Weekly outlook: Corbyn looms over utilities and spotlight on inflation

The key events for UK wealth managers for the week starting 20 May

Monday 20 May

-Public Accounts Committee

-FCA chief executive Andrew Bailey appears before MPs in the public accounts committee to discuss consumer protection, alongside bosses from Ofcom, Ofgem and Ofwat

-FCA multi-firm review: Principals and appointed representatives in the investment management sector

Tuesday 21 May

-UK CPI figures – ONS

-Bank of England governor Mark Carney will front up to MPs in the Treasury select committee to discuss the central bank’s inflation reports

-Results from Severn Trent and WH Smith

Wednesday 22 May

-Retail sales, Great Britain for April 2019

-SSE reports

Investors will keep a particularly close watch on the utilities companies reporting this week, including SSE and United Utilities, in light of Jeremy Corbyn’s plan to nationalise Britain’s energy networks.

AJ Bell’s Russ Mould suspects the direct impact on the stock market will be relatively limited even if the Labour administration looks to pay below market valuations for the assets.

He said: “The quoted water and electricity utilities represent just 3% of the FTSE 100’s market capitalisation and, based on forecasts for 2019, 5% of the index’s revenues, 2% of its profits and 4% of its dividends. Also do not forget that around 40% of National Grid’s assets are to be found in America, well beyond the reach of any British Government, so it is not as exposed as some to the proposed Corbyn plan.”

But he believes this plan could have wider implications for financial markets, including deterring foreign direct investment which would place more strain on the public purse that is “hardly flush with cash”.

“Secondly, the shift away from free-market, supply-side economics and globalisation, to more state-interventionist, demand-side economics and nationalism, has potentially profound implications for investors’ portfolios,” he added. “Both could bring to an end the era of disinflation, ushered in by the Volcker Fed and the Reagan and Thatcher administrations of the early 1980s, and possibly usher in a new era of inflation. That would effectively mean that the most successful investment strategies of the last 30 years – long-dated bonds, growth—and-momentum driven equity strategies – may well struggle and emphasis will return to areas that have been neglected for a while, such as the cash flows that come from pricing power and also real assets.”

-Trading statements from Marks & Spencer and Close Brothers

Thursday 23 May

-United Utilities and AJ Bell report

-Aviva, Nucleus Financial and Legal & General hold AGMs

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