investment tips for 2011 ; The end of 2010 is fast approaching and people are starting to think about where to put their money next year. Simon James, founding partner of Gore Browne Investment Management tells Money Matters the investment themes to watch out for in 2011.
1. Growth
Globally there is unlikely to be a double dip, but worries about Chinese tightening will persist for some time. In the UK there may be some negative months of consumer activity in Q1 2011, which will raise double dip anxiety.
2. Inflation
This is more of an issue for emerging economies than developed ones. UK statistics will remain high due to commodity prices and tax increases, but there will be little transmission to wage growth, and core inflation measures, excluding taxes, will remain below target. This will justify continued monetary easing, and low interest rates.
3. QE2
This will commence in the UK around Easter, as fiscal tightening squeezes consumers. This will be a good chance to sell gilts.
4. Credit confidence
UK and European banks will continue to suffer crises of confidence. Any capital raising will continue to fall short of broad pre-emptive action. Credit will remain tight. Remain wary of bank shares.
5. UK Equities
Among UK equities there will continue to be a divergence of performance between beneficiaries of the “new normal” and others. On the one hand companies generating good cash flows which can raise dividends, de-equitise, or drive M&A, and beneficiaries of emerging market growth or UK and global infrastructure spending will thrive, while those exposed to domestic consumption will struggle unless they are winning market share. Our tip is to avoid the index and buy Trojan Income.
6. Developed markets
Trends within international developed markets will be similar to those in the UK. Buy Findlay Park American Smaller Companies.
7. Emerging markets equities
These will be volatile early in the year, as tightening dominates investors’ thinking. Later they will recover their position as leaders in global equities, as growth drives value. There will be no bubble here. Investors can expect substantial issuance of new shares. Buy Templeton Emerging Markets.
8. Industrial & Agricultural commodities
The long term trends for both remain intact. Industrial commodities may fallback as concerns about the degree of tightening in emerging economies prevails, but they will recover. Agricultural prices may also fall back as hope for next year’s harvests rise, but the levels of inventories are historically low, and any supply disruption will cause spikes in prices. Buy Investec Enhanced Natural Resources Fund.
9. UK Property
Well financed UK property is interesting. Yields are good relative to corporate bonds, and property is not a homogeneous market. Buy Land Securities.
10. Private Equity
Listed private equity shares will benefit from closing of discounts, as realisations continue to benefit their financial positions. They will be beneficiaries of the general rise in corporate cash flow generation. Either buy small positions in a few funds, or access private equity “lite” via RIT or Caledonia.
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