Brewin Dolphin's Views and Forecasts for 2015

Tim Walker Head of Brewin Dolphin in Exeter said “We anticipate a significant year in 2015 – the unpredictable election and talk from all sides about more devolution will give us much to consider and be sure any changes will advantage our clients and our business here in Exeter.  Whilst we are impressed with the Government’s reform of savings to date, now is perhaps the time for some stability as too many short term changes to long term savings plans, can dent the confidence that savers need to invest for their futures.”

Tim Walker Head of Office and Divisonal Director at Brewin Dolphin in Exeter

David Nicol, Chief Executive of Brewin Dolphin said, “2015 sees the curtain open on the most uncertain political landscape in living memory - and there is very little idea of how this drama will play out. In this context, Brewin Dolphin is doing all it can to grow and protect its clients' wealth so that they will be in the best possible position to withstand whatever politicians deliver. The biggest challenge to our industry is to ensure that savers can benefit from the veritable savings revolution that starts on Flexiday in April and for the years to come.”

Stephen Ford, Head of Investment Management said, “We already know that the financial services industry begins this year with one of its biggest challenges yet. Wide ranging and huge changes to pension rules mean that financial advice will be of more importance than ever, and with questions remaining about how simplified advice will be implemented there has never been a more important time for this industry to make its voice heard.  Collectively we have to ensure that everyone understands the significance of these changes and that the State won’t be able to support us all to the same extent in future – and so savers need to make good decisions in increasingly complex areas. Brewin Dolphin is responding to these needs by reshaping our proposition to ensure we provide advice on the right products and have the expertise to do the best for our customers.”

Guy Foster, Head of Research said, “We have below consensus expectations for global growth next year as we see a combination of policies which is unhelpful for growth. Growth is clearly still very weak in a number of major economies while some others are seeing their growth faltering. The response still comes only from central banks, not from governments. We see an increasing number of economies lowering interest rates and potentially employing unconventional measures in 2015. In many cases, however, we are concerned that these measures won’t be significant in stimulating borrowing because underlying demand remains tepid. In fact the aggressive targeting of inflation at all costs risks being net contractionary force, a form of beggar they neighbour policy of competitive devaluation.

From an investor perspective the conditions remain benign. Away from policy errors, we are seeing a synchronous expansion in employment across the majority of major economies and at the same time falling input costs are going to help margins and disposable incomes. As a result we expect to see weaker growth, and consequently weak revenue growth but reasonable earnings with modest downgrades.

Policymakers trying to fight inflation is a recipe for continued strength in the bond markets and continued valuation expansion as all invested assets re-rate upwards. We see this combination helping the FTSE to a level of 7000 which would represent a capital gain of 11% from Friday’s closing price of 6,300. Added to which we expect shares to yield some 3%, more than bonds and instant access bank accounts which gives a total return of 14% but recognises the increased threat to some dividends.

In the UK we see the election as being unusually troublesome for markets. In general political risk is exaggerated and fears of a Labour victory or a hung parliament have not resulted in trauma for markets. We project that the Conservative will be the largest party in parliament although it will be close. More importantly, however, we don’t believe the Conservatives or Labour have the scope to achieve a majority together or with their current coalition partners, as such a confidence and supply arrangement looks likely which has scope to weigh particularly on the pound. Gilts would likely remain well-bid in that scenario although it might weigh on risk appetite in the equity market to a modest extent.

Interest rates will not rise in the UK until after the election and, given the MPC’s tendency to change monetary when the Bank of England’s inflation report is issued, August looks to be the first available opportunity. There remains, however, real doubt over whether this will prove possible. We believe the MPC would like to prevent consumers from becoming hooked on low interest rates. One rate increase is likely to be the worst the UK should fear in 2015 and, if headline inflation remains weak, even that will be difficult to achieve.

Rates are likely to rise in the United States at the Federal Reserve’s June 17^th announcement. Again the pace will be modest and as New York Fed Chief William Dudley remarked the market’s reaction will determine what happens thereafter. This looks like another year of headwinds for emerging markets and strong bond markets with reasonable potential for equity markets in general.”

Nick Fitzgerald, Head of Financial Planning said “2015 will also be momentous for financial planning. First, it is essential that all pension providers are ready for Flexiday in April and second, we expect there will be two more signals from the Chancellor of sweeteners to come if he is re-elected.

Firstly, that the individual Inheritance tax threshold will be increased to £500,000 (£1m per couple) and as the threshold for Higher Rate Tax will rise to £50,000 by the end of the decade, the top rate of tax will actually reduce from 45% to 40%, corroborating many studies that reducing the topline of tax, actually increases the Exchequer’s tax take.

We predict the journey to introduce both measures will begin next year and be concluded by the end of the next Parliament 2020.

However, we do expect that such incentives may be offset by reduced or even flattening of pension tax reliefs – so invest now while stocks last.”

Research predictions for 2015: 
Brewin Dolphin's Stock and Fund Picks for the New Year
Brewin Dolphin’s predictions for commodities in the New Year

Disclaimers
The value of investments can fall and you may get back less than you invested.
No investment is suitable in all cases and if you have any doubts as to an investment's suitability then you should contact us.
Past performance is not a guide to future performance.
Any tax allowances or thresholds mentioned are based on personal circumstances and current legislation which is subject to change.
If you invest in currencies other than your own, fluctuations in currency value will mean that the value of your investment will move independently of the underlying asset.
The opinions expressed in this article are not necessarily the views held throughout Brewin Dolphin Ltd. No Director, representative or employee of Brewin Dolphin Ltd accepts liability for any direct or consequential loss arising from the use of this document or its contents.