that stance within the G7 and I'm sure that bond investors, bond markets will be happy that there's a reluctance to actually ramp up debt in the UK.

[00:03:12] Sheldon MacDonald: Returning to my point around the potential stimulus to growth that this might give, the measures that have been announced undoubtedly put money back into our pockets as a country. Question though is, will we spend it?

[00:03:24] So, in a recession or in lower growth times, there is people's nervousness to go out and spend and often they will put that money into savings if it's in savings, it's not out there stimulating the economy.

[00:03:36] So kind of remains to be seen around whether we as a nation will go out and spend this money that's being given back to us.

[00:03:43] Now turning to the investment side of things moving away from the economy You touched on it earlier No real reaction by markets just yet and perhaps a little bit of disappointment on the fact that there was no announcement about a British ISA.

[00:03:57] This had been touted as a way of stimulating UK companies, a way of boosting ownership in UK companies. This has been one of the features of the last couple of years that the British stock market has underperformed because of a wholesale move away from UK stocks by institutions, by retail, by wholesale investors, and perhaps a change in the ISO regulations might have provided a way of stimulating these companies.

[00:04:24] No real announcement on that just yet, what we did see was an announcement that... LTAFs, Long Term Asset Funds, might be permitted in ISA's and also a permission of some fractional shares, ownerships, and also, again, some regulations around, you know, using multiple ISA's and things like that, but as we mentioned before, little reaction from an investment front, no real surprises in the statement.

[00:04:50] Nathan Sweeney: Yeah, so I suppose the big question is, what does that mean from a portfolio management perspective? Does that change our view, given today's statement? So I think from our perspective, we continue to believe that the biggest driver of the UK stock market as we move into 2024, will be central banks and what they decide to do with interest rates.

[00:05:10] Now, as it stands, we do expect to see interest rate cuts next year. This is because we have falling inflation. And ultimately that will provide central banks with the wriggle room they need to reduce interest rates.

[00:05:22] Now, that is likely to benefit bonds, so it's an area that has come under a lot of pressure over the course of the last year and a bit, but ultimately we do expect to see a much more prosperous environment for bonds as we move into 2024, particularly longer duration bonds.

[00:05:41] We also think that it's likely to benefit interest rate sensitive areas of the market, so we do expect to see smaller companies benefiting as we move into 2024 as well.

[00:05:53] Sheldon MacDonald: Well, that's a good place for us to wrap up. We'll see in the days ahead and the weeks ahead, there'll be more analysis on this and perhaps more trickling out of information around the fine print of the autumn statement.

[00:06:05] In the meantime, thanks for listening, and we'll speak to you again soon.

Sheldon MacDonald is the Chief Investment Officer of Marlborough and Nathan Sweeney is the Chief Investment Officer of the Marlborough Multi-Asset funds. These are the investment manager’s views at the time of recording and should not be construed as investment advice. The opinions expressed are correct at time of recording and may be subject to change.

Capital is at risk. The value and income from investments can go down as well as up and are not guaranteed. An investor may get back significantly less than they invest. Past performance is not a reliable indicator of current or future performance and should not be the sole factor considered when selecting funds.

Marlborough Investment Management Limited. is registered in England and Wales at Marlborough House, 59 Chorley New Road, Bolton, BL1 4QP with company no. 10947598.  

Marlborough Investment Management Limited. is regulated by the Financial Conduct Authority with FCA Reference no. 115231.Marlborough is the trading name of Marlborough Investment Management Limited.