Paul Norris, of London-based wealth managers, Clear Capital Markets, considers the investment opportunities now that the General Election has been held.
The markets and sterling both enjoyed immediate post-election surges, following the emphatic win by the Conservatives on 12 December — the UK economy put on £33bn and the pound rallied to a 19-month high against the dollar. The pre-election doubts about the date of Brexit were allayed with prime minister Johnson’s landslide victory and the country is set to leave the EU on 31 January 2020, as repeatedly stated throughout the election campaign.
On the other side of the pond the US economy remains in good shape and the catalyst for the next 18 months will be Trump’s anticipated re-election, which in the light of no strong Democrat (or any other) contender looks like shoo-in.
Trump certainly remains the bookmakers’ favourite to win, unless the impeachment of the president leads to the President Trump being ousted from office, which could dent confidence in the markets.
That said, I believe he will keep markets stimulated with possible further tax cuts that will help strengthen his already strong chances of remaining in the White House. So, the background for investment remains positive, although there are dark clouds on the horizon in the form of a slowing US economy.
According to recent forecasts from the Federal Open Market Committee meeting, US GDP growth will slow to 2.1% in 2019 (down from 3% in 2018); it will be 2% in 2020 and in 2021 it will be 1.8% in 2021. The projected slowdown in 2019 and beyond is a side effect of the trade war with China. With sabres being rattled in the Gulf we could well see oil markets further impacted by the growing tensions in the region.
All that said, it is very much a stock-pickers market and the sectors in which I have achieved excellent returns are smaller challenger law firms — particularly those involved in funding litigation capital — an area still holding great potential for those who do their homework.
I am also investing in companies which process data in all forms — another massive growth area because, as the saying goes, data is the new oil!
For people perhaps nearing retirement there are a number of blue chip names giving returns of between 6-6.5% net — not ordinary shares — but even safer forms of equity, and with building societies continuing to offer pitiful rates of interest for the foreseeable future this is an easy choice.