Speaking on Tuesday, Lewis, who oversees more than £20bn of assets, outlined the five biggest themes that will guide Tilney’s investment strategy during 2017.
An interest rate rise by the Bank of England by Q3 and a strengthening of the pound were among two of the shifts Lewis expects this year, with an increase in unsecured lending pointing to a more positive outlook for banks which are “less troubled than people think”.
Lewis said: “Weak sterling, base effects and bank lending all point to a change of direction for the BoE. Sterling has weakened significantly since the Brexit vote. While fear of ‘hard’ Brexit is one explanation, BoE policy is another.
“Cutting rates and reintroducing QE can be expected to weaken a currency significantly,” said Lewis. “There has already been a pickup in UK banks’ lending since Q1, which has turbo charged UK monetary expansion, suggesting the UK has a growing inflation problem requiring BoE action. Language has already changed to reflect the new reality. There we could expect QE to end and possibly a reversal of the August rate cut.”
Predicting the driving force behind monetary policy would be politics, not the economy, in 2017, Lewis added the dollar would also be strong and treasury yields would rise but the combination could reduce global money supply as a result, while China will continue to be the structural source of deflation.
“Change in the political climate across the developed world represents the first significant shift in the post-global financial crisis policy debate,” Lewis said.
