Four Months In, and So Far So Good….

by | Apr 24, 2015

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It loves us, it loves us not. With four months of 2015 gone, David Cowell from Myddleton Croft Investment Managers offers some timely calendar thoughts .





Easter came early this year – but still after Christmas, which is how it should be. The last dbankingay of the tax year fell on Easter Sunday, which meant that the first day of the new tax year was a holiday. Hopefully this meant that some over-keen people with pension funds had longer to think before blowing the lot. For those who remained over-keen, they have a month to regret it as the taxman will then start to take up to 50% of it and challenge them to reclaim it.

The reason for this is that the total withdrawn will be added to whatever other income the person has and HMRC will assume that they are going to get the same ad infinitum. Thus, someone taking their total pension fund of, say £100,000, would pay PAYE tax on this plus any other income. The crafty catch is that on income over £100,000, personal allowances are lost at the rate of £1 for each £2 of income so the effective tax rate is actually 60% on roughly £20,000. This is more than the official top higher rate at 45%. So you squeal and get your reclaim in as quick as you can but no prize for guessing how long it takes HMRC to return your cash.


The sensible ones take advice…….




Normally this expression is used for the July/August holiday period when there is no proper news and journalists invent more stuff than usual. However, this year even their inventiveness will be overshadowed by the run up to the 7th May, when we will either elect a government or an apology for one. In this matter I am speaking as a disinterested party as my main concern is to ensure that you are not discommoded by the result. To quote de Maistre who wrote in 1811, “Every country gets the government it deserves.”

In the past, a Tory victory would mean that the stock market went up then back down whilst a Labour one meant the reverse. Either way the short term result was the same.

It is a truism in investment circles that past performance is no indication as to the future. It would be a brave person who followed this in politics. If track records are anything to go by, the Tories meddle too much and Labour spend too much. It is therefore up to you as to whether you wish to be interfered with or robbed.

Potential uncertainty surrounds the UK general election, with the risk that business confidence will be shaken either by the prospect of an EU referendum, or by large increases in corporation tax and the minimum wage. London is a hub for international financial and business services and a rise in the minimum wage would hit labour-heavy sectors such as care homes, hotels, leisure, pubs and retailers.


myddleton croft


Or, when shall we three meet again? In three months’ time? Enough of the Scottish play until 8 May when the SNP may hold the balance of power. Seriously, this UK election can either make or break the nascent recovery but with the two major parties playing ‘snap’ with their manifestos it is a hard one to call. We have taken some profits on UK equities and will take more if circumstances require it.

Overall, we have reduced ‘Balanced Moderate’ portfolios from 58% to 52% in equities both UK and globally. Some of the proceeds will remain in cash in the short term in case of a correction in the UK and a slowdown elsewhere. This will not only soften any fall but allow us to re-enter at lower prices ready for the recovery.

There is still some action to be had in the currency markets even though we have made good money to date. The Australian dollar looks expensive against the $US, especially after the head of the National Bank of Australia has said that the fall in commodity prices, especially iron ore, could knock $A25 billion off GDP. Overall we prefer currency markets to fixed interest as they are less dependent on politicians’ unpredictable actions.

The world is still a dangerous place with none of the dangers mentioned in the January edition having abated. In fact, there could be a new tail wagging the equity dog in the shape of Chinese investors who are starting to affect the major stock markets with the volume of their trading.


We have holdings in both UK and European commercial property, having initially bought back in 2013. A recent consensus forecast is for total returns (rent and capital growth) to be about 12% in 2015 although Schroder’s think it will be nearer 15%. Whichever it is we are happy to take it in a climate of 10-yr government stock yielding from 2% down to less than nothing. The similar forecast for European property is 7-9%pa for the next three years.



US shares are fully valued and await signs of increasing earnings which given the strength of the US $ has led to the opposite this year. Moreover the Fed may decide to nudge up interest rates, as soon as June, which may spook the market.

the back of a halving in raw materials prices and stagnant wage growth. Europe could well be the leading area as it appears that QE has had the desired effect as well as equalising wage levels across the eurozone. France and Italy could well surprise on the upside. Sectors may well matter more than geography although peripheral countries could be the winners over northern Europe.

Japan is starting to benefit from ‘onshoring’ so both domestic and exporting companies may have a further run. However, emerging markets are open to further flights of capital once the US starts to raise interest rates.

Bonds aren’t worth discussing (except maybe Ozzies); currency plays have further to go as has property.

There we have it. It is unlikely that the next six months will be as rewarding as the last but there are still plenty of potential returns in excess of cash. Rest assured we will be trying our best on your behalf.

This chart shows the performance of relevant indices:

MC chart April 1


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

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