By Rory Grant
I can comfortably state the cliché that the world is an uncertain place at any meeting, confident that it will be met with knowing smiles and nods. You could live on a desert island for a year, with no access to the internet or rolling newsfeeds, and still confidently make this declaration without fear of reprisal. It’s a cliché because it’s true; there is always something to be concerned about.
At time of writing, markets are buoyant; both traditional and exotic. Hesitation therefore comes in part from an understandable fear of paying over the odds - investing at an artificially high point, or even worse; just before a crash or slowdown. This is always the worry when markets hit all-time highs, but it shouldn’t be reason in itself to delay making sensible long-term plans.
Looking beyond prevailing index levels, we see a busy political calendar this year coming on top of the widening conflict in the Middle East. The world of investments is usually insensitive to such events. The primary focus for long-term investors generally concentrates on any knock-on effects to global growth, often with a particular emphasis on commodity prices.
There is clearly a valid case to be made for incoming economic recessions. The UK is there already, and the BoE may be tempted to bring forward the anticipated interest rate cuts as a way of stimulating some much-needed growth. Chancellor Hunt’s new £5k ‘UK ISA’ is, in our view, unlikely to be sufficient on its own.
No such problem in the US it would seem, where the economy still refuses to buckle under the breakneck rate-hiking sequence of the last two years. Central to this continued acceleration is further innovations in technology, and in particular the inescapable field of generative Artificial Intelligence (AI). In this ‘best-case’ scenario, inflation returns gently to target, as further demand boosted by positive real wages is met head-on by an increasingly fertile corporate sector.
Consensus would suggest that interest rates are expected to trend at a higher level than seen in the years running up to the pandemic. For this reason, and perhaps combined with a fear of mistiming an entry to equity markets, fixed income (bonds) hold some appeal.
Higher and additional-rate tax payers have been buying up gilts in huge numbers, taking advantage of a level of return largely free of both risk and tax. Savers are enjoying levels of return from cash not seen for more than a decade.
However, what these products don’t offer is the ticket to participate in further industrial transformation. The opportunity to buy in to the fruits of future productivity and efficiencies still looks attractively priced, especially if you’re able to take a longer-term view while looking beyond the sometimes more tangible appeal of the cautious asset classes. What these technological advancements will ultimately mean for us is still anyone’s guess, but these emerging technologies are finally pledging something of much greater significance.
History would suggest the need for caution during these periods of step change. The initial protagonists don’t always emerge as the eventual cup winners. Uncertainty abounds, but that’s often where the opportunities lie.
Rory Grant is a wealth manager at Barclays Private Bank and Wealth Management
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