Investments 

Woodford points to 'growing evidence' he is right on Brexit

Woodford points to 'growing evidence' he is right on Brexit

Neil Woodford believes the UK economy has entered 2019 with "strong economic momentum" which will help the returns of his fund in the year ahead.

In his latest update to investors out today (January 9), Mr Woodford spoke of a strong labour market, which was a sign the economy was improving.

He wrote: "We are consistently seeing macro data that reflects the underlying strength of the UK economy.

"The UK labour market continues to improve and that, more than any other single issue, is the most important determinant of the more upbeat view I continue to hold about the outlook for the domestic economy."

He added: "Although the UK stock market has remained preoccupied by the ebbs and flows of the Brexit debate, the UK economy has continued to produce strong data.

"Towards the end of 2018, we have seen further positive numbers on wage growth and employment, backed up by more good news on inflation.

"With the lowest unemployment since the 1970s, strong growth in employment and hours worked, combined with the fastest real wage growth since the financial crisis, we enter 2019 with strong economic momentum in the UK."

Meanwhile, the rest of the world economy was looking less robust, according to Mr Woodford.

He said: "China is very visibly slowing, emerging economies continue to struggle with dollar strength and higher dollar borrowing costs, and Europe has slowed significantly.

"The weak oil price that was evident in the final months of 2018 is, from our perspective a reflection of this backdrop, with much weaker demand growth than the consensus had expected, as well as more robust supply growth."

He said the US economy was visibly strong but the waning influence of fiscal stimulus and lagged effects of tighter monetary policy were beginning to challenge policymakers and financial markets.

"Bond investors appear to be pricing in a much more challenging economic environment and the correction that appears to have started in the equity market is another warning of more troubling times ahead," he added.

Mr Woodford said he expected the investment backdrop to look "very different" to the one that has prevailed for the last two years.

"And it is an environment for which I am very confident that the Woodford funds are positioned appropriately," he wrote.

He added: "There is a growing body of evidence to support my view of the world, highlighting the risks that exist in many parts of the market, and the long-term opportunity that our strategy is looking to exploit."

Mr Woodford’s flagship Equity Income fund has lost 4 per cent since Brexit day in June 2016, while the average fund in the IA UK All Companies sector gained 21 per cent.

But he believes Brexit will be similar in effect to the millennium bug of the year 1999, when the world was concerned about the impact of the change of date on computers, and then nothing happened.