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In This Week’s Newsletter:
- UK Stock and Bond Market Outlook
- Will the Bank of England Raise Interest Rates?
- Triple Lock to End By 2030
- Will Capital Gains Tax Go Up at the Budget?
- Help to Buy Makes a Comeback
- The 10 Best Companies to Invest in Now
- How the Largest Investment Trusts Performed in Q3?
- The Top-Performing UK Dividend Stocks in Q3
- Can Unicredit Take Over Europe?
It’s been a busy week for market-sensitive government interventions. On Monday the relaunch of the Help to Buy property purchase scheme shook housebuilding stocks out of their summer slump: value housebuilder Persimmon PSN was the biggest beneficiary, rising 15% on the day (year to date, it’s still down 7%). UK markets reporter Christian Mayes covered the initial market reaction, while Morningstar housing analyst Jack Fletcher-Price looks at the policy in detail.
The next day, Prime Minister Andy Burnham announced major changes to the state pension triple lock, a multi-year scheme to boost retirement income. Under extreme pressure, this was a pre-emptive move to soothe restless bond markets and prove budget prudence, says one economist. “The government’s acknowledgement of fiscal constraints reduces the risk of a bond market accident,” says Berenberg’s Andrew Wishart. Still, this week UK long-term borrowing costs rose further, with the 30-year gilt yield moving over 6%. Morningstar’s Ollie Smith looks at the long and now contentious history of the triple lock and rounds up the reaction to the change.
As part of our ongoing Autumn Budget coverage, Smith also analyzes another potential revenue-raising move for the government: aligning capital gains tax rates with income tax. This may seem like a technicality for accountants to deal with. But in practice, it could mean a high earner paying 45% tax on the sale of property or share portfolio rather than 24%. The jury is out on how much money this will raise: Some academics say it will bring in billions, others say it will cost the government money as people defer asset sales or even move out of the country to avoid it.
The final quarter of the year has arrived, and it could prove decisive for UK stock and bond markets. There’s plenty on the calendar to derail the UK stock market’s near 10% gains for this year, not least the Autumn Budget and two Bank of England meetings. Christian Mayes and Ollie Smith look ahead to the key events for investors. The new quarter also offers an opportunity to look back at Q3 fund performance: One UK investment trust rose 86% in the last three months. We have also rounded up the performance of Morningstar-rated trusts.
In stocks, Morningstar’s senior markets reporter Karen Gilchrist also examines the drama in the Italian banking sector, a usually staid arena where there’s recently been a fair amount of drama. Can national bank Unicredit UCG, whose shares are up 600% over five years, become a European “big beast”?
While there is a lot of handwringing about higher inflation, one of Wall Street’s best-known bond managers isn’t too worried. Rick Rieder, BlackRock’s chief investment officer of global fixed income, argues that inflation is being driven by factors beyond the Federal Reserve’s control, but that price pressure should come down thanks to a coming productivity boom. Check out Leslie Norton’s great Q&A with Rieder.
James Gard, Morningstar UK Editor
