UK- Asset manager Standard Life Investments has warned investors to pay particular attention to Chancellor Gordon Brown’s March 7th budget given its proximity to the general election.
The March issue of Global Insight, the monthly investment review, admits the budget’s influence on financial markets has been on the wane in recent years as public sector financial management has become more consensual. However, it says that there are specific issues that will affect specific sectors and investors rather that financial markets as a whole.
According to Standard life’s global investment strategist Ken Forman, gilt investors should be particularly interested in any announcements on debt issuance, inflation, annuities and the Euro, all of which could affect yields.
With regards annuities, the report says: "It is possible that, in response to lobbying by the pensions industry, the chancellor will relax the requirement for those with a personal pension agreement to buy an annuity by age 75. Such a change would reduce the demand for gilts relative to equities."
Equity investors, meanwhile, should keep a close eye on any increase in the tax burden and the degree of regulation. "Investors should look out for corporate tax announcements such as extending tax allowances, as well as the extension of R&D tax credits which could help certain sectors such as pharmaceuticals, aerospace or technology," says Forman.