Why there's little cheer in the Beer

Article Abstract:

United Kingdom government security (gilt) yields have dropped to 5.4% for long gilts, the lowest level the UK has experienced since 1963. This means that equities could appear to be cheap, since the ratio of gilt yields has dropped in relation to yields for non-financial stocks. Not all analysts see such a low ratio as a buying opportunity, since it should be low in recessions. Itis not clear that this ratio is the best way to assess the valuations of markets, and dividend income is also important.

Government Bonds

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The message from the gilt market

Article Abstract:

United Kingdom yields for long-term government securities (gilts) are lower than short-term interest rates, an inverted yield curve. This type of curve often precedes an economic downturn, and could signal that stock prices will rise. An inverted yield curve means that interest rates are expected to fall, and this helps stock prices, while lower earnings in the short term has less of an impact on stock prices. There is no guarantee, however, that stock prices will rise.

Interest rates

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UK markets: a harder year

Article Abstract:

UK financial markets will face more difficult conditions in 1996 than in 1995, according to Goldman Sachs. Government securities could be affected by political uncertainty in the UK, especially if there are problems in international bond markets. UK economic growth may be sluggish which would affect corporate earnings, which in turn would affect share prices. Political uncertainty could have a greater impact on equities than on government securities.

Financial markets

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