Politics and monetary policy have dominated the financial press this week, with the latter also having a profound effect on markets. 
Following on from the ECB’s announcement of even looser monetary policy last Thursday – which caused another snap rally in European equities and bonds – the US Federal Reserve told the market this week that it was only planning on one rate hike this year, instead of the four it had previously stated.
The repercussions of this weren’t very positive, with gold flying a further 3 per cent in US dollar terms on the back of the comments. All told, the precious metal is now up 20 per cent in sterling terms since the start of the year, highlighting the fact that many are losing faith with central bankers’ abilities to control inflation and the economy.
Performance of index in 2016
Source: FE Analytics
In the UK, we had the Budget and chancellor George Osborne has brought in a number of changes to the world of finance such as a new Lifetime ISA and an alteration to income tax on bond funds.
All this news, along with our access to FE Analytics and the shedload of data it provides, has meant we at FE Trustnet have had plenty to write about this week. So, here are a selection of our favourite articles.
Have a very enjoyable weekend!
Lifetime ISA under the spotlight: A gimmick, Trojan Horse or long overdue help for millennials?
We start with the Budget. In this article, senior reporter Daniel Lanyon took a closer look at the new Lifetime ISA and gauged the reaction of financial experts towards them.
The new tax wrapper is aimed at investors looking to save for a first home or for retirement. The government will contribute £1 for every £4 saved. If investors take out their money before they are 60 or not to purchase a home, however, there will be a 5 per cent charge, they will lose all of the government’s contributions and lose their capital gains.
The Lifetime ISA
Source: HM Treasury
Osborne has long voiced his concerns over the lack of savings culture among young people and the potentially catastrophic consequences this could bring about in terms of providing later life care for an ageing population.
Nevertheless, his new ISA has been met with mixed reviews.
Some, such as Aon Hewitt’s Lynda Whitney warned: “The new Lifetime ISA may be welcome, but it could well be the Trojan Horse that kills off pensions at a later stage”.
Others, like Mark Soper, co-founder of RetireEasy.co.uk, were concerned the Lifetime ISA may impact on an individual's decision to join a workplace pension plan as the ability to save in both may prove difficult to low earners and younger savers alike.
Revealed: The UK funds that have consistently avoided the worst of the FTSE’s falls
This article was a follow on from a study put together editor Gary Jackson, where he questioned whether maximum drawdown is really any use in helping investors find defensive funds.
His findings were that locating a fund that was one of the best members of its peer group for protecting capital during past market crashes offers investors little indication on whether it will help shield them from future sell-offs as very few have consistently fallen less than the wider market during times of stress.
Nevertheless, in this article, he highlighted the funds that have a very strong record when it comes to maximum drawdown and appear to have persistently shielded their investors from the biggest falls in the market.
He also used an easy to read gallery structure for the article, which has been received very well by our readers.
These funds include Invesco Perpetual Income & Growth, Threadneedle UK Equity Income, Artemis Income and Premier Monthly Income.
Bruce Stout: Today’s financial landscape is “distorted” and “dangerous”
This article covered notorious market bear Bruce Stout’s most recent message to investors, which again didn’t paint an overly rosy picture of the global financial landscape – as reporter Lauren Mason noted.
In the note, Stout warned that today’s economic landscape has never been experienced before, even by the most seasoned investor, yet many are becoming complacent about the turmoil that all asset classes and regions are currently enduring
“History is littered with examples of arrogance discarding the familiar for self-justification – ‘it's different this time, profits and dividends don't matter, business cycles and market forces are dead, a new paradigm for all to see’. When such contempt arises, the financial consequences are seldom redeeming,” Stout said.
“Structurally plagued by unrecognisable economic fundamentals, yet possessing unquestioning conviction that nothing is seriously untoward, the financial world ignored escalating dissonance between familiarity and contempt over the review period [2015].”
“To those familiar with history, nothing was familiar. Whilst at best disconcerting, and at worst downright dangerous, the most unsettling aspect is how ambivalent the world has become to the prevailing distorted financial landscape.”
“Current economics, markets, geo-politics and demographics may confound the laws of rational behaviour and common sense, yet few are prepared to acknowledge the fact. The collective denial casts an eerie silence over the reality of an increasingly unrealistic world.”
Whitechurch: Three UK income funds we are backing to avoid dividend cuts
Fears have been ramping up over the outlook for UK equity income funds, with many expecting widespread dividend cuts across the FTSE All Share due to a more challenging macro environment, increased pay-out ratios but falling levels of dividend cover.
This has painted a pretty dark picture for investors – who still very much need income given the lack of yield elsewhere in the market – but Ben Willis, head of research at Whitechurch, told news editor Alex Paget there are a number of IA UK Equity Income funds which are well placed to deal with the uncertain environment.
Two of those were CF Miton UK Multi Cap Income and CF Woodford UK Equity Income, which Willis uses widely across his client portfolios, as well as Trojan Income – the only fund to have grown its dividend in each of the last 10 years.
Trojan Income’s dividend history in pence per unit
Source: FE Analytics
“This is a fund that has an exemplary dividend track record. The fund is very income-orientated and is plain vanilla in many ways as, thanks to their analysis at a stock level, the team won’t invest in those companies with challenged dividends,” Willis said.
Five stocks that Jupiter’s Mitchell is backing for world domination
In this story, Stephen Mitchell of the Jupiter Global Managed fund revealed five stocks in his portfolio that he is particularly excited about at the moment.
The manager highlighted Pfizer, which he said could be a major beneficiary of the ageing population in the West and the growing demand for drugs in emerging markets; Merlin Entertainments, due to its ambitious expansion plans in Asia; and Pernod Ricard, which he says is at an attractive entry point following overblown concerns about what impact an anti-corruption drive in China will have on sales of luxury brands in the country.
He also highlighted employee services firm ADP and Cheung Kong Infrastructure, listed in Hong Kong.
