sicav logo
Home
About Us
Contact Us
          

Quarterly Investment Report - Qtr ending December 2004


“Prediction is very difficult, especially about the future”
Niels Bohr (1885-1962)

Certainly there is never a time where there aren’t positive and negative factors affecting either the global economy, the UK or individual securities for that matter. The art is balancing these “for and against” factors and deciding which is likely to dominate and thus cause downwards or upwards movements in stocks.

 

Whether our view on future events proves to be well founded or not, it is probably fair to say that the industry consensus would be that over the next couple of years we are looking at single digit returns from all/any asset class.

 

As we see it, the following are the major positives and negatives affecting individual asset classes/Sterling:

 

Sterling

Negative: Rising UK inflation. Possible peak in UK market interest rates.

Positive: US$ will have to fall to correct US trade deficit. Weak German economy.

Our view: That the £ will strengthen against the US$ and the Yen and will remain broadly static against the Euro.

 

Variable interest

Negative: Rising UK inflation. Possible peak in UK market interest rates.

Positive: Rising UK market interest rates.

Our view: Hold existing deposits. Add to cash through asset disposals.

 

Fixed interest

Negative: Rising UK government borrowing. Rising UK inflation. Rising UK interest rates. Rising US inflation and market interest rates. Falling Gilt and US Treasury prices.

Positive: Loss of 10% reclaimable tax credit to PEPs and ISAs on dividends.

Our view: Sell Gilts. Sell quality stock (BBB credit ratings and above) and junk bonds (CCC ratings). Hold 2nd line fixed interest securities such as Preference shares. Hold bonds rated B to BB.

 

Equities

Negative: High levels of consumer debt. Loss of 10% reclaimable tax credit to PEPs and ISAs on dividends.

Positive: Expected UK GDP growth in 2005 in the region of 2.5%.

Our view: Sell cyclical stock. Hold defensive stocks.

 

Index-linked

Negative: Relatively low UK inflation rates.

Positive: Rising UK inflation.

Our view: Sell index-linked gilts. Buy 2nd line index-linked securities.

 

Property

Residential

Negative: Falling prices in many UK areas. Rising UK interest rates. Historically high UK property values to earnings ratio. Weakening demand in many parts of the UK. Penal UK Stamp Duties. High levels of consumer debt. Rising repossessions. Fall in the number of mortgage approvals.

Positive: Anticipated influx of EU workers into the UK. Possible peak in UK market interest rates. More buoyant private rental sector with First Time Buyers being either unable to get onto property ladder or awaiting a fall in prices at bottom end of market.

Our view: Sell residential property.

Commercial

Negative: Rising UK market interest rates. Penal UK Stamp Duties. Rising Gilt yields. Weakening tenant demand in certain areas/sectors (retail and manufacturing). Analysts predict little capital growth in the immediate turn. Many investors now committing funds to this asset class.

Positive: Possible peak in UK market interest rates. Expected UK GDP growth in 2005 in the region of 2.5%. Stronger tenant demand in certain areas/sectors (offices).

Our view: Sell commercial property.
Important:
This publication does not provide individual tailored investment advice and is for general guidance only. We recommend that individuals seek independent professional advice from a qualified financial adviser. This publication represents our understanding of law and Inland Revenue practice as at the date of publication. We cannot assume responsibility for any errors or omissions it might contain. Levels, bases and reliefs from taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. The value of land and buildings is a matter of a valuer’s opinion rather than fact. The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not necessarily a guide to future performance and past performance may not necessarily be repeated. If you withdraw from an investment in the early years you may get back less than you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency.
Your Home may be repossessed if you do not keep up repayments on your mortgage.
The Financial Services Authority does not regulate all the activities undertaken by the company.


Sicav Banking is a trading style of Sicav Investment Services Limited. © Copyright 2003-2006 Sicav Investment Services Limited.  All rights reserved.
The Sicav Group is an affiliation of businesses that offer services under the “Sicav” banner.

Disclaimer | Terms & conditions | Privacy | Contact Us