The consensual view is that the UK consumer is under the cosh. Real wages are growing at less than CPI, interest rates are ticking up and the economic risks are perceived on the downside, hence the squeeze is on. But is this really true? Our analysis suggests, with some caveats, a cautiously more optimistic outlook.While the noise may be unrelentingly negative- be it political procrastination, weak and unstable Government and an unprecedented negative media narrative, so long as confidence holds, the consumer is set to surprise on the upside again.
Not since Michael Foots 1983 election campaign has the UK been faced with such a radical alternative to the general consensus that the free market is broadly the best way to order society in this country. Since 1979 the Government has oscillated between pink and light blue. Now the choice appears between tepid blue and deep red. The note looks at the probability of the current Government falling and examines the credibility of Corbyn's approach examining the likely equity, bond and currency consequences of a Labour Government. Please contact us for a copy.
The overall outlook remains positive with anticipated DPS growth of 7.5% this year and 5% next. A primary driver for income stocks has been the debt/ equity arbitrage and this note examines the impact that possible rising interest rates might have on this asset class. We also look at the impact of a resurgent Sterling, against the USD and the impact that might have on payment streams.
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No one cares but they should. This note updates our thoughts on the UK's fiscal position and concludes that while there is an apparent improvement the system remains highly vulnerable to shocks. We believe the structural problem is largely unresolved however for a variety of reasons, which are largely political, we think the Government will seek to loosen the pure strings beyond current consensus expectations, initially gradually, but potentially by as much a as 1% GDP by 2020/1, as the temptation to spend increases.
The note outlines the prospects for UK consumer spending highlighting the Walbrook Consumer Spending Model. We see spending growth slowing in 2018 and 2019 but by less than the consensus view. Overall we remain cautiously optimistic on UK consumer prospects. Please contact us for a copy of the note.