UK equities: budget showdown

Article Abstract:

The UK Nov 1995 Budget may shift attitudes to share prices toward a more cautious stance. UK fund managers are not yet confident about UK equities, according to a survey by Gallup and Merill Lynch. There is a division of opinion on the performance of government securities (gilts). The gilts market may respond favorably to the Nov 1995 Budget, and this would mean that forecasts for equities would have to be revised, as would revisions of calculations for economic growth in 1996..

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Testing the gilt-equity link

Article Abstract:

UK government securities (gilts) could affect the performance of the UK stock market in 1996. There is a closer link between shares and gilts than there was in the 1980s since dividends have grown slowly during the 1990s, taking inflation into account. Changes in inflation expectations affects interest rates in the 1990s and this also links gilts and shares. The link could be broken and equities would probably benefit more than gilts if this happens.

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UK equities: struggling

Article Abstract:

UK equities could be affected by slower earnings growth and lower volume growth in 1996, according to Kleinwort Benson. A slowdown in demand from abroad could affect volume sales. Political change could also bring problems for equities. A new Labor government could be elected, or the ruling Conservative party could make too many concessions in the 1996 Budget in the hope of being re-elected. This would affect assets held in pound sterling.

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