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INVESTOR
CENTRE
The shock of the Brexit vote
proved short-lived.The UK
enjoyed a post-Brexit bounce
as overseas investors were
attracted by a weaker pound,
and domestic ones were
encouraged that the result was
not having a significant impact
on the underlying economy.The
Bank of England’s decision to
cut interest rates offered further
reassurance that policymakers
are willing to act.Uncertainties
about global markets remain,
however. In the US, interest rate
policy and the election result
could impact sentiment.The
EU is trying to brush off the
impact of Brexit but the vote has
increased political uncertainty.
China’s economy remains a
concern, and Japan and the EU
continue with programmes of
monetary support. Falling
government bond yields
indicate investor nervousness.
On the positive side, the UK
and US economies continue to
show signs of recovery.
IN THIS SECTION
24 Viewpoint
David Page, AXA Investment Managers
26 Unit Trust Portfolios
28 Fund manager commentaries
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THE INVESTOR
Do you think that the recent
cut to interest rates and
additional stimulusmeasures
are enough to protect theUK
economy fromrecession?
The cut will obviously make some
difference. It was introduced as part
of a package of measures to ensure
that the cut feeds through to the retail
client base of banks. If you include
the extension of quantitative easing
(QE) and the purchase of corporate
bonds, we estimate that the combined
effect is equivalent to a 0.75% rate
cut in‘old money’ – that is, before
these exceptional monetary
circumstances. It should help to
mitigate the headwinds the UK
economy is facing but it will not
completely offset them – and actually,
the Bank of England has said it is
not trying to do that.Many
commentators are suggesting that
there is a role for fiscal stimulus of the
economy – the technical name for
government stimulus through things
like tax cuts or spending increases
– perhaps through a repeat of the
temporaryVAT reduction introduced
in the wake of the financial crisis, or
a similar policy which will give
instant relief. It will be interesting to
see what the new Chancellor does in
hisAutumn Statement.
Viewpoint
DavidPage, SeniorEconomist,
AXAInvestmentManagers
The economist analyses the health of the UK
economy and likely effects of Brexit, and the
impact of global politics on worldwide growth
What do you think of the
speculation that therewill be
further rate cuts this year?
The Bank of England has said that
it expects rates to fall to near zero
and we think that could mean a cut
to 0.1%, probably in November.
That is a cut of only 0.15%, while
past economic cycles have seen rates
fall by 0.25%, so it is only a small
additional easing.The lion’s share
of the monetary stimulus will have
to come fromQE.
How, andwhen, will Brexit
impact theUKeconomy?
Our analysis at the start of the year
found that there would be a negative
impact of between 2% and 7% of
GDP over the next 15 years.This was
a long-term projection to give time
for the economy to transition and
establish a new equilibrium.That is
a substantial loss over the period,
equivalent to a small recession –
indeed, at the mid-point of the
forecast, it would be quite a big
recession. But spread over 15 years,
it is equivalent to only 0.25% to
0.5% a year. In the near term, we
expect a slowdown in growth in
2017 and 2018, which may meet the
technical definition of a recession,
then a pick-up in growth after that.
FUND MANAGER VIEWPOINT: DAVID PAGE, SENIOR ECONOMIST, AXA INVESTMENT MANAGERS