I am afraid the portents have turned badly for 2025, here at home at least. We are reacting on investment strategies with enough good news stories to help against the negativity and don’t forget the UK was and is very cheap to start, so there is a protection cushion there regardless to make us somewhat more sanguine.
However, it is those with ‘defensive’ government bonds who will see their ‘low risk’ assets having been falling and that may well confuse them, just like it did in 2022.
The Government’s long-term (30-years) borrowing costs have now reached a new post 1998 peak of 5.38%. This bodes badly. The rate was 4.79% before the Budget. The worst level during the clumsy Liz Truss affair was ‘only’ 5.1% (in May 2020, rates hit 0.55%!). They had fallen by over a quarter to 4.02% in December 2023 as the economy was beginning to grow under Rishi Sunak and the strongest growth in the G7 showing. Ten-year gilts have jumped to 4.92%. Liz Truss has launched a clever ‘cease and desist’ action against Sir Keir Starmer – clearly he and his Chancellor have been the ones to really ‘crash the economy’ by a poorly thought-through Budget, not her, with really nasty ramifications for the populace (and little if anything to show for it for most) and with higher (not lower) taxes as well as poorer economics to boot (Kwasi Kwarteng announced tax cuts which would have boosted economic growth, not causing a slump in confidence and output). It is odd that the same screamers against Liz Truss aren’t screaming even more loudly now…
Added to the manufacturing sector’s grim S&P Global UK Manufacturing PMI Survey for December where the level sank further to 47 (below 50 means the output is contracting) and at the same time job cuts hitting a 10-month high. Company confidence fell to a two-year low, exacerbated by global headwinds but fuelled by the Budget’s swingeing costs.
Sterling has been sinking, down over 8% since 30/9/24 against the Dollar and as the borrowing costs to the Government rise exponentially (though some currency loss is Dollar hopes in Donald Trump). Investors, especially internationally, have decided the UK is a more dangerous place to invest now and ramifications are being felt. The Treasury makes an emergency statement saying ‘nothing to see here’ which in itself is flippant – as is the Chancellor’s failure to appear in The Commons (despite not having left for China) and leaving her pleasant but rather naïve and leftist Chief Secretary to the Treasury, Darren Jones MP, to respond very inadequately to the concerns, reassuring no one, it seems.
So, the consequences? Inflation is going to rise again as we import so much and plenty is linked to the US Dollar (and commodities including oil and gas have bounced from recent troughs). The cost of the £2.8trillion National Debt will rise – not immediately but all new debt and every time a bond matures it needs refinancing at the latest rates. In the same way falling interest rates make debt refinancing cheaper, the opposite is happening.
Already the Bank of England has said the Chancellor’s artificially created wriggle room in the Budget has all but ‘gone’ so taxes will have to rise again or/and public services cut – and that will have to mean jobs, as they are typically one of the biggest savings.
Here is Tesla’s worker replacement for you to cogitate:- Here Are Tesla’s Optimus Robots & How Much They Cost To Buy – maybe more likely to be a reality going forwards and not just telephone bots and AI doing the donkey work!
What else? Cuts to general levels of interest rates may have to be on hold to protect Sterling. Mortgage rates, linked more to long-term Gilt yields, are likely to stay high and indeed rise, unemployment is already beginning to increase and job vacancies fall. Will the Bank of England be forced to start buying-in Gilts again as it did via Covid as ‘quantitative easing’ and certainly stopping selling the expensive Gilts it owns already (and where most sold-back so far have been done at a loss as they were bought so expensively, above the par value of the debt in the main and thus costing the Country billions)?
Economic progress elsewhere

So last Year, Mr Milei’s Argentina saw the largest gains on any stockmarket. It might have been and still is tiny but well-done him on finally offering some hope to that great, resource-rich Country, one which has such potential if it had not all been squandered by corrupted policies for so many decades. I hope the recovery will continue in all respects and as he cuts ‘government’ as well as quangos and favours.
At the bottom of the performance list however, were two comparative giants – Brazil and Mexico – where the markets floundered both because of their governments’ politics but also fears over what the US may do with tariffs. Albeit still very tiny but the contrarian in us has increased exposure to Latin America (dominated by these two) and where their markets are concentrated on sectors which we favour too, including natural resources and energy. As ever, we shall be paid a handsome income whilst we wait. We have done very well there previously – curiously being forced to accept the extra profit from a fund wind-up and a cash buy-back on another, as the sector was out of favour… it’s a funny world.
Adviser satisfaction

The latest survey by Scottish Widows says 82% (four out of five) people with a financial adviser believe the service represents ‘value for money’, a gain of 10 points since the last one. The survey emphasises the difference which having an adviser makes to their clients, especially when guiding them through times of market volatility.
The report noted that it ‘consistently found that advised clients are more confident than non-advised investors, setting them up to benefit from market conditions when others are more cautious.’ Accessibility to their advisory firm is also of paramount importance.
This resonates with us – and we offer complimentary access for guidance on any matters financial to our investing clients, regardless of their size of funds we manage for them. We believe this is a truly elite Club and with no minimum fees to join or costs for that contact.
Good news/bad news

