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Weekend press round-up: which way for the markets?

  • By Myles Carey

The Sunday Times money section leads with a campaigning story about a consumer’s battle with Barclays Bank to get compensation after a cyber fraud incident meant he had £20,000 stolen from his bank account, which was only refunded after intervention by – yes you’ve guessed it – the ST. Moving on to investment matters, it’s down to Ian Cowie, in his Personal Account column, to share his concerns about the sustainability of current stockmarket levels, which he describes as “looking a bit scary”. Cowie confesses to doing something he hasn’t done in 30 years of investing – and that is building cash reserves instead of reinvesting dividend income. The idea, he says, is to keep some powder dry to go bargain hunting if share prices do fall this summer or autumn.

When it comes to the new “simpler” state pension, it might not be quite so simple for many people who are still confused as to the level of pension they are set to receive in retirement according to the Sunday Times. They’ve asked the DWP to examine the cases of four consumers to see the kind of problems which are arising. The process flags up particular problems in the transition period for those who have contracted out of SERPS for a proportion of their working lives. Readers are advised to find out how they stand by getting a proper state pension forecast well in advance. They are also shown the value of buying additional years by making voluntary class 3 NICs to make up for any missing years.

The Financial Mail on Sunday asks Holly Mackay of Boring Money to review the most appropriate SIPPs for DIY investors. As you’d expect, the results rather depend on what people’s circumstances are and what they want from their SIPP provider. A.J. Bell, Hargreaves Lansdown, Charles Stanley, Nutmeg and Interactive Investor all gain approval. There’s also an online calculator powered by Broker Compare that readers can use to get a pointer to which SiPP, ISA or GIA might best suit their needs.

In its fund focus this weekend, the MoS looks at the £1billion JP Morgan American Investment Trust, as it reports that investors are set to benefit from reduced charges. From October, the management fee will reduce from 0.52% to 0.33%. The MoS reports that it will fall further if the trust grows, as any assets above £1 billion will attract a management charge of 0.25 per cent, against 0.35 per cent on the first £500 million and 0.3 per cent on the next £500 million. Garret Fish, lead manager on the trust is quoted as saying he would not be surprised if the market experienced a 10% correction in the coming weeks, but he does not believe it will ‘go off the rails’. ‘Not now,’ he adds, suggesting it could at some stage.

Ben Willis of Whitechurch Securities is writing in the Sunday Telegraph, giving his recommendations on how to build an income portfolio using “cheap tracker funds”. Yes, there’s a warning that passive funds do not distinguish between companies whose dividends appear secure and those whose payouts look shaky, so an active fund may have more dividend security. Ben’s portfolio recommendations consist solely of tracker funds, including some so-called “smart beta” funds, and exchange-traded funds. It yields 3.6pc overall and is split almost into thirds between bonds, UK shares and global shares, with providers such as Vanguard and LGIM on the list of providers – amongst many others.

When it comes to property, the Sunday Telegraph suggests that improving your existing property might be a better bet than moving – and they suggest different ways that people might approach the financing of such a decision. No great surprises with suggestions of a further advance or a remortgage but zero interest credit cards certainly caused a raised eyebrow here at IFA Magazine – we should say however that there is a warning that this should only be done as a short term ploy. Treading a dangerous line there perhaps?

Never let it be said that the Financial Times doesn’t warn you against taking things too far. The FT runs an enlightening – and sometimes entertaining – review of no less than ten different ways in which HMRC can tell that you’re cheating on your tax returns.

We won’t try to steal too much of the FT’s thunder – you’ll need to catch the full article to get the awful detail – but suffice it to say that the first and most important tool in the Revenue’s arsenal is the mysterious ‘Connect’ program which has spent the last seven years busily sifting through everything it knows about you and looking for inconsistencies that might suggest you’re being economical with the truth.

One quoted example was where somebody with no visible income except for a state pension was running a multi-million pound property that turned out to be an escort agency with revenues of £100,000 a year. How did HMRC stumble upon the scam? By looking at internet listings that pointed toward the property. Easy in hindsight, more challenging in practice.

But, as the FT points out, the Revenue has been extending its sensitive antennae into sales data from Apple, Amazon, AirBnB and most recently Paypal. And which of us doesn’t use any of those? The battle changes again with the increased co-operation of international agencies and tax authorities, and with the increasing use of incentives for informants and leakers – not to mention simple appeals to private guilt that are backed up by threats of draconian penalties for evasion. You can run but you can’t hide.

The Telegraph considers the ups and downs of the Brexit negotiations in the context of a typical investor’s portfolio. Although the FTSE-100 is up by a welcome 16% since last year’s June referendum, and a smaller companies fund by up to 37.9%, this may in fact have introduced an imbalance into what was supposed to have been a carefully weighted portfolio. Time to rebalance? The Telegraph thinks so.

It would be easy for us to conclude that a weak pound may have been responsible for the UK surge, by encouraging non-sterling investors to move into London on bargain-shopping sprees. But the article also stresses that continental European bourses have been just as strong, and perhaps even more so. That would have caused a significant list in your rowing boat if you’d been heavily into Europe.

But what of government bonds? On the one hand, the Telegraph says, strong equity moves like this would have weakened your portfolio’s weighting in fixed interest; but if the trend continued for many years you might find that what had originally been a 40% bod weighting had been reduced to just 15%. A wise investor will move quickly to correct the balance, it’s suggested.

But not too quickly, mind. The article expresses the sensible view that twice a year is probably quite often enough to review and adjust your portfolio weightings.

Money Mail opens the weekend’s news with a cheerful report on the forthcoming UK Residential Market Survey from the Royal Institution of Chartered Surveyors, which it says will show a dip in UK selling prices – not the first such survey to cast doubts on the health of the nation’s housing stock, but probably the most worrying because of the respect with which this particular survey is regarded.

Are prices actually softening? It isn’t entirely clear, but the rate of increase is certainly slowing. The Mail quotes an expert from EY as saying that the balance between surveyors who have seen price rises in the past three months and those who saw falls is set to drop to +15, down from +17 in May.

Should that worry us? Only, perhaps, if we believe Professor Paul Cheshire, who has advised the Government on housing policy, and who has been quoted as expecting “a significant correction in house prices….. I think we are beginning to see signs that correction may be starting.” The Mail doesn’t dodge the fact that most forecasters think Prof Cheshire is going over the top. But the man himself is unapologetic: the shortage of housing supply in England, he says, makes Britain a more volatile housing environment than any metropolitan area in the US.

Are we comparing apples with pears here? Read the article and decide for yourself.