23rd March 2011
In a growth-starved environment, with inflation figures stoking fears, today's budget was awaited in eager anticipation.
Aiming to simplify our complex tax system, increase competitiveness and boost domestic industry, the politically astute rhetoric rang loud while bottom-line impacts remained mixed. Most crucially as an investor, how has the budget impacted the outlook for investment?
Growth alone does not drive equity returns
Much noise has been made over the downgrade of this year's growth forecast (from 2.1% to 1.7%) but studies carried out to investigate a link between growth and equity returns have come back empty handed.
Taking the recession during the early 1990s as an example, during its duration the UK All Share Index increased in value by more than 16%. Furthermore, as I write this article, the FTSE 100 is barely reacting.
Outlook for stock pickers remains buoyant
The government has picked certain sectors for penalty, others for promotion and the budget will impact companies in different ways. Investors and fund managers able to differentiate and exploit this will be well-placed.
The following bullet points give a high level overview highlighting some of the discrepancies:
To receive our free weekly email sign up here.