Capital Markets Corporate

December 21, 2018

Our Weekly Newsletter

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Across Instinctif Partners’ Financial Services team, we are always keeping an eye on the key developments taking place across the sector to evaluate their impact on the many businesses we work with. Here we share our picks of the week’s most interesting news, and our expert views.

Businesses aren’t Brexit-Ready

Amidst the Brexit bedlam, businesses are struggling to make contingency plans in the event of a no-deal scenario. This is particularly true for small businesses: just one in seven are said to be making plans for if the UK crashes out of the EU, with smaller companies struggling to justify spending on something that might not happen. A lack of transparency from the government on its contingency plans is also hindering any attempts to prepare. (From The Financial Times, 18 December)

UHNW Family Fund Management is Booming Business

Family office businesses – whose responsibilities include managing families’ wealth and administering assets for the ultra-wealthy – are booming. The biggest have become deal powerhouses, capable of competing with global banks and private-equity firms on big transactions. And with upwards of $2trn expected to pass from entrepreneurs to their heirs over the next 15 years, the success of family offices is only expected to rise. (From The Economist, 13 December)

Britons’ Personal Finances Out Of Control

More than a quarter of Britons do not have their financial situation under control, with many turning to borrowing to pay their bills, according to research from Europe’s largest credit management firm. Almost three in ten respondents say they have maxed out their credit card or borrowed money to pay a bill (excluding mortgages) during the past six months, in a worrying snapshot of British indebtedness. (From The Times, 17 December)

State Pension Funds 3/5 of Retirement Income

Despite industry efforts to promote the adoption of private pensions, the state pension still makes up the bulk of post-retirement income, accounting for £6 in every £10 received. The state pension typically falls short of the income most will have earned before retiring, causing a cost of living crisis when this shortfall is not topped up with private pension savings. (From Moneywise, 18 December)

2019: year of the 100% mortgage?

The Building Societies Association (BSA) has argued that mortgage lenders should consider bringing back the controversial 100% loans to prevent buyers from relying exclusively on the Bank of Mum and Dad. Critics argue that 0% deposit products – which disappeared after the financial crash in 2008 – are too risky, particularly in the current financial climate. Consumers however are keen on the idea; 48% of UK adults in a recent YouGov poll expressed their support for 100% mortgages. (From Which?, 14 December)

UK stocks – un-investible or a 2019 bargain?

In recent days, the FTSE has sunk to two year lows as global investors put Brexit fears into context. Seemingly, a choice between the Tories’ shambolic Brexit and a Jeremy Corbyn government have made the UK equity market “un-investible”.

This lack of confidence can be seen in the international fund management sector this year. Fewer than one in five UK-based funds have made positive returns, and of the top 10 performers of 2018, very few have any stock in UK firms. In fact, any mention of “worst performing funds” can usually be found next to a mention of UK equity right now.

If general international investor sentiment is anything to go by, it might not get any better in 2019 either. Half of investors think the UK stock market will continue to slide into spring 2019 as Brexit continues to draw out up to and possibly beyond the end of March. Confidence is at a record low in UK companies.

But it’s not all doom and gloom. Some experts predict that any concrete Brexit outcome – hard or soft – will buoy markets and make the UK a surprise winner in 2019. They think the “fog of uncertainty” is holding back pent up demand for UK stock.

Moreover, two years of Brexit battering has left UK stock very much undervalued, according to some market watchers. Predictions of the market ‘rocketing’ after the UK leaves the EU are shared by more than a few investors.

Most fund managers believe 2019 is going to be a challenging year, but the UK could be a shining light amidst the gloom. Clarification on UK/EU relations could send unloved UK stocks soaring – and investors may even act sooner, pre-Brexit, to lock in any bargains still out there.

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