Weekly outlook: Brexit plan B; SJP results; and gender pay

The key events for UK wealth managers this week

Theresa May will appear before parliament on Monday with a tweaked version of her deeply unpopular Brexit deal following her humiliating defeat last week, while over in the US president Donald Trump enters his third year of the presidency, which is historically when most administrations see the the largest returns from the US stock market.

“The thinking is that the president is starting to think about getting re-elected or pave the way for their successor to be elected,” says AJ Bell investment director Russ Mould. “Given you have a president who seems to measure his presidency on the strength of the Dow Jones Industrial, I can envisage him doing things that will be stimulative for markets. There are a lot of market participants expecting him to take a softer line on China and likewise on the government shutdown.”

The thorn in his side will be the actions of the US Federal Reserve, Mould says. “For the last 10 years, markets have bathed in cheap money, the Fed is now withdrawing that money, the Bank of Japan is undershooting its targets, the ECB isn’t adding, the Bank of England isn’t adding. You throw in the Swiss, the big five central banks, whose balance sheets have expanded by $12trn since 2009, those balance sheets are shrinking.”

On that note, the Bank of Japan and the European Central Bank both have interest rate decisions ahead of them this week.

Within the UK investment industry, this week could see the FCA provide further details on what it wants to see from pension providers deliver for individuals as they approach the pensions freedoms age of 55. Its policy statement and a further consultation paper on its retirement outcomes review is due before the end of the month.

Aegon pensions director Steven Cameron expects more insight into the investment pathways concept, which under current proposals would see customers presented with three scenarios that describe at a high level what they want in retirement. The customer would then be put in a fund broadly appropriate.

Cameron says: “We see merit in this as long as individuals don’t think this means they needn’t take advice – we believe the best way to make the right choices at retirement is to seek advice.”

The FCA could also set off further thoughts on how to ensure customers don’t end up investing in cash by default. “There is evidence that those who don’t seek advice tend to have higher proportions invested in cash when in drawdown which is unlikely to be a suitable longer term investment,” he says.

Monday 21 January

  • Theresa May reveals her plan B for Brexit

The prime minister doesn’t seem too keen on budging when it comes to her Brexit deal, in part because she won’t get it past the EU, says AJ Bell investment director Russ Mould. He has been pleasantly surprised that markets are anticipating a softer deal following May’s crushing defeat in the House of Commons when MPs voted 432 to 202 against the current deal on the table.

“If you go softer, the DUP might be unhappy if you look to extend the backstop, the hard-core Brexiteers won’t like it. If you stay where you are, that’s already been thrown out. If you go with no deal, well we’ve been told most of parliament doesn’t want no deal. It’s hard to know where you’re going to go which logically means what we’re heading for is a no deal.”

  • Hopes for rising UK wages
    UK labour market – Office of National Statistics

Brexit means analysts aren’t expecting the latest unemployment rate statistics to fall below December’s estimate of 4.1%.

However, with inflation easing there are hopes wage growth will hold at around the 3.3% to lift real income and support the UK’s troubled retail sector, The Share Centre says.

  • Bank of England scrutinised for rising costs
    Bank of England’s central services – 4pm Public Accounts committee

The Bank of England will face scrutiny over its failure to bring running costs under control with the cost of central services instead rising from £174m in 2014-15 to £188m in 2017-18.

The public accounts committee will hear from chief operating offer Joanna Place and chair of the court of directors Bradley Fried at 4pm on Monday.

Building costs are 35% higher than other government bodies and 800 unoccupied desks a day at the Threadneedle offices are among the concerns raised by a National Audit Office report.

It also highlighted that central bank staff spent £10m in during 2017-2018 without following proper procedures, including 200 purchases above £25,000 that were made without checking with the appropriate office.

Tuesday 22 January

  • FOS faces up to MPs over failings revealed by Channel 4 investigation
    Independent Review of the Financial Ombudsman Service10am Treasury select committee

In March 2018, a review into the Financial Ombudsman Service was launched after a Channel 4 Dispatches investigation highlighted cases of undertrained and overworked staff dealing with complaints.

Treasury select committee chair Nicky Morgan called for FOS chief executive Caroline Wayman for answers about unqualified staff, unanswered cases and a possible bias against complainants.

Wayman and chairman will appear before the select committee to discuss the findings of the independent review.

  • Gender pay gap and executive remuneration
    Corporate Governance: delivering on fair pay10.45am Business, Energy and Industrial Strategy committee

MPs will hear about how investors are engaging with companies on fair pay and the gender pay gap with Shareaction chief executive Catherine Howarth those giving their views.

Progress on the target to have FTSE 350 boards a third female will be examined with specific scrutiny on the fact sectors with the highest pay gaps have some of the lowest numbers of women executives.

Financial Reporting Council Paul George and minister for small business, consumers and corporate responsibility Kelly Tolhurst will also give their views with excessive executive remuneration also on the agenda.

Wednesday 23 January

  • Bank of Japan interest rate decision
  • MPs quiz pension providers on auto-enrolment
    Auto-enrolment – 9.30am Work and Pensions committee

MPs will hear from auto-enrolment pension providers NEST, People’s Pension, Legal & General in a one-off session, seeking industry views on the maturing auto-enrolment market, reforms following the 2017 auto-enrolment review, and the regulation of master trusts.

  • PRA boss Sam Woods to front up for annual review by MPs
    The work of the Prudential Regulation Authority – 2.15pm Treasury select committee

Thursday 24 January

  • FCA consultation on illiquid assets in funds closes
    FCA Consultation Paper CP18/27

Illiquid assets held within daily dealing open-ended funds has been an area of focus for the UK regulator since the Brexit referendum triggered the gating of a series of property funds unable to deal with redemptions.

In October, the FCA revealed proposals that would require open-ended commercial property and infrastructure funds to suspend trading when an independent valuer expresses “material uncertainty” about the valuation of 20% of their assets. The proposals would have flow on affects for multi-asset, which would also be required to shut if 20% or more of a portfolio is affected.

Consultation on the proposals closes on Thursday with the FCA due to publish final rules and guidance in a policy statement later in 2019.

  • Investors look for better inflows at SJP
    St James’s Place (Q4 2018 Earnings Release)

Shares in wealth manager St James’ Place have underperformed the market over the past six months, notes The Share Centre. In Q3, inflows disappointed and concerns about prospects for global growth have also knocked the UK wealth management giant.

  • ECB interest rate decision

Friday 25 January

  • Overlooked barometer for Europe released by Belgium
    Belgian Courbe Synthetique business sentiment survey

The Belgian Courbe Synthetique, an equivalent of a purchasing managers survey out of the country’s central bank, deserves more attention as a European economic indicator, says Mould. “If you draw a chart of the Courbe against the Eurostoxx 600, it’s a good fit. Quite why 6,000 Belgian industrialists are such a good proxy for European equities, I have no idea, but it generally is and it’s been softening a bit in the last couple of months so it will be interesting to see how that turns out.”

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