25 March 2014

Market comment: a personal view 25 March 2014

Although markets have not succumbed to the downward pressure the continuing unrest in Ukraine is generating, they are not making much positive prog ress either

In theory the ending of compulsory annuity purchases should be good for shares. Personal pensions, which hitherto would have had equity assets sold in order to fund an annuity purchase, can now remain invested in the stock market. You might have thought such news would be greeted with enthusiasm by investors, but such is the concern generated by the Russian annexation of Crimea that investors are sitting on their hands.

Because it is difficult to see an early end to the situation out East – and with the risk of further escalation and possible economic sanctions – it looks as though this unsettling development will cloud sentiment for a little while. Economic news being published is unlikely to make much of a difference. Inflation figures turned out to be more subdued than expected, with the Consumer Price Index dropping to +1.7%. Meanwhile, the retail sales numbers for the UK are likely to show a fall. Even confirmation of what the growth was in our Gross Domestic Product last year, when it comes, is unlikely to provoke any excitement.

But life goes on, with news of the Co-op Bank’s black hole deepening adding to the woes of this embattled institution and a possible bid for Ignis Asset Management from Standard Life enlivening the corporate market. Life insurers were amongst the hardest hit following the budget, but for many of them asset management is more important than annuity provision. The financial sector could well see more activity in the light of the new landscape being created.

For investors in general there is little more to do than wait on the sidelines for events to settle down and hope the global economic recovery is not knocked off course. In a way markets have proved remarkably sanguine over the Russian land grab, but they may not prove so detached if it turns out that President Putin’s territorial ambitions are as yet unsatisfied. With the economy there in poor shape, we must hope that the threat of further economic sanctions will be sufficient to prevent further escalation. In the meantime, patience and watchfulness are the requirements today.

Brian Tora, who is a respected writer and broadcaster on investment issues, is a consultant to JM Finn & Co. Brian has enjoyed a long and distinguished career in the City. Any opinions expressed are his own and should not be construed as advice from JM Finn & Co. A version of this article may appear elsewhere in the press

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