“Here we are again, happy as can be. . . ”, as my dear old Dad used to sing, when we were setting off on our summer holidays. Well, you could be excused for thinking that happy days are here again, if you read the right papers, or listen to the right radio stations: the ‘Footsie’ is up by something approaching a thousand points since my last column, mortgage approvals up by 19% in February and 16% in March and the Nationwide’s house price index actually rose in March! Years of experience have taught me to not to get too carried away, when things are starting to go well. In fact, I am less optimistic about the short-term future of the UK stock market, than I was when writing my piece for the February/March issue, when I said “when things are looking bleak, it is usually a good time to invest”. Not that I am pessimistic about markets, I still feel that many stocks and bonds are undervalued, but just not as cheap as they were. Many other economic factors are still negative, and there is a lot of bad news that needs to work its way through the system. Unemployment will go up, and house repossessions with it, and they will not be the only ‘bitter pills’ that will have to be swallowed. But ever the long-term optimist, I continue to believe that – barring earth shattering events, this year will be a positive one for stock markets.

The much predicted rally in bond markets doesn’t seem to have manifested itself yet, but more industry luminaries seem to be ‘putting their money where their mouths are’ and investing in quality bonds and bond funds. With some funds offering running yields of 10 – 15% the potential for some capital appreciation (with income reinvested) seems to far outweigh the potential risks. While I am on the subject of risk, yesterday, I met up with the manager of one of my favourite ‘protected growth’ funds. He was updating me on the roll-out of a higher risk, multi-asset fund (also designed and run by him) but I had to congratulate him on the success of his low-risk fund. It was designed to provide 100% capital protection; yet the units in the fund are up by over 6% since the launch in December 2008, a very creditable performance indeed.

Now just a brief few words on the recent Budget. The major impact is on the taxation, and pension tax-relief of those who earn in excess of £100,000 a year. A lucky few, most will think, who have probably already assessed the impact of the new rules. In the absence of any more notable events in the meantime, I shall give a summary of the most important budget proposals in the next issue. Until then, make the best of these ‘interesting times’.

David Foot