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INVESTORS WILL NEED ‘RISK ASSETS’ TO BEAT INFLATION IN 2018

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INVESTORS WILL NEED 'RISK ASSETS' TO BEAT INFLATION IN 2018

Investors now have little alternative but to support risk assets if they want to beat inflation, affirms one of the world’s largest independent financial advisory organisations.

The assertion from Tom Elliott, International Investment Strategist at deVere Group, comes as global stock markets enter 2018 with positive momentum, including the Dow Jones which has surpassed 25,000 for the first time in history.

Mr Elliott explains: “Market confidence is supported by a reasonably strong cyclical upswing in world GDP growth. This is being translated into corporate earnings growth, by a belief that central banks will not significantly tighten monetary policy unless justified by growth and inflation data, and by the U.S. corporate tax cuts announced in December which will boost Wall Street corporate earnings.

“In the face of continuing low interest rates and bond yields, investors now have little alternative but to support risk assets such as equities and non-core government bonds, if they want a yield that will beat inflation.”  

An acronym is currently being popularised that describes how many investors see markets unfolding in 2018: MOTS, standing for ‘more of the same’. That is to say, solid returns for stock markets with continuing low volatility, and positive returns from investment grade corporate bonds.

“The risks to the MOTS scenario include central bank policy error, Trump turning America away from its traditional support for free trade, a credit crunch in the Chinese financial system and from geopolitics such as North Korea and the Middle East. However, as supporters of MOTS would argue, none of these risks are particularly new and they failed to de-rail markets in 2017,” confirms the strategist.

He continues: “We favour a long-term multi-asset approach to investing, whereby investors choose a suitable combination of global equities and bonds – depending on their risk profile and investment horizon – and leave the portfolio unchanged. Regular re-balancing ensures winners are sold and losers are bought – which financial history, and common sense, supports but which is so hard for us to do in practice.”

Mr Elliott goes on to say: “Looking forward to 2018, Japanese and emerging market stock markets appear to some commentators to offer most value, the U.S. less so. The Japanese economy, which grew at an annualised rate of 1.4% in the third quarter 2017 (despite a shrinking population), continues to benefit from a weak yen and the upturn in global demand for its exports. Fiscal reform, in particular lower corporate tax rates for companies that increase wages by 3% or more, comes into effect in April. It is hoped that this will lead to improvements in household demand growth, which has been weak in recent years. Emerging market equities continue to look undervalued relative to their developed market peers on most valuation measures, despite their outperformance in 2017.

“Wall Street is the most overvalued of the major stock markets, with the attractiveness of equities against bonds diminishing as Treasury yields creep up. However, the increase in yields is likely to be modest and U.S. corporate earnings growth will remain strong, limiting any pull-back in share prices. The weak dollar boosts export earnings, while strong consumer confidence supports domestic-focused sectors. Tax cuts will be a net benefit to U.S. corporate earnings, but the impact of changes to the tax code on individual sectors is as yet unpredictable. Fourth quarter earnings statements and outlook comments, from mid-January, will hopefully offer clues.”

Mr Elliott is not so confident about fixed income. He concludes: “Once again we begin the year with commentators generally nervous of bonds, fearing that an inflation problem is around the corner. Some fear that central banks will tighten monetary policy faster than is priced into the market in an accelerated effort to ‘normalise’ policy.

“It seems prudent to heed such warnings, even while acknowledging that the fear of imminent inflation has been voiced by monetarist hawks – and proved wrong- ever since central bank’s policies of quantitative easing and ultra-low interest rates began nearly 10 years ago. This suggests favouring short duration core government bonds, since the cash can be re-invested in a few years in higher bond yields.”

Investing

What is the procedure for proving a missing or lost Will?

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Intermediaries will be key to Investment Houses navigating the Covid19 crisis

By Alexa Payet, Partner at Bolt Burdon and listed specialist in the Certainty

Contentious Probate Hub & Area

Initial steps

When an individual dies it is necessary to search their paperwork to establish whether they made a Will and gather information regarding their estate. This is important because the personal representatives of the estate have a legal duty to distribute the estate correctly and could be held financially responsible for any mistakes made through any breach of duty.

Where a Will cannot be found but is believed to exist there are a number of steps that can be taken to help confirm its existence, including (but not limited to) the following:

  • making enquiries of the deceased’s family and friends;
  • making enquiries with the deceased’s professional advisors;
  • instructing The National Will Register to undertake a Certainty Will Search.

Presumption of revocation

Where the original Will is known to have been in the testator’s possession before their death and cannot be located afterwards, there is a rebuttable presumption that the Will was destroyed by the testator with the intention of revoking it. If an order for the proof of a copy is to be obtained then this presumption must be rebutted.

Procedure for proving a copy Will

The procedure for proving a copy Will is set out in Rule 54 of the Non-Contentious Probate Rules 1987 (‘NCPR’).

The application is made to the Probate Registry at which the application for the grant will be made and the order can be made by a district judge or registrar.

The application must be supported by evidence in the form of an affidavit (although during the global pandemic the rules have been amended by the Non-Contentious Probate (Amendment) Rules 2020, SI 2020/1059, to provide for the use of witness statements as an alternative to affidavits).

The evidence must set out the grounds of the application and any available evidence that the applicant can adduce as to the Will’s existence after the death of the testator or, where there is no such evidence, the facts on which the applicant relies to rebut the presumption that the Will was destroyed by the testator during his/her life.

The applicant must ensure that the Court has the best available evidence of what happened to the testator’s Will in order that effect may be given to his/her testamentary wishes.

