AJ Bell Comments

“Helped by the long-awaited drop in conduct and litigation costs, loan and asset write-downs and restructuring charges, the Big Five FTSE 100 banks racked up a stated pre-tax profit of £9.3 billion in the second quarter of 2018, their best three-month showing since the £10 billion total racked up between January to March 2013,” says Russ Mould AJ Bell Investment Director.

The Office for National Statistics has today published its latest analysis of UK longevity data, alongside a comparison with major developed countries.

“Management’s decision to recommend a cash offer for the John Laing Infrastructure fund from a consortium of financial buyers could well trigger more bids for the remaining London-quoted investment trusts in the infrastructure area for three reasons,” says Russ Mould, AJ Bell Investment Director.

“Yet another increase in the total cash pile at his Berkshire Hathaway, to $129.6 billion, despite $12 billion in net new investments in traded securities in the second quarter (mainly Apple), suggests that master investor Warren Buffett is still having difficulty in finding value in US – and perhaps global – stocks,” says Russ Mould, AJ Bell Investment Director.

The Work and Pensions Committee has today launched a wide-ranging inquiry into pension costs, charges and value for money.

“RBS boss Ross McEwan had identified three major obstacles to the bank’s long-awaited return to the dividend list. He has now satisfied European state-aid regulators regarding the Williams & Glyn subsidiary, settled with the US Federal Housing Agency and in principle reached a $4.9 billion settlement with the US Department of Justice, so all three of those boxes are ticked,” says Russ Mould, AJ Bell Investment Director.

“The substantial jump in Tesla’s shares in after-hours trading in the US could lead you to believe that the car maker is firmly back on track after a torrid few months of production problems, a plunging share price and public relations gaffes from its boss, but a more muted reaction from the company’s traded bonds shows that there is still much work to be done,” says Russ Mould, AJ Bell Investment Director.

“If stock market investors want a guide as to what they need to know about the Bank of England’s second rate hike in ten years, then they should take a look at the UK Government bond – or Gilt – market,” says Russ Mould, investment director at AJ Bell.

The Office for National Statistics (ONS) has today published early indications of its Wealth and Assets Survey.

“Apple’s third-quarter earnings easily beat analysts’ forecasts, as sales rose 17% and earnings per share soared by 40%, as price increases on its hardware and flourishing services and app store revenues more than compensated for sluggish volume growth in iPhones, iPads and iMacs,” says Russ Mould, AJ Bell Investment Director.

“The first-half results show the way forward for Lloyds and its shareholders. The combined cost of bad loans, PPI compensation and restructuring costs fell by £539 million compared to the first six months of 2017 and pre-tax profit rose by £573 million. It’s that simple,” says Russ Mould, AJ Bell Investment Director.

“Gone are the days when BP was offering a dividend yield of 7% to 8% and that is actually a good thing, because it means investors are no longer demanding such a high return to compensate themselves for the risks associated with holding the shares,” says Russ Mould, AJ Bell Investment Director.

The Treasury Committee has published its report on Household finances: income, saving and debt.

“Roll-up strategies, where a series of acquisitions are used to create growth (or at least the impression of it) tend to work very well – until they don’t, and that is what serial plastic packaging company purchaser RPC now seems to be finding out the hard way,” says Russ Mould, AJ Bell Investment Director.

“Investors in Netflix are suffering a rare reverse today as the shares are tumbling amid disappointment over the company’s subscriber addition number for the second quarter of the year. But nerves over the subs figure relay reflect the company’s lofty valuation and how the company is still a long way from generating the sort of cash flow that would justify its $155 billion market capitalisation,” says Russ Mould, AJ Bell Investment Director.

A report in the Times today (17th July) suggests the Department for Work and Pensions (DWP) is planning to ‘kill off’ the Pensions Dashboard, a project it was hoped would eventually allow savers to see all of their retirement pots in one place online.

The Financial Conduct Authority (FCA) has today published the interim findings of its platforms market study.

Savers have been fleeced out of over £51 million by investment fraudsters in the first three months of the 2018/19 tax year, new analysis of official City of London Police figures reveals.

Last month the Financial Conduct Authority (FCA) published its Retirement Outcomes Review, a long-awaited report on the pension freedoms.

“Sterling has suffered three crises of confidence since 1945, so a repeat cannot be entirely ruled out owing to the current political upheaval and lack of clarity on Brexit, although previous notable plunges have been the result of economic problems rather than any games of musical chairs at Westminster,” says Russ Mould, AJ Bell investment director.

“It’s not as if much further evidence was needed, but today shows just how tough it is to be a retailer in the current environment of low wage growth, high debts and brittle consumer confidence,” says Russ Mould, AJ Bell investment director.

