Following up his recent paper ‘Britain’s just not working’, Gary says he is both “concerned about the types of issues that we’ve got to get through economically” and “excited by what we are holding in the portfolios.”
In a hard-hitting interview, Gary urges the government “to wake up and smell the coffee” in relation to the shortage of workers that has seen some restaurants unable to reopen due to a shortage of staff after the lockdown. “Yes, have controls by all means. But if we haven’t got the people here to do the jobs, then let’s get somebody over who will.”
He is similarly critical of the government’s failure “to articulate what our future looks like outside the EU” which he argues “has caused problems with business investment.” Whether you’re a remainer or a Brexiteer, and Gary who voted remain insists he is not a ‘remoaner’, “the truth is that Brexit has been handled pretty appallingly” since the vote in 2016.
Commenting on the Bank of England’s latest quarterly forecast, which he describes as “the gloomiest thing I‘ve ever seen come out of a Central Bank” Gary declares himself “quite shocked” at the extent of the recession the bank is predicting.
In contending that the Bank “probably got it wrong” in forecasting that after inflation levels of 9% to 10% in Q3 of 2023 it is going to go back down to 2% very quickly, Gary admits he is “putting his neck on the block”. Gary’s own view is that inflation is a bit more transitory and will come down “a bit faster” than the bank expects, although not to the 2% level that the Bank of England is talking about. For the reasons set out in his paper, Gary says inflation “is going to get a bit stickier from here on in.”
Despite the problems of raging inflation, poor levels of business investment and weak productivity growth Gary strikes an optimistic note. Yes, there will be “choppy waters for the foreseeable future”, especially with a new prime minister taking office, but the current difficulties as well as high levels of uncertainty have thrown up some “good opportunities” for the Investment Team.
“A lot of stocks have been marked down quite viciously during the year, and actually on the Investment Team we are beginning to find lots of very good companies at decent prices.”
While exciting stock opportunities are beginning to emerge, Gary warns that not all assets are similarly attractive. Declaring “the end of a 30-year period of gradually declining interest rates to record all-time lows”, he warns that “holders of long-dated bonds, who hope that interest rates are going to go back down to 2.5%” are particularly vulnerable. “A good old dose of mean reversion” means there is the potential for these bonds to lose “about 50% of their value”. To read Gary’s paper, click on the banner below or scan the QR code.
