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John Husselbee: Look both ways

As we approach 2015 it would appear that equity and bond markets are telling two different stories regarding the economic and investment outlook.

Any investor looking for the best investment vehicle to help them navigate the fast-moving lanes of traffic in the capital markets super-highway may think it helpful to invoke the green cross code principles that were drummed into us all as children: Stop, Look, Listen, Think! Well, look one way and you see low growth, low inflation and expanding corporate margins on the horizon, good ‘goldilocks’ type conditions to jump on the equity bandwagon surely? But look the other way and the spectre of deflation and stagnant growth loom large, which means we should clamour for the safe ride provided by government bonds, right? We can’t look both ways at the same time, so which direction tells the true tale of conditions?

Mark Williams, Asia: China correction no cause for panic

Yesterday’s fall in Chinese equity markets – if triggered primarily by the government reducing access to funding – looks overdone in our opinion. The Shanghai Composite fell by over 5% yesterday, but this correction needs to be viewed in the context of the preceding 36%* three month rally to a three year high at Monday’s close. Likewise, the Hang Seng China Enterprise Index of Hong Kong-listed Chinese companies fell 4.6% having previously rallied 8.3% from the end of August (and 15.2% from the end of September). We remain overweight Chinese equities with a 44% exposure (as at 30 November).



Jamie Clark, Macro-Thematic: Osborne’s Autumn Statement a reminder of political risk to banks

Chancellor Osborne ramped up the political hostility towards the UK’s incumbent high-street banks on Wednesday by describing as “totally unacceptable” a situation where some may not pay tax for 15 to 20 years. His solution is to reduce to 50% the amount of past losses that can be used to offset current profits and reduce their tax bills. For us, the increasingly populist tenor of political rhetoric as we approach next year’s general election is of greater interest than the direct financial impact on the banks, which is actually relatively small in the grand scheme of things and was swiftly priced into the shares.

Anthony Cross, Economic Advantage: Our three alternatives to Royal Mail

Youtube clips showing scenes of devastation up and down the country – from Asda Wembley through to Blackpool Tesco – stand testament to the UK consumer’s susceptibility to US marketing techniques. As Black Friday becomes an established part of the holiday calendar, retailers earlier this week jumped at the chance to promote its online equivalent, Cyber Monday.

With Amazon, the country’s biggest online retailer announcing a raft of ‘lightning deals’ designed to exploit the pre-Christmas rush (anyone for Gucci Flora Eau de Toilette for Women, down 44% to a bargain £35.31, or 63% off The Jeffrey Archer Collection edition at £9.50?) you would think that the holiday season would be a bumper period for the recently privatised and newly-efficient Royal Mail. Not necessarily so, for two main reasons. Firstly, Amazon is now rolling out its own delivery service which will eat away at its position as the Royal Mail’s largest customer. Secondly, competition in the parcel delivery space is fierce and – as the incumbent operator – Royal Mail is taking an increasingly defensive stance.



Disclaimer

Any opinions expressed should not be construed as advice for investment in any [product or] security mentioned or which may form the underlying content of any topics discussed in this blog.  The information and opinions provided in this blog take no account of the investors’ individual circumstances and should not be taken as specific advice on the merits of any investment decision.   Any opinions or information provided has been based on sources we believe to be reliable at the time of this blog’s preparation: no representation or warranty, express or implied, is made as to the accuracy, reliability or completeness of such information.  Neither Liontrust, nor any of its partners, employees, representatives or agents accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of our research or its contents.

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