“Shares in house builder Barratt are trading at their lowest level since January 2017 despite a reassuring full-year trading update, which shows further price increases, better-than-expected profit and a higher-than-forecast net cash pile, all of which support the company’s plans to pay meaty dividends to shareholders,” says Russ Mould, AJ Bell Investment Director.

Graduates have paid off £50 million in student loans that they didn’t owe in just one year

HMRC has delivered a bitter blow to millions of savers after refusing to re-think its stance on the taxation of pension freedoms withdrawals.

“The company may be Great Portland by name but its first-quarter update was neither good nor bad and as such will do nothing to change the views of those investors who feel that UK real estate stocks now look cheap or those who think that Brexit and the ongoing hollowing out of the High Street means the asset class is a disaster waiting to happen,” says Russ Mould, AJ Bell Investment Director.

The Financial Power of Women report released today by Fidelity International shows that women face a lower retirement income than men.

The Financial Power of Women report released today by Fidelity International shows that women face a lower retirement income than men.

The Government has confirmed its long-awaited ban on pensions cold-calling will be delayed until Autumn this year as it consults further on “technicalities” in relation to the ban.

“The latest GfK survey on UK consumer confidence shows a fresh decline to -9 in June and leaves us without a score above zero since January 2016. This may help to explain the woes of many retailers but perhaps executives at (and shareholders in) the house builders need to start paying attention to this data too,” says Russ Mould, AJ Bell Investment Director.

The Financial Conduct Authority (FCA) has today published its long-awaited Retirement Outcomes Review

The share bull market in the US has currently run for 3,399 days – just 53 days shy of the longest bull-run since the second world war of 3,452 days which ran between October 1990 and March 2000.

“General Electric announced the merger of its oil and gas operations with Baker Hughes in October 2016, when times were tough for oil services and equipment providers, and closed the transaction in July 2017, right near the sector’s lows. There now has to be a risk that it will undo that deal just as trading conditions start to improve, judging by today’s trading statements from FTSE 250 firms Hunting and Wood Group,” says Russ Mould, AJ Bell Investment Director.

Addressing the House of Lords on Monday evening, DWP spokeswoman Baroness Buscombe said the Government intends to “examine the process for payment of pensions tax relief” in response to concerns low-paid workers in ‘net pay’ schemes are losing out.

As the UK regulator prepares to publish the long-awaited Retirement Outcomes Review report in response to the pension freedoms, new research* shines a light on what has happened to the £17.5 billion that has been flexibly withdrawn since April 2015.

The Lifetime ISA is a valuable new option for people saving for a house deposit or retirement but there are some complications in the rules that are catching investors out.

“After a stumble in spring, amid the Cambridge Analytica data scandal and broader worries over regulation, trade and tariffs, technology stocks are surging higher once more. The Fang+ index in America, which consists of ten high-flyers in total, has just passed the 3,000 level for the first time. It took the benchmark just 1,365 days to get there after its launch at 1,000 in autumn 2014. By contrast it took the NASDAQ Composite 1,570 days to get from 1,000 to 3,000 between July 1995 and November 1999,” says Russ Mould, AJ Bell Investment Director.

The Government has published its response to the Work and Pensions Committee’s report into the pension freedoms.

AJ Bell is urging the Government to exempt pensions and ISAs from inheritance tax (IHT) as part of a drive to simplify the UK savings landscape.

“A vote of 6 - 3 to leave interest rates unchanged at 0.5% and Quantitative Easing (QE) unchanged at £445 billion suggests that the Bank of England is closer to the European Central Bank rather than the more aggressive US Federal Reserve in its outlook, with any tightening of monetary policy likely to come slowly and in modest steps,” says AJ Bell Investment Director Russ Mould.

New DWP research suggests 10% of employers have implemented lower wage increases to absorb automatic enrolment costs

“Second-guessing Tony Pidgley, chairman of Berkeley Homes, is usually unwise and investors appear to be taking his forecast that profits have peaked at the house builder more seriously today than when he first made it back in December,” says Russ Mould, AJ Bell Investment Director.

The FCA today released its Financial Lives survey of UK consumers’ attitudes to financial products.

New Office for National Statistics (ONS) research supports claims UK life expectancy improvements may be ‘grinding to a halt’

With the respected Institute for Fiscal Studies (IFS) warning the so-called ‘Brexit dividend’ doesn’t actually exist, the Government is facing questions over how it will find the extra £20 billion a year Prime Minister Theresa May has promised for the National Health Service.

“The latest promotions to – and relegations from – the FTSE 100 index come into effect today and investors will be intrigued to see how shares in both relegated firms are down in early trading. G4S is down 3% and Mediclinic down 1%. A glance at the promoted firms will show that GVC is up 1% to perhaps suggest there is a trading strategy that could be followed here, although a 3% fall in the other index entrant, Ocado, suggests that there isn’t such easy money to be found after all,” says Russ Mould, AJ Bell Investment Director.

