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Culpability Brown

From Peter Temple

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After my failure to predict the summer rally in equities I am not about to forecast the start of a new bear market. On the other hand the market has now risen around 65% from its bear market low over the course of 29 months, a length and size of upswing fairly typical of normal bull phases before the 1980s and 1990s.

Chancellor redefines economic cycle

Are we returning to that type of market scenario? The political climate appears to suggest so. The Chancellor has redefined when the economic cycle began, the purpose of which appears to be to allow additional public spending without making him break a self-imposed 'golden rule' to live with his means over the course of a cycle, only borrowing to 'invest'. The Bank of England has, in so many words, rightly poured scorn on this notion as a flimsy device.

'Boom and bust'

The disagreement has uncomfortable echoes of a return to 'boom and bust', which is unlikely to prove beneficial for the market in the longer term. Interest rates may have to rise higher than they might otherwise have done to contain inflationary increases in public spending. Gilt prices look set to fall, reflecting higher rates and an increased supply of paper to fund the PSBR.

It all has the potential to turn rather ugly, and a bit of caution on the market may be no bad thing at present

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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