Name: AJ Bell's Russ Mould says 18% inflation in 1970s was 'extremely difficult' time except for gold
Uploaded: 2022-08-31T22:56:54.823492+00:00
Duration: 455 s
Channel: Adrian Hargrave

Adrian Hargrave

Russ Mould, AJ Bell's investment research director joins Proactive London's Katie Pilbeam to talk about the battle ahead for whoever wins the keys to number 10 in less than two weeks time. 

For investors wondering what impact each candidate will have on a portfolio, he says its whether they will look at specific industries, where they will have to tax or regulate more or less or will they come up with 'positive' policies for the British economy that have 'unintended consequences'. 

The UK is now on a path to exceed 18% inflation next year, the highest rate among larger western economies, according to a report from Citigroup because of surging wholesale gas prices. Mould says this will look like the 1970s - which was an 'extremely difficult time' except for gold.

Russ Mould, AJ Bell's investment research director joins Proactive London's Katie Pilbeam to talk about the battle ahead for whoever wins the keys to number 10 in less than two weeks time. For investors wondering what impact each candidate will have on a portfolio, he says its whether they will look at specific industries, where they will have to tax or regulate more or less or will they come up with 'positive' policies for the British economy that have 'unintended consequences'. The UK is now on a path to exceed 18% inflation next year, the highest rate among larger western economies, according to a report from Citigroup because of surging wholesale gas prices. Mould says this will look like the 1970s - which was an 'extremely difficult time' except for gold.

New Prime Minister's New Challenges

Stockmarket effects of a new Prime Minister

What are the policies of each candidate

Are tax cuts wise?

Effects of inflation

Can the Government do anything?

https://d3ev5earl6dvd0.cloudfront.net/public-media/videos/004/569/004569/video_DYiCp1M.mp4

Russ Mould explains what the thinks are the big challenges for the new Prime Minister; inflation and possible recession. But the new Prime Minister will also be subject to things outside the UK such as slow downs in Europe and China

Russ Mould states that typically new Prime Minister's have limited effects on stockmarket, but investors should watch out for any specific industries that they target

Russ Mould outlines the likely policy changes depending on whether Liz Truss or Rishi Sunak wins. Liz Truss seems to be more likely to cut taxes and reverse national insurance, whereas Rishi Sunak is likely to spend less as he thinks there isn't the money to do so

Russ Mould understand why Liz Truss wants to stimulate demand, but supply chain issues remain a problem and he is not convinced that cutting taxes will compensate for other economic issues

If the UK hits 18% inflation, it is likely to be a difficult time for investors. In the 1970s the only asset that did well was gold, but even that was boosted by removing the dollar from Bretton Woods. Equities, bonds and cash did badly. In the 1908s interest rates got to 12% and more, a lot higher than today. The UK economy could not stand those levels today.

Russ Mould explains that many problems are sturctural and that increasing energy supply, due to ESG concerns and lack of time is difficult. Therefore, to offset price increases, demand has to be reduced, which is likely to cause a recession. There are no quick solutions.