“Sainsbury’s chief executive Mike Coupe may have been caught singing ‘We’re in the Money’ when his guard was temporarily down but Tesco boss Dave Lewis must be feeling equally pleased with himself after the first-quarter sales figures,” says Russ Mould, AJ Bell Investment Director.

“The US Federal Reserve’s determination to continue tightening monetary policy, via both higher interest rates and sterilisation of Quantitative Easing, is likely to make life more difficult for investors, if history is any guide, even if financial markets are largely still behaving as if improved returns on cash and increased borrowing costs poses little or no threat,” says Russ Mould, AJ Bell Investment Director.

“To the surprise of many, OPEC and Russia have stuck to the production cuts of 1.8 million barrels a day that they agreed upon in December 2016, even extending them to the end of this year, but all eyes are now on the oil cartel’s latest meeting in Vienna on 22 June, to see if Riyadh and Moscow in particular decide to stay with the status quo or start to nudge output higher,” says Russ Mould, AJ Bell Investment Director.

“It might not be a household name although a record of 39 consecutive increases of more than 5% in Halma’s annual dividend suggests that it should be, especially as this track record means the FTSE 100 firm is a good example of how a company that gets the basics right can reward patient investors,” says Russ Mould, AJ Bell Investment Director.

“Investors don’t appear to be overly worried about the latest state of affairs with international trade following the G7 meeting, given that markets in Asia and Europe move ahead on Monday. In the UK, the FTSE 100 moved up 0.5% in early trading to 7,718, helped by gains in utility, tobacco and financial stocks,” says Russ Mould, investment director at AJ Bell.

“At least the BT share price showed some mercy as it failed to bounce sharply upon the announcement that chief executive Gavin Patterson will step down later this year, but investors and the company’s board have finally decided it is time for new leadership,” says AJ Bell Investment Director Russ Mould.

“Today it is the turn of the National Audit Office to unpick and quantify the cost of the Carillion debacle,” says AJ Bell Investment Director Russ Mould. “The NAO hands out further criticism of the Government’s efforts to monitor the financial health of central government’s sixth biggest supplier by value, suggesting it did too little too late to properly monitor the risk posed by its reliance on Carillion and make appropriate contingency plans.”

“So much for claims last July from RPC’s chief executive officer, Pim Vervaat, that the plastics packaging specialist’s share price ‘significantly undervalues the performance to date and the Group’s future prospects,’ says Russ Mould, AJ Bell Investment Director.

The Office of Tax Simplification has today published a review entitled ‘Savings Income: Routes to Simplification.'

“George Osborne received all sorts of criticism when he sold a 6% stake in Royal Bank of Scotland at 330p a share, for a £1 billion loss, back in 2015, so his successor Philip Hammond was always going to get a hard time if he sold any further Government holdings at less than the taxpayer’s 502p purchase price. Patriots may also be disappointed to note that the four lead investment banks who co-managed the deal were all American, although RBS may not have been too keen to work with direct local competitors such as HSBC and Barclays anyway,” says Russ Mould, AJ Bell Investment Director.

Influential Work and Pensions Committee chairman Frank Field MP has written to the trustees of the Dixons Retirement and Employee Security Scheme – the defined benefit scheme of Dixons Carphone – raising the issue of the balance struck between paying dividends and deficit repayments.

“The latest quarterly reshuffle of the FTSE 100 index is due to be calculated on the basis of closing market valuations on Tuesday 29 May and at the moment Ocado is poised to break into the UK’s corporate elite at the expense of support services firm G4S,” says Russ Mould, AJ Bell Investment Director.

“A sharp jump in Marks & Spencer’s shares this morning means that the retailer got its news management right, by releasing the details of big store closures ahead of its results, but the numbers themselves are nothing to be proud of and show just how much work there is still to be done,” says Russ Mould, AJ Bell Investment Director.

“The FTSE 100 continues to overcome investors’ concerns over the Brexit negotiations, a wobbly Government, indecisive central bank and modest UK economic growth as it reaches further new highs. There are three good reasons why the index could keep going, too, and launch a fresh assault on the 8,000 mark – although investors also need to be aware of the potential downside and what could still go wrong,” says Russ Mould, AJ Bell Investment Director.

“Investors appear to be taking today’s very cautious trading outlook from Ryanair in their stride, as the airline’s shares are gaining altitude in early trading. This may be a reflection of the company management’s long-term track record of getting it right and providing customers with what they want, hopes that the spat with the unions is over and that further consolidation in the airline business will help keep supply and demand in balance,” says Russ Mould, AJ Bell Investment Director.

