By Annabel Brodie-Smith
What a week! A decisive Trump victory on Wednesday. The Bank of England deciding to cut interest rates on Thursday.
Trump’s victory has been celebrated by US markets leading to all-time highs and the dollar surged. The Trump trade has swiftly benefitted some large investment trusts with US exposure (see chart).
However, it looks like inflation may be back – Trump will be spending more money and his favourite word is tariffs. This is likely to lead to interest rates staying higher for longer.
“Trump will be spending more money and his favourite word is tariffs. This is likely to lead to interest rates staying higher for longer.”
And just over a week ago the UK Budget was a sombre affair – £40 billion of tax rises and £30 billion of borrowing. It could have been worse. Current ISA limits were frozen until 2030 and VCTs’ tax reliefs were extended until 2035, which had already been announced.
Personally, after so much emphasis on growth and investment during the election campaign I was hoping for more from the Budget. There were increases in capital gains tax and pensions are going to be subject to inheritance tax. Business property relief on AIM shares was not scrapped altogether but you will now pay 20% inheritance tax on qualifying AIM shares.
And entrepreneurs’ tax relief will be cut – an issue which is close to our hearts in our household as my husband is an entrepreneur. Where was the growth? The figures looked anaemic. What will incentivise private investors and the private sector to invest? What are the plans to revitalise the UK stock market?
We have been promised an “invest invest invest” strategy which will “catalyse £70bn of investment through the National Wealth Fund”. The government is going to invest a lot more in the NHS, schools and public services and has promised planning reforms and a ten-year infrastructure spending plan.
But next time I hope we hear more about how private investors can invest and help generate growth for the UK. Please note, Chancellor Reeves, investment trusts are an ideal vehicle for investing in infrastructure, cutting-edge technology and the transition to net zero and they should be part of the government’s investment and growth solution.
“investment trusts are an ideal vehicle for investing in infrastructure, cutting-edge technology and the transition to net zero and they should be part of the government’s investment and growth solution.”
With that said, you’ll be pleased to hear the wonderful Ian Cowie is on the hunt for Budget buys this month. Ian optimistically reminds us that “bears sound clever but bulls make money.” The Chancellor has vowed to make Britain “a clean energy superpower”. This is good news for two of Ian’s holdings: Ecofin Global Utilities and Infrastructure and Greencoat UK Wind. He also suggests BlackRock Energy & Resources if you think fossil fuels will be around for a while.
And to benefit from the NHS big spend, Ian points to the Biotechnology & Healthcare sector. He holds Worldwide Healthcare but mentions strong performers RTW Biotech Opportunities and Polar Capital Global Healthcare. More generally he thinks it’s worth investigating the UK All Companies and UK Smaller Companies sectors which have performed well over the last year and are on double-digit discounts.
Ian’s views on trusts are always worth hearing so don’t miss ‘Me and my trusts’, a video interview with Ian where he talks about some of his best-loved and most successful investments.
If you’re looking to add some spice to your own portfolio, we have asked analysts and wealth managers for their favoured higher-risk sectors and trusts. These trusts can add some punch to a portfolio over the long term but it’s worth remembering that the potential for higher returns comes with higher risk. On the spice rack is Templeton Emerging Markets Investment Trust from the Global Emerging Markets sector, Odyssean Investment Trust and Henderson Smaller Companies from the UK Smaller Companies sector, HgCapital Trust, NB Private Equity, CT Private Equity and HarbourVest Global Private Equity from the Private Equity sector, Chrysalis Investments and Seraphim Space Technology from the Growth Capital sector and RTW Biotech Opportunities from Biotechnology & Healthcare.
“If you’re looking to add some spice to your own portfolio, we have asked analysts and wealth managers for their favoured higher-risk sectors and trusts.”
It was a pleasure to meet so many of you at the AIC Investment Company Showcase last month. Thank you so much for your support – I had so many interesting conversations. If you missed it, please do visit our Showcase on-demand recordings.
And another event is round the corner! Mello Events are celebrating their tenth anniversary by returning to Derby, back where they first started, at The Derby Conference Centre, London Road DE24 8UX on Tuesday 19 and Wednesday 20 November. Some investment trust managers are presenting, and you can get half-price tickets with the discount code AIC50. Find out more and register here.
“I’d like to wish you all a good month. I’ve been talking to directors today and I’m writing this from a very mild and beautiful Edinburgh.”
Finally, I’d like to wish you all a good month. I’ve been talking to directors today and I’m writing this from a very mild and beautiful Edinburgh. This Emily Bronte poem sums up the view here. “Fall, leaves, fall; die, flowers, away; / Lengthen night and shorten day; / Every leaf speaks bliss to me / Fluttering from the autumn tree.”
Annabel Brodie-SmithCommunications Director, AIC
