The head of the firm’s UK equity growth trust sees May’s general election as a potential scupper for the healthy amount of leisure money in the public’s pockets.
“That is the area we worry about – will the consumer stop feeling confident and better off?” Boucher said. “At the moment they have got much more money available to spend on discretionary items than they have had for a long time, but non-discretionary spending is growing at over 6% at the moment.”
Boucher believes that which party comes to power will sway the direction in which the present level of discretionary consumer spending will head.
As of 28 November, consumer services and goods accounted for 31.9% and 10.1% of his portfolio respectively, with his overweight in the travel and leisure industry having recently been increased by 10.1%.
However, in accordance with his election-based concerns, Boucher plans to adjust those figures in the next few months.
“We don’t own any banks or oil companies, and are underweight in materials and mining,” he said. “We are overweight in airlines, travel companies and house-builders.
“As we run up to the election and all the uncertainty that comes with that, house prices may go up depending on which party comes into government, but there is no arguing that there is massive shortage of houses in the UK at the moment.
“We have been looking to selectively reduce our consumer exposure because of the uncertainty we see in the general election. We will reduce our exposure to companies that have earnings from a dollar base, because we see the dollar strengthening continuing.”
A trending topic of discussion at the moment is the Bank of England might implement a rise in interest rate rise following the dropping inflation rate – something that would have significant influence on Boucher’s current positioning.
“If you had asked me six months ago I would have said that UK interest rates would have gone up in mid-2015,” he said. “But now, with the inflation rate at 1% and probably going to fall further, it pushes those interest rate expectations out a bit.
“If you look at bonds and the way the market is priced, we may be looking at interest rates not going up until some point in 2016. The very earliest would be late 2015, and I don’t think markets will start to perform particularly well until interest rates go up.”
Andrew Wilson, head of investment at Towry agrees with the view, adding: “The British General Election – and another likely coalition government – will not greatly help investor confidence at home, with UK assets, which to date have held up remarkably well, likely to be hit in the run-up to the election especially given that sterling has started the year poorly.”