It is important to understand that the applicant does not need to demonstrate that the Will has been lost (it is the fact of its loss which gives rise to the presumption of revocation). Instead, the applicant must establish, by evidence, that the Will was not in fact revoked.

What is a Certainty Will Search and why is it necessary?

A Certainty Will Search searches for Wills that have been registered on The National Will Register (circa 8.7 million Will registrations in the system) and for Wills that have not yet been registered in geographically targeted areas where the deceased used to live and/or work. A Certainty Will Search is extremely important as it will be necessary to notify the probate registry of any persons who would be prejudiced by the grant if the copy Will is proved. If no such person exists then the registrar is more likely to grant the application. Alternatively, if such a person does exist then you should seek to obtain their written consent to the application. The written consents can then be lodged with (or following) your application.

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Oil prices rise as investors look to higher demand seen in second half

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Oil prices rise as investors look to higher demand seen in second half 1

By Shadia Nasralla

LONDON (Reuters) – Oil prices climbed on Tuesday as optimism that government stimulus will eventually lift global economic growth and oil demand trumped concerns that renewed COVID-19 pandemic lockdowns globally are cooling fuel consumption.

Brent crude futures for March rose 72 cents to $55.47 a barrel by 1152 GMT after slipping 35 cents in the previous session.

“The perception that any retracement will be quick as confidence in economic and oil demand recovery is unlikely to fade away,” said PVM analysts in a note.

U.S. West Texas Intermediate crude was at $52.65 a barrel, up 29 cents. There was no settlement on Monday as U.S. markets were closed for a public holiday. Front-month February WTI futures expire on Wednesday.

Investors are upbeat about demand in China, the world’s top crude oil importer, after data released on Monday showed its refinery output rose 3% to a new record in 2020.

China also avoided an economic contraction last year.

Investors are watching out for U.S. oil inventory data from the industry association API, due on Wednesday, the same day U.S. President-elect Biden’s inauguration speech will likely give details on the country’s $1.9 trillion aid package.

The International Energy Agency cut its outlook for oil demand in 2021, but pointed to a recovery in demand in the second half of the year to an annual average of 96.6 million barrels per day.

“Border closures, social distancing measures and shutdowns…will continue to constrain fuel demand until vaccines are more widely distributed, most likely only by the second half of the year,” it said in its monthly report.

(Additional reporting by Florence Tan, editing by Louise Heavens)

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Investing

Can Thematic Investing provide investors with growth opportunities in uncertain times?

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The impact of COVID-19 on the investment market

New whitepaper from CAMRADATA explores

CAMRADATA’s latest whitepaper on Thematic Investing, considers the role this type of investing can play in asset management and explores trends that can permeate society and traverse sectors. The whitepaper includes insights from guests who attended a virtual roundtable on Thematic Investing hosted by CAMRADATA in November, including representatives from CPR Asset Management, Sarasin & Partners, Impact Investing Institute, PwC, Quilter Cheviot, Scottish Widows and Stonehage Fleming.

Sean Thompson, Managing Director, CAMRADATA said, “In these seminal times, thematic investing has the potential to shape how the future unfolds. Yet running a successful thematic fund is no easy feat – it is a bit like navigating unchartered waters trying to identify the trends and the long-term opportunities.

“Trends such as AI and biotechnology are still in their relative early days, for example, and global economies are undergoing dramatic changes. But mapping out certain trends, identifying potential sustainable returns through a unifying thread that spans multiple sectors, could help future-proof investments. “Our roundtable guests considered current key themes, which themes worked well, and which have not and how thematic investors could identify trends with the potential to offer future growth.”

The guests named themes they currently like which included artificial intelligence, China, climate change, clean energy, automation, evolving consumption, ageing, digitalisation, water, waste management, biodiversity, and board diversity.

After discussing themes that have worked or not, the guests looked at total allocation to themed funds, and whether clients might be blinded by themes to the overall risk exposure in their portfolios.

Key takeaway points were:

  • Themes have a habit of coming and going. One guest recognised that automation and robotics, for example, were cyclical, which means that investors will have to think carefully about entry-points.
  • It was agreed that the commodities ‘super cycle’ of the 2000s came about with the economic development of China. Many commodities-based products found their way into mainstream investing, but this is unlikely to happen again.
  • One guest was surprised by some of the themes that interested their customers; with their research showing that Board Diversity was almost the lowest-ranking concern among the ESG choices they listed.
  • There was correlation between environmental impact and social benefits to investing. The theme that concerns the Impact Investing Institute, which is less than two years old, is improved measurement of such relationships.
  • In terms of successful themes, one clear winner due to COVID had been digitalisation.
  • One theme that has not done so well is the Ageing theme focused on older people travelling and enjoying experiences abroad later in life.
  • One guest said their firm used themes for ideas generation, not as a shortcut for portfolio construction. They said themes lead to good ideas, but they then spend at least three months researching a stock, so that the best themes are represented by the best investments.
  • The final point was that there are sensitivities for any global investor in allocating to themes, even the biggest one of all, Climate Change.
  • But on a positive note, one guest added if all stakeholders can resolve their differences on definitions such as impact and ethical investing, then more capital will be readily transferred into opportunities.

The whitepaper also features two articles from the sponsors offering valuable additional insight. These are:

  • CPR Asset Management: ‘Central Banks: leading the path towards Impact Investing’
  • Sarasin & Partners: ‘Theme or fad? How to invest for the long term’

To download the Thematic Investing whitepaper, click here

For more information on CAMRADATA visit www.camradata.com

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