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“…our view that fiscal activism has made an emphatic comeback…”

Jamie Clark, co-manager on the Liontrust Macro Equity Income fund:

“Philip Hammond’s inaugural – and final – Autumn Statement confirms our view that fiscal activism has made an emphatic comeback. The headline Productivity Fund initiative paid lip-service to the Keynesian commonplace that productivity is explicitly a function of government largesse. Although a mixture of both novel and preannounced measures, the £23bn initiative’s emphasis on R&D, housing, transport and digital infrastructure signals that the state will be assuming a bigger role in the economic life of the country. This was underscored in the long-term commitment to increase infrastructure expenditure from 0.8% of GDP in the present fiscal year, to 1-1.2% on an ongoing basis. Modest in the context of the multi-decade decline in infrastructure expenditure, but an inflection that is party to a more global recourse to fiscal policy.

“The Liontrust Macro Equity Income fund’s Infrastructure Spending theme is intended to capture this shift in the political economy. Equally, we believe this shift augurs the end of ultra-easy monetary policy, implies higher sovereign debt yields, and therefore an incredibly difficult period for assorted bond-proxy equities – tobaccos and consumer staples – that have rerated aggressively in the post-crisis era.”

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