Despite encouraging signs that the slump is close to being turned around, investors are not taking any chances
This week, the phrase that pays is _looking through the recession'. Investors are still worried by the economic slump, but in the same way that they knew it had arrived before it was announced, they know it is leaving before it has left. Optimism, there is not. But there is much talk of Prudence, a dame once loved and left by the fickle Chancellor of the Exchequer.
The current consensus is for UK economic growth to pick up again by the end of 2002. Scan the headlines of the financial press and words like _improved', _better', _up' and even, in a rare occurrence, _green shoots' are appearing. People want to believe the market will revive soon. They want things back to _normal', even though that now means the highly abnormal bull market of the past 10 years.
The British are actually saving for the first time in years, according to one poll. The message is getting through: their best shot at increased state benefits is under a Labour government, which is less and less inclined to grant them. If people are putting their money in the bank, interest rates are pitifully low. Property, the next most favoured asset class, is a little pricey, since job losses haven't been bad enough to rock the housing market.
Their next stop will probably be equities. The UK has weathered the fallout from the full-blown US recession rather better than many others but sentiment is not exactly robust. The FTSE 100 index has been horribly volatile, bouncing optimistically with any good news and slumping disconsolately at the first whiff of trouble. It is not at all certain the leading index will end the year above its psychologically important level of 5,000.
Once the festive season has been put to bed, it is time for all good financial advisors to don weatherproofs and get out there to sell. Here is the slogan: Saving for a rainy day is good but investing for one is even better. There is much to be done to recoup the losses of the last Isa season, when fund management groups were surprised by the degree of investor caution.
Stockpickers will quickly run into the professionals waiting to sell into the traditional end-of-year rally. But how long will they wait? If, as a sad person, you have nothing better to do on 31 December, this might be the time to act. The fleet of foot (or perhaps the loud of mouth) have already abandoned their defensive holdings for something a little more racey. They are jogging with the cyclical stocks, preparing to offload the lame and lazy when the rest of the punters catch up.
Which should be sometime in mid January. A miserable time for almost everything else, January is usually a bumper month for rebounds. Those stocks that had the hardest year previously tend to show the fastest rise. Distance lends enchantment to the view. A funny red hat, a pair of lit-up antlers and a few New Year's resolutions will make a day trader out of any couch potato.
However, this season's must-have investments are more homely than hot, more steady than spectacular. We like enterprises that are long on dividend payments and short on mission statements, companies that are still in their old offices and under their old CEOs. The Chancellor may have deserted Prudence, but down in the market, they are fighting to dance with her.
Partner Insight: For Blackfinch, the arrival of its IHT portfolio services was a 'natural evolution' in the group's offering and points to an established track record of returning cash to investors.
Senior Managers Regime
Interest rate outlook unchaged
FCA made demands last week