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Weekend press round up: What about the Santa rally?

  • By Myles Carey
newspapers financial roundup

FT Money reports on the recent strength of the UK manufacturing sector, which it says recorded its fourth consecutive month of growth during November – confounding [we might add], the doomy expectations that followed the Brexit vote in June.

But the Markit/CIPS survey of purchasing managers in the manufacturing industry wasn’t all that it had been expected to be. November’s figure was down to 53.4 (where any figure above 50 denotes growth), whereas October’s figure had been 54.2. This time, says the FT, analysts had been expecting an increase to 54.4.

IHS Markit agreed that strong demand from both consumers and businesses was boosting demand –  helped also by the weakening of the pound on the foreign exchange markets. But, it warned, the trend in new orders for investment goods such as plant and machinery had “eased sharply so far in the fourth quarter”, indicating that the investment element of the economy might not contribute positively to economic growth.

The FT also reports on figures from the Consumer Advice Bureau, indicating that fears about an explosion of illegal lending in the wake of the payday loan crackdown have failed to materialise. Indeed, says the CAB, the number of cases handled by the Bureau with regard to illegal lending actually fell last year.

As for the regulated payday lenders, says the FT, the imposition of a 0.8% per day cap on short-term loans has had the desired effect of bringing down the average rate paid from 1.3% in 2013 to just 0.7% during 2015. The FT quotes further research from the Social Market Foundation showing that the number of loans taken up between January and April 2016 was 42% down on the same period of 2013.  Wonga, the FT notes, reported a 64% fall in its revenues during 2015.

That does not alter the fact that borrowing from other sources is booming. Consumer borrowing from banks grew in October at its fastest pace since November 2006, the FT says – with most of the activity focused on overdrafts and personal loans.

The Saturday Times looks at the rally in US shares following last month’s surprise election result, and asks how long it can last. It indicates that the market is already looking expensive relative to other markets and to history – something that IFA Magazine has also been pointing out of late. It progresses to ask a number of experts for their preferred fund choices which they feel would make the most of those sectors expected to benefit.

It also looks at the LISA – or Lifetime ISA – which has attracted plenty of controversy and it’s not even launched until April. According to The Times article and its commentators, while LISA is likely to appeal to those saving to buy their first home, savers should make sure they are aware of the terms for exit as these can be punitive.

In its section called “The Guide” Mark Atherton gathers together opinions some of which cast a critical eye at tracker funds, warning that ethical investors might not realise the large exposure they may have to so called “sin stocks” such as tobacco by investing in the index rather than actively managed portfolios or funds. Others dispel the idea, saying that many active funds also invest in such stocks.

Finally, and although articles like this give us at IFA Magazine a slightly uneasy feeling, The Times gives some pointers to investors on how to pick a fund, starting with performance tables. It then goes on to investigate the fund’s manager, whether it has outgrown its universe and also the impact of fees. For us, sound portfolio management is about a whole lot more than just picking a fund but getting all the detail in a few column inches is just not possible we have to admit!

The Telegraph carries the claim that many millions of British pension savers are failing to make the most of the higher rate tax relief that’s available on their contributions, simply by failing to claim it.

New research from wealth managers True Potential shows that as many as one in five middle and higher earners settle for the 20% basic rate relief that pension providers automatically reclaim on their behalf, and do not claim the additional 20% (or 25%) relief that would also be available to them if they filled out self-assessment forms. The result – says the Telegraph, working with HMRC figures – is that £361 million is likely to have been left unclaimed by around 1.6 million people each year.

At IFA Magazine we’d caution that some of these figures seemed to have been arrived at by a deductive process rather than by positive confirmation; but they seem doubly surprising given the widespread perception that higher-rate reliefs may be for the chop at some time during this parliament. As for the HMRC, the Telegraph quotes a spokesman dismissing the reports of unclaimed money with the abrupt declaration that there was “no evidence any taxpayers are missing out on pension tax relief”. Curiouser and curiouser.

Sunday Newspaper review

In his personal account column for the Sunday Times, Ian Cowie explains the attractions of microcap stocks as part of a balanced portfolio, and how using professional fund managers is his preferred means of gaining exposure. He cites a number of investment trusts and VCTs which he holds for this purpose.

The ST also voices concerns over European markets pending the result of yesterday’s Italian referendum.

The only investment related content in the Mail on Sunday’s personal finance section is the regular Fund Focus feature from Jeff Prestridge. This time he focuses on Sanlam Private Wealth Global High Quality Fund ,which, at just £98 million and not yet three years old, is one of the minnows in the sector. The fund is attracting attention however because of its strong performance to date. The manager employs a high conviction approach, currently investing in just 29 stocks alongside a chunky 20% in cash.

The Sunday Telegraph Money section leads with concerns that the family house allowance which is due to take effect from April, will make life more complex for executors. They also review the cost of getting legal advice on IHT matters.

In an article entitled “The self-build discount is about to grow” the Telegraph highlights new legislation introduced last month which means that councils will now earmark land for people to build their own homes. Keen DIYers can register their interest in self build with their council.

It also reports on a new service from the Royal Mint which will allow investors to buy and sell bullion from the same company they use to trade funds and shares. It will use the same technology behind the digital currency, Bitcoin. It will provide another means for investors to gain access to physical gold within their portfolios, and comparisons are drawn with ETFs such at ETF Securities Physical Gold.

Finally as was also covered in the Saturday Telegraph, the Sunday version also highlights the potential that many higher rate tax payers are failing to claim the relief due to them.

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