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For immediate release: 25 November 2015 No Man’s Land The current macro-economic environment is supportive of US and UK equity markets but developments in emerging markets could offer buying opportunities and investors should keep some cash available, says Rowan Dartington Signature’s Guy Stephens This Wednesday’s Autumn Statement is going to be big news in the UK. It is the first budgetary declaration from an outright majority Conservative Government since the Major Government of May 1997. That is a period of 18 years no less. The predictions are that it will involve spending cuts which will reduce the size of the state over the lifetime of this parliament to the smallest since the Second World War. Some departments are forecast to have to reduce their spending by over 25% although politically sensitive areas such as health and defence are protected. It is easy to predict that the speculation is the result of the usual media frenzy around such announcements. However, we should remember that the tax and spending policies of the Blair/Brown era have been wholeheartedly rejected by the electorate at the last election and austerity is no longer such a hot potato now that unemployment is so low. In addition, we should not forget that the first budget of a new Government is always the most radical as the incumbent Government is feeling confident and the next election is a long way off. This is doubly so with the opposition in disarray and appearing, so far, to have elected a leader, in the name of Jeremy Corbyn, who is deeply unpopular even within his own party. So, we are expecting a lurch to the right and nothing that is remotely negative for corporate UK, which should be supportive for the equity markets. Last week actually saw a robust performance despite the heightened terrorist threat pervading throughout Europe. Surely there will be some sort of impact on consumer spending on holidays, restaurants and leisure involving public gatherings but history shows that as time passes by without another attack, the public relaxes and life assumes normality. The next US interest rate rise is looking like a foregone certainty for 16th December with the FED somewhat backed into a corner having missed the opportunity in September and needing to rebuild some credibility. The debate will shift to when the second rise will come and we expect that to be an equally drawn out process. Whichever way the investor looks at it, yields from the equity market look considerably more attractive than other asset classes with perhaps the exception of commercial property. With US and UK economic growth above 2%, why should there be any significant concern regarding their sustainability outside of the energy sectors. The major risks to a gradually strengthening global economy and equity markets lie with the emerging markets. Whilst the Chinese hard landing scenario looks to be confined to the commodity markets and high end luxury goods sector, there is a real risk that an emerging nation with a heavy reliance on oil/mining exports will get into trouble with its debts, especially as they get more expensive as US interest rates rise. One of the riskier candidates is Venezuela followed closely by Nigeria; both economies are indebted to the US and rely heavily on oil and commodity revenues. However, as we have seen in the past, such events come and go and are dealt with by the IMF via a debt restructuring programme and bail-out and are relatively small in the overall scheme of global GDP. It is worth keeping some cash available should such an event occur as it will undoubtedly be a buying opportunity. Maybe it is what is required to move us forward from the current no-man’s land of robust earnings tempered by geopolitically inspired trepidation.