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What the mini-Budget fallout means for portfolios

What the mini-Budget fallout means for portfolios

There are "screamingly cheap" opportunities in the UK market at the moment, despite the upheaval of the past week, according to guests on the latest FTAdviser podcast.

Robert White, portfolio manager at Momentum Global Investment Management, said there were reasons to be optimistic about investing in the UK despite the turmoil of the past week.

Gilt yields surged and the pound plummeted after the government announced a spate of tax cuts in last week's mini-Budget - though they recovered later in the week after the Bank of England was forced to intervene to calm markets.

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The resulting turmoil led to banks withdrawing mortgage products as they anticipated much higher interest rates as part of the Bank's attempts to bring inflation under control.

This led some commentators to say that the UK was behaving like an emerging market.

White said: "It's a great headline and there are similarities in terms of the dual deficits the UK is running and the more populist policy since Brexit, I suppose, depending on how you view that politically.

"But you must remember the UK has got strong independent financial institutions most obviously with the Bank of England. Our average term of debt is pretty long as well, about 16 years, which is longer than any other OECD currency and most of our liabilities are in our own currency.

"If you do take a longer term view you can see some pretty attractive opportunities opening up in the UK equity market which looks screamingly cheap now.

"The key thing now is to steady the ship. I think more details are needed from the chancellor and the government in terms of what they are going to do going forward in terms of how they are going to fund this tax cut."

Oliver Jones, asset allocation strategist at Rathbones, said the past week had reinforced some of the themes he had been thinking about with his portfolios.

He said: "We were already concerned about how long inflation might linger for, how long it might stick around for. We were already carrying fewer conventional government bonds, fewer gilts in our portfolios, and what we have seen over the past week I think has validated that.

"More generally we are positioned defensively. It is not just the UK where there are economic problems at the moment. The Eurozone probably is on the cusp of recession, you have got a housing downturn in China. We know the US economy has been relatively resilient but we are starting to see some fault lines there."

Jones pointed out that the largest UK companies were not dependent on the UK itself since they operated globally and were in defensive sectors.

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damian.fantato@ft.com