Jamie Clark

Autumn Statement initial thoughts

Jamie Clark

Philip Hammond’s inaugural – and final – Autumn Statement confirms our view that fiscal activism has made an emphatic comeback. The headline Productivity Fund initiative paid lip-service to the Keynesian commonplace that productivity is explicitly a function of government largesse. Although a mixture of both novel and preannounced measures, the £23bn initiative’s emphasis on R&D, housing, transport and digital infrastructure signals that the state will be assuming a bigger role in the economic life of the country. This was underscored in the long-term commitment to increase infrastructure expenditure from 0.8% of GDP in the present fiscal year, to 1-1.2% on an ongoing basis. Modest in the context of the multi-decade decline in infrastructure expenditure, but an inflection that is party to a more global recourse to fiscal policy.

Our Infrastructure Spending theme is intended to capture this shift in the political economy. Equally, we believe this shift augurs the end of ultra-easy monetary policy, implies higher sovereign debt yields and therefore an incredibly difficult period for assorted bond-proxy equities – tobaccos and consumer staples – that have rerated aggressively in the post-crisis era.

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Originally published on 23 November 2016.

Tuesday, February 14, 2017, 4:31 PM