3 October 2019

A Blast from the Past

Markets have become unsettled recently. Perhaps this is because there are so many issues unresolved that could have an impact on investor sentiment, of which Brexit is just one, though disappointing economic data from the US had a clear impact.

Returning to the leave negotiations, we now know that the final card has been played in the game with Brussels, but whether this will bring a deal any closer is far from certain. The Prime Minister is behaving as if the Benn Law demanding a deal does not exist, so we could be in for an interesting few weeks.

The fact that economic and company news is thin on the ground right now, US factory output data aside, will also play its part. We are, after all, right at the beginning of the final quarter of the year, so it is too early for statistics on how the third quarter went. Concerns remain that the global economic slowdown might build momentum, though China is making much more positive noises, even if they have rather militaristic overtones. At least the trade talks with the US are continuing, so perhaps we might get some more positive news on the global front.

As for corporate events, there is little around right now, though we have seen details of the flotation of M&G, which is being spun off from the Prudential. M&G is one of the most respected names in investment management, having been responsible for the first unit trusts to be made available to investors in this country back in the 1930s. The mighty Pru bought M&G some twenty years ago but now clearly feel their future lies more with their traditional insurance products and in continuing to expand in Asia.

I have always had a soft spot for M&G. They were one of the first City institutions to take marketing to the general public seriously and, with around £350 billion under management, are a serious player in the global investment management world. They also manage many of the largest, most popular retail funds and have an approach more aligned to value investing than anything. I well recall an advertisement they ran after the stock market crash of 1987, pointing out that their Dividend Fund, launched 25 years previously, was returning an income half as big again as the amount an initial investor would have committed at the original launch. Forget fluctuating capital values, it implied, concentrate on the income return delivered.

As it happens, October promises to be an important month for investors. Not only is the next deadline for leaving the European Union at the end of the month – rather spookily on Halloween – but plenty of data on economic performance over the past three months will emerge. Don’t forget, too, that October has proved a capricious month in the past. The Wall Street Crash of 1929 took place in October, as did Black Monday in 1987, when shares lost a third of their value in less than a week. Let’s hope this month is less dramatic.

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