Liz Truss is the overwhelming favourite to win the Conservative Party leadership election
Liz Truss is the overwhelming favourite to win the Conservative Party leadership election when the results are announced later today. Commenting on the challenges facing the new Prime Minister, RLAM Head of Multi Asset Trevor Greetham said:
"Boris Johnson once said it would be a great thing to a have crack at being Prime Minster if the ball ever came loose from the back of the scrum. Now, in rugby terms, he looks to have executed what is known as a hospital pass. The new Prime Minister takes office with inflation running into double digits, strikes crippling essential services and energy shortages looming.
"Liz Truss has set expectations high by saying a recession is not inevitable. Targeted help for lower income households that will struggle to pay heating bills this winter is essential, but broad based fiscal stimulus is unlikely to prevent a contraction in the economy, in our view. This is because, with inflation expectations surging, the Bank of England is likely to respond by pushing interest rates higher than they otherwise would have done.
"According to OBR and Bank of England estimates, Brexit is part of the stagflation shock the UK is suffering, reducing long run GDP by about 4% while adding about 5% to the cost of living. In this context, following through on promises to override the Northern Ireland Protocol could worsen an already fragile outlook by triggering further sterling weakness and raising the spectre of a trade war with the EU.
"This remains a difficult environment for UK bond investors, who will need reassurance that talk of reviewing the Bank of England's inflation fighting mandate or avoiding Office for Budget Responsibility scrutiny was something for the leadership campaign rather than government.
"The picture is very different for equity investors. Despite the challenging macro outlook, the UK market has outperformed this year. It offers good value, its sectoral make up is resilient to rising interest rates and UK-listed companies derive the bulk of their earnings overseas, so continued sterling weakness would, if anything, be a positive."
For further information please contact
Lena Nunkoo, PR Manager
- Email: firstname.lastname@example.org
- Tel: 02032 725 816
- Mob: 07919 171 919
About Royal London Asset Management (RLAM):
Established in 1988, Royal London Asset Management (RLAM) is one of the UK's leading fund management companies, providing investment management solutions to both wholesale and institutional clients such as not-for-profit organisations, local authorities and the insurance sector.
RLAM manages £150 billion of assets as at 30 June 2022. It invests in all major asset classes including UK and overseas equities, government bonds, investment grade and high yield corporate bonds, property and cash.
For professional clients only, not suitable for retail investors.
Issued August 2022 by Royal London Asset Management Limited, registered in England and Wales number 2244297; authorised and regulated by the Financial Conduct Authority. Registered Office: 55 Gracechurch Street, London, EC3V 0RL.
Visit rlam.com to learn more.