Autumn Investment Outlook

A new world – An introduction from our Chief Investment Officer Michelle McGrade

Life after the Referendum vote has turned out to be fairly smooth, with the UK market steadily climbing higher on the back of a weaker pound and the economy returning to normal day-to-day life.

At the Conservative Party conference, we saw Prime Minister Theresa May’s true colours. We are all going to have to adjust to her strong autocratic leadership but silent style. She is definitely in charge and she is determined to put her stamp on everything, but she isn’t a communicator and she shuns the media limelight, so we won’t hear from her that often.

What is clear is that Theresa May is determined the UK will make a clean break from Europe. Companies and industries are going to have to make plans and the main questions that concern the UK are surrounding future trading with Europe and how to recruit and train great employees. This is especially true for the city of London which has enjoyed passporting rights throughout Europe.

Across the Atlantic we are watching one of the most bizarre US elections yet; the polls seem broadly split and Trump is definitely considered a maverick and a loose cannon. Whatever happens to politics in the US, it will take on a new phase by the year end.

Onto interest rates. I have been an advocate for leaving interest rates on hold and was not pleased to see the Bank of England (BoE) cut rates. Lower interest rates aren't helpful for those holding cash, and that includes companies with cash balances waiting to invest post Brexit vote, pensioners and those saving for the next stage in their lives. Bond yields have fallen and caused pension fund deficits to increase, and banks can no longer make a margin on the cash that they hold on our behalf.

The information we provide in this Investment Outlook are opinions provided by TD or one of its partners on whether to buy a specific investment. None of the opinions we provide are a personal recommendation, which means we have not assessed your investing knowledge and experience, your financial situation or your investment objectives.

Investors should be aware that the value of investments can fall as well as rise, you may get back less than you invested. If you are unsure about the suitability of a particular investment you should speak to a suitably qualified financial adviser.

The economy has held up well and there have been recent reports where the BoE has claimed that it was their work that buoyed the economy. But make no mistake, this isn’t the case. Changes in interest rates take time to filter through, although it is true their actions have stabilised the bond and equity markets.

So where next for interest rates? All eyes are on the US Federal Reserve which has indicated that the next move in rates is up. This move, when and if it happens, should mark a change in monetary policy around the world. The IMF has suggested that governments start using fiscal policy to reinvigorate their economies and we expect to hear Philip Hammond do just that in his Autumn Statement in November. To my mind the switch to fiscal rather than monetary policy will be welcome and should have a more positive effect on the economy.

In our Investment Outlook this quarter we discuss cash and the hazards of low interest rates and rising inflation. We also look at emerging markets, which have again become popular for investors. There should be room for an allocation within most of your portfolios if you have not done so already.

After a strong run in markets this quarter we have seen some profit taking and may even see some more major wobbles, but don’t lose your nerve – stay invested and you could even use those wobbles to add any cash you don’t need right now to add to your portfolios. As we enter a new Brexit world there will be uncertainty, but this is nothing new. There is always uncertainty in some shape or form but if you invest for the long term you are likely to be rewarded.

Michelle McGrade, Chief Investment Officer, TD Direct Investing

Market Outlook

Market Outlook

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TD Recommended Funds Update

In light of these market conditions, find out how our TD Recommended Funds performed in the third quarter of 2016 – there were some excellent performances amongst those on the list. You can also find out how each of the funds has performed over the last few years.

Our fund recommendations are the result of a good deal of detailed work and drawn from the whole of the market, with Morningstar providing unbiased, in depth research that is analysed by our own Investment Team. All recommendations are presented to and approved by TD Direct Investing's Investment Committee.

Remember that each fund is unique and hence exposed to different levels of risk. Some are relatively low risk, whilst others can be very risky and those will only be appropriate for more sophisticated investors.

TD Recommended Funds Performance

Additions and Removals

TD Recommended Funds - Highest and Lowest returns

We reveal which funds are flying right now and those that have hit a bit of a lull but are still interesting.

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The role of cash in a portfolio

A low interest rate environment means investors aren't getting a return from cash, so what role should it play?

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Investors should be aware that the value of investments can fall as well as rise, you may get back less than you invested. If you are unsure about the suitability of a particular investment you should speak to a suitably qualified financial adviser.