Russ Mould, investment director at AJ Bell, looks at four factors that have helped power the FTSE 100 to record highs:

“Ocado’s fourth overseas technology partnership, with American grocery giant Kroger, is potentially the biggest of them all so far and this means more pain for the short-sellers who continue to question the lofty valuation attributed to the FTSE 250 firm’s shares,” says Russ Mould, AJ Bell Investment Director.

“Today’s decision from Culture Secretary Matt Hancock and Sports Minister Tracey Crouch to reduce the maximum stake on a Fixed Odds Betting Terminal to £2 is prompting a predictable degree of wailing from some bookmakers, although their share prices are proving relatively resilient,” says Russ Mould, AJ Bell Investment Director.

“The report prepared by the Parliamentary Business and Work and Pensions Committees on Carillion offers a clear analysis of what caused the company to collapse and offers a potent-looking list of potential responses, including a break-up of the big auditing firms, an overhaul of the UK’s corporate governance regime and how management teams are paid and reform of key regulators,” says Russ Mould, AJ Bell Investment Director. “The problem is that we have been here before. The debate over how companies are run and for whose benefit still rages on, with investors seemingly no better protected now than in the early 1990s, given that a FTSE 250 firm has just been able to go broke in plain sight.

The Pensions Regulator (TPR) has today published its Corporate Plan for 2018-2021, setting out the main areas of focus for the next three years.

“While no-one at RBS will be able to take any pride in yet another huge fine from a regulator, and shareholders can hardly be pleased that the firm’s book value is taking another hit as a result, today’s news that the bank has, in principle, reached a settlement with the US Department of Justice over the alleged mis-selling of mortgage-backed securities is likely to be taken as good news by the stock market for four reasons,” says Russ Mould, AJ Bell Investment Director.

The Bank of England’s Monetary Policy Committee has voted by a majority of 7-2 to maintain Bank Rate at 0.5%

“The Bank of England’s latest policy flip-flop has already hit the pound hard, and may not do much for the Old Lady of Threadneedle’s credibility either, but it could help bring utility and real estate stocks back into focus,” says Russ Mould, AJ Bell Investment Director.

“The natural temptation is to put the weak British Retail Consortium sales figures together with St. Modwen’s decision to sell around a quarter of its retail property portfolio and come up with yet further gloomy headlines – but perhaps investors need to think a little harder,” says Russ Mould, AJ Bell Investment Director.

“Oil traders may have seen President Trump’s decision to withdraw the US from the 2015 nuclear sanctions coming from some distance away but confirmation of the move and American plans to exclude OPEC’s third-biggest producer* from global markets is still giving a fresh lift to the price of crude,” says Russ Mould, AJ Bell Investment Director.

Latest official statistics show almost three-quarters (73%) are now saving in a workplace pension, up from 47% in 2012.

The Pensions and Lifetime Savings Association (PLSA) will tomorrow (5th July) publish a report setting out a package of reforms designed to boost pension saving in the UK.

Latest HMRC figures reveal £22million in overtaxed pension freedoms payments was repaid in Q1 2018

“The hit TV series Billions, which follows the fortunes of a New York hedge fund manager, has recently witnessed the death of a visionary entrepreneur when his new space rocket crashed to earth with him on board and you can’t help but wonder if the canny writers were having a gentle dig at Tesla’s Elon Musk,” says Russ Mould, AJ Bell Investment Director.

“Apple beat analysts’ forecasts for its second quarter, reassured on iPhone growth and upped its already massive cash returns to investors, by increasing its dividend and launching a new $100 billion share buyback scheme – but the fact that its shares rose only 2% after hours, shedding some of their initial gains, suggests that the tech firm has yet to convince everyone that it remains a growth stock rather than a more mature cash machine,” says Russ Mould, AJ Bell Investment Director.

“BP’s best operating profit since 2014 leaves the oil major’s shares trading at a five-year high as investors welcome the support the first-quarter earnings figures show for the company’s tempting dividend yield, even if there are still a few issues regarding cash flow, which still does not technically cover the quarterly shareholders payout,” says Russ Mould, AJ Bell Investment Director.

“Assuming the Competition and Markets Authority lets the deal pass relatively unhindered – and the manner in which it waived through the Tesco-Booker deal suggests it might – then the next decision that will follow the proposed Sainsbury-Asda merger is Morrisons’ competitive response,” says Russ Mould, AJ Bell Investment Director.

“Tuesday’s second-quarter figures from Apple have huge implications for both the company’s own shares, the wider technology sector and even the whole US stock market, as they may leave investors having to decide whether they are happy to swap state-of-the-art technological engineering for financial engineering,” says Russ Mould, AJ Bell Investment Director.