City: Taking stock
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.HOW IS the U-turn in economic policy signalled by John Major last week going to affect the landscape for investment? On the face of it, the impact should be quite dramatic. From a low inflation, low growth, high interest rate, high exchange rate environment, we are about to be flipped into a world of low interest rates and low exchange rates. The reverse side of the coin for growth and inflation is less easy to predict. Little more than a month ago, base rates stood at 10 per cent. By Christmas, they could easily be half that level if the Government is serious about a policy for growth.
Theoretically, that should make equities highly attractive even after taking account of last week's heady 100 point climb in the FT-SE 100. Shares presently yield an average of about 4.5 per cent. With interest rates at 5 per cent, the gap would be at a historic low. In the US, the Fed's low interest rate policy has led to a flood of money into stocks and shares.
The same thing could be about to happen here. Cash is king would become replaced by a new mantra: cash is trash. But watch it. Business confidence is still plunging and the outlook for both earnings and dividends is poor. The London market will want real signs of economic revival before following Wall Street's example.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments