The Light at the End of the Tunnel….

by | Oct 31, 2014

Share this article

….may turn out to be exactly that, says David Cowell of Myddleton Croft Investment Managers. Time to lighten the gloom, perhaps?

Artemis finds reastunnelons to be cheerful. ”….. It’s hard to look ahead and see shares performing less well over the next seven years than they have over the last, crisis-marred seven.,” the team’s researchers report. “German equities, for example, stand almost a quarter below their peak in 2007. Even including dividends, the FTSE 100 is barely flat over the last seven years. Total returns are a function of the market’s current yield and its future dividend growth.”

“Our best guess is that UK equities ought to give returns of about 8% per annum over the next decade or so. This is likely to be made up of a 3.4% dividend yield, 2.8% inflation (as implied by the UK bond markets) and 1.7% real dividend growth (the average rate of growth over the past 50 years.) This is not a spectacular return, but it is likely to prove rather better than the return from government bonds.”


The Bank of Japan will increase the pace at which it expands base money to 80 trillion yen a year, instead of 60-70 trillion yen. It also intends to triple its purchase of ETFs and REITs and extend the duration of its portfolio of Japanese government bonds. The surprise move caused the Nikkei 225 to rally 4.8% on Friday while the yen fell to its lowest level in seven years against the US dollar to trade at 111.29 yen per dollar. According to reports, the Bank’s Governor, Haruhiko Kuroda, said today that the BoJ would consider further easing if needed.

We have been expecting this for a few months, so again we were early into yen and share plays. Excuse the brevity of this missive as we have to add to positions this morning. Isn’t it good when a plan comes together?

myddleton croft


In Europe, the Swedish central bank cut its main interest rate to zero in an attempt to combat deflation. At least Sweden can see the dangers even if the Germans can’t.

The UK has announced that it will repurchase the remaining £218m 4% Consols which were offered in 1917 to finance the war effort. It’s not being altruistic – it’s just that Osborne can borrow much cheaper.

Are we about to see the start of a major consolidation of platforms? Firms considering bidding for Transact include two US PE firms and one UK-based. Anyone using platforms really needs to consider the future. Don’t forget that the regulator expects you to consider threats to your business from this quarter as well as the other three.


In a similar vein, appointed representatives  of Sesame are being told that advice previously passed by the network as suitable has now been deemed wrong, as a result of a widespread review that followed a £6m fine from the regulator. Compounding matters, the FCA says that Sesame effectively set up a “pay to play” arrangement which undermined the ban on commission under the RDR. Who else? Payments were made by a number of the providers on Sesame’s restricted advice panels for services.

The yield on the Bank of America Merrill Lynch US High Yield Index recently reached 6.4%, having traded as low as 4.85% in June, and is currently around 6%, a level likely to appeal to institutional buyers. Whilst the absolute level of yields may look low by historic standards, valuations relative to cash and government bonds still look compelling.

US high yield spreads


Following on, Morgan Stanley predict that a conventional 60/40 US portfolio will produce an expected gross return of 4.8% over the next decade, compared with a long-run average of 8.6%. “Total returns over the next decade will likely be low relative to the experience of the last 30 years. Investor expectations, everywhere, need to be revised lower,” the analysts said. They obviously read my piece last week.

A man and woman were married for many years.  Whenever there was a confrontation, yelling could be heard deep into the night.  The old man would shout, “When I die, I’ll dig my way up and out of the grave and come back and haunt you for the rest of your life!” Neighbours feared him.  The old man liked the fact that he was feared.  Then, one evening, he died.  After the burial,  her neighbours, concerned for her safety, asked, “Aren’t you afraid that he may indeed be able to dig his way out of the grave and haunt you for the rest of your life?”

” Let him dig,” she retorted.  “I had him buried upside down…and I know he won’t ask for directions.”



Have a good weekend.

David Cowell



For and on behalf of Myddleton Croft Investment Managers

1 Woodside Mews

Clayton Wood Close


LS16 6QE

Tel:        0113 274 7700

Fax:       0113 274 7711

Share this article

Related articles

Strong return for Structured Products in 2022

Strong return for Structured Products in 2022

Investors secured strong returns in performance among most maturing structured products during the volatile financial environment of 2022, a new UK report reveals. Among a total of 632 structured product maturities, no plan returned a capital loss during 2022. Of...

Invesco launches Sustainable Global Income Fund

Invesco launches Sustainable Global Income Fund

Invesco, one of the world’s leading asset managers announces the launch of the Invesco Sustainable Global Income Fund. The Fund offers investors the opportunity to invest for income and capital growth whilst supporting the transition to a low carbon economy over the...

Trending articles

IFA Talk logo

IFA Talk is our flagship podcast, designed to fit perfectly into your busy life, bringing the latest insight, analysis, news and interviews to you, wherever you are.

IFA Talk Podcast - listen to the latest episode