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Spending review: a positive outlook for equities, property and commodities

25th November 2020

Following the Chancellor’s spending review today, Trevor Greetham, head of multi asset at Royal London Asset Management (RLAM) comments:

“We’re left with the impression that we are going to see permanently higher debt levels, continued financial repression with interest rates kept artificially low and a higher trend in inflation. For investors this means persistently low interest rates and a positive outlook for assets like equities, property and commodities which have a good track record in beating inflation over the long run.

“While gilt yields are below the rate of inflation there is no real cost in letting national debt levels rise. We’ve breached 100% debt to GDP, but Japan’s debt ratio stands at more than 200% with no ill effects.

“It is already set to be difficult to grow our way out of debt with Brexit set to drag on the economy by 5 to 8% over the next fifteen years, according to the November 2018 Treasury impact assessment. The long term impact of the Covid crisis is expected to be smaller, around the 2% mark, as a post-Covid recovery will restore much of the output lost over 2020. A new era of austerity would further hamper growth and could come at a high political cost.”

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