Signs of recovery in the real world

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By Leigh Himsworth, portfolio manager, Fidelity UK Opportunities Fund

Perhaps I and many other commentators are guilty of focusing too much on the gloom, and like the evening news, the bad usually makes far more interesting headlines. It is also true that as Brits we do love a good grumble. We’re probably world champions.

So now I force myself to look to the positive, in contrast to other recent articles.

In the near term: interest rates are low, inflation is low and monetary stimulus is massive in most of the major economic zones and there appears to be a generally concerted effort to boost demand globally. The price of oil has fallen over 50% and economic surprises are growing in the UK and US.

I also think it is essential that, from time to time, market professionals should take time out and step back from the screens to figure out what the ‘real world’ might be up to rather than trying to over-analyse numbers and confuse ourselves with ‘confirmatory’ charts.

A chance meeting in a Gatwick Airport car park last month has caused this re-assessment. A simple throw-away comment from an attendant – “never known a February like it, the place is rammed” – has caused my re-think. I did pause and consider a retort that included quoting the overall level of UK indebtedness and questioning where he thought tax receipts would appear from, but he wouldn’t have cared, his lot in life is on the up and it is, crucially, expectations that determine a downturn, recovery or boom.

In isolation, such a comment could easily be dismissed, but it takes on greater significance when joining this ‘dot’ to other similar recent experiences – a nephew gaining interesting employment, trains are bursting, hotel staff are full of life and bubbling about the business, struggling to book a table at the local pub…things out there look okay.

Time to move back to the confirmatory charts.

A key set of stats that I have been keeping an eye on through the downturn, and which I have referred to in previous notes are the loan officer surveys. Until recently, they have shown little demand but the most recent, in January, has shown signs of life.

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