Markets remain calm over Budget announcements

NFU Mutual investment manager Kevin Watson describes the impact that Chancellor Philip Hammond's 2017 Autumn Budget has had on the investment markets.

“From an investment perspective, markets have reacted fairly calmly to the Chancellor’s tax and spending plans. Leading shares, for example, are virtually unchanged.

"With a difficult Budget to deliver given the continued heavy debt overhang and Brexit uncertainties, the main economic story is that he was blown somewhat off course by the reduced OBR economic growth and productivity forecasts. Chancellor Hammond has, however, delivered a range of fiscal loosening of £6bn and £10bn this year and next.

The main economic story is the reduced growth and productivity forecasts
Kevin Watson
NFU Mutual investment manager

“He has steered a fairly balanced path with a real focus on housing (increased housebuilding, planning reform and funding), extra resources for the NHS (c.£7bn), personal tax changes and a boost to young first time buyers, abolishing stamp duty up to £300,000.

"His emphasis on skills, investment and infrastructure will help improve productivity. Individuals and companies will benefit from the range of Income Tax changes, fuel duty freezes and business rate changes."

Equities hold steady

“Equities held steady on the announcement despite the deterioration in the outlook and sterling initially moved lower with many policies generally as expected with housing, technology and automotive sectors highlighted.

“Bonds may benefit from slightly reduced supply in the short term as tax receipts are currently ahead of plan, steady inflation and the improved deficit numbers following reclassification of Housing Association debt.

Importantly, weaker growth may also help sentiment as it means interest rates may rise less quickly over coming years with this weaker outlook."

 Investors consider global context

“In summary, with many important changes to combat the economic deterioration and prepare the economy for uncertainties ahead, it is likely that investors’ attention will return to consider the wider global issues – global economic growth, the state of Brexit negotiations and its impact on sterling and politics; whether wage pressures begin to push inflation given tight labour markets; the high levels of consumer and government debt etc. which will drive stocks and shares and currencies.”

Watch NFU Mutual chief investment manager Paul Glover