A value-based investor in the US has been accumulating stakes in Investment Trusts here. You can hold up to 29.99% of something before having to consider a bid for the Company. It has recognised some of the ridiculous value in so many of these Trusts – as have we. It has created its own good performance of course as its buying has pushed prices up on its target companies, at the same time shrinking or totally eliminating the discounts at which the shares have been trading.
Readers will know I have harped-on about this for years. When it happens (not assured) it is extra bonuses for investors, for free and on top of the market performance from the underlying assets held. We have enjoyed many over the years and such action has escalated more recently. We see this as a way to extract more return out of exactly the same assets in many cases that ‘open-ended’ investors have – and yes, we like to feel it’s an informal ‘target’ for us, so that we can more than pay all our management fees – that’s better than the best ‘cheap’ trackers isn’t it!
Of course that is difficult to quantify and assure but it too is for ‘free’ as we still benefit from the performance of the underlying assets, after all. Most advisers out these don’t use Investment Trusts at all and there are various reasons, from not understanding them to a simple lack of access to them, either through size or their ‘platforms’ don’t allow them.
Anyway, we have sold all our CQS Natural Resources on Saba’s interest and at prices above the quoted selling prices at the time. Last Monday week, we sold all our Henderson Opportunities Trust at £2.337 – thank you Winterflood’s for the generosity. They were £2.315 offered (£2.29 today) had we not bothered to ‘try’. Giving a schematic example of this:-
1. Buy a share for 80p where underlying assets are valued at £1 (a 20% discount)
2. Sell shares for 98p where underlying assets unchanged (a 2% discount)
3. Return from discount narrowing – 18p/80p = 22.5%
4. Add-back our £1 buys 25% more shares for the same money as opposed to buying an open-ended Fund, so we also make 22.5% on the extra 25% invested = 5.625%
5. Yes, brokerage costs apply in and out and Stamp Duty on purchases (as applies with assets in open-ended funds of course!).
And whilst we are invested… we receive the income from £1’s worth of assets for our 80p. We bought the shares from existing investors, so the host fund manager makes not a penny out of our initial purchase, nor does it make any extra fees because we are on board (that only applies if we bought new shares from the manager, at a premium, if ever available), unlike open-ended funds which ‘always’ act like that (odd, says the cynic, there is a direct interest for the ‘industry’ in selling those, in preference, I guess, to encouraging the use of Investment Trusts!).
Lastly, some more good news – Ground Rents Income Fund has received an opportunistic bid from Victoria Property Holdings at a 48.5% premium to the latest share price. The 34p price is too low and potentially the true asset value is nearer 90p but there remain many unknowns affecting sentiment, from cladding to leasehold reform. However, our reportable 8.6% stake in the Company which we have quietly and patiently acquired has risen significantly as a result, though we may be holding fire for the moment. Remember too, mainstream investors bought this for years at well over £1 (they hit £1.40 in 2017) to secure a diversified and ‘safe’ asset and high income stream from ground rents.
We never did, though temptations were there; we only started buying when the troubles arose, even if not every share we acquired was at the lowest levels of course. They were just over 20p on 4/11/23. Patience is rewarding yet again as £600,000 is added to client funds from this one move – 0.25% upon our total assets from just one investment, on one day. Well done indeed if you have waited patiently with us! Remember, too, not one of our assets exceeds 2% of our total client funds presently, for risk mitigation and diversification.
Poor investment choice

So is it a sad indictment of our ‘political correctness’ to frighten investors away from holding things linked to the markets, because has this resulted in UK savers having the smallest exposure to shares in the whole G7 (ignoring pensions)? Abrdn’s report suggests UK citizens are very poor at benefiting from the opportunities which shares offer and certainly from our perspective, the ‘risks’ are over-played and the rewards underplayed.
Indeed, last week I read of a wise suggestion that cash accounts should have risk warnings on them – not necessarily about the regulated institution which holds your deposits but that inflation can mean your capital falls in real terms, that interest rates can drop to zero too and the opportunity loss of not having better returns elsewhere. It would certainly make people stop and think and of course, ‘we’ have far too high a reliance on residential property as well, slightly below Germany and France in the percentage of personal wealth overall. On cash deposits we are third after traditional savers Japan and Germany.
Ignorance has something to do with it. The regulatory machine is making it even harder for people to access independent financial advice. Even then, costs have escalated too. That doesn’t result in ‘best outcomes’. The culture must change; it used to always be that cash deposits were for short-term/emergency savings and ‘proper investments’ for the rest.
With low interest rates (like now) that holds sway more than ever, especially as a running income from ’alternative investments’ can exceed the interest received on cash, before even thinking about capital gains and increases in that income later. Indeed, in the worst case scenario, people become susceptible to being frightened into the arms of unregulated scams to ‘invest’ as they don’t know where else to turn, or highly speculative and doubtful ‘crypto currency’, wine, whiskeys, art or even holiday caravans (see below).
Mobile homes/caravans/bungalow sites

Finally there is a legal action against the nefarious practices used by so many of these operators selling ‘dreams’ to people. I hope the legal action is successful but where have successive governments been and what about the regulators and Trading Standards when these things were being promoted as ‘investments with guaranteed returns’ too?
Of course there are some exceptions but there are countless failings and insecurities and hundreds of thousands of people who have been cheated out of considerable sums – often worsened by borrowed money to complete the purchase on top of their initial nest egg.
Please note: Above image is for illustration only and implies no wrongdoing for this location
My best wishes
Philip J Milton DipFS CFPCM Chartered MCSI FPFS FCIB
Chartered Wealth Manager
Fellow Of The Personal Finance Society, Fellow Of The Chartered Institute Of Bankers