Attack on banks
Retiring Stout slams banks over rates policy
One of Scotland’s long-serving investment managers has announced his retirement with an attack on central bank policies towards tackling inflation.
Bruce Stout of Murray International Trust described current attempts to tackle inflation through “one dimensional dogma” as “at best foolhardy, at worst downright destructive.”
Mr Stout, who will have been the trust’s lead investment manager for 20 years when he steps down next June, said central banks were “discredited and detached” in their attempts to squeeze inflation out of the global economy.
“Cracking a nut with a sledgehammer seldom delivers the desired results. The shell usually breaks but the kernel invariably gets pulverised in the process,” he said.
“Faced with stubbornly high inflation in the developed world, discredited and detached central banks continue to follow a similar Pavlovian practice which, in their world, involves hiking interest rates until demand subsides.
“This is theoretically logical if it is assumed that excessive consumer demand is the root of all price inflation.
“However, it is woefully misguided if rigidity of labour markets, de-globalisation, rising global protectionism or “doing whatever it takes” through printing money are structurally influencing the overall cost of living.
“Against such a backdrop, religiously following such a one-dimensional dogma appears at best foolhardy, at worst downright destructive.”
Martin Connaghan and Samantha Fitzpatrick will take on co-management responsibility for the company’s investments. Both have worked with Mr Stout since 2001 when they joined what was then Aberdeen Asset Management from Murray Johnstone.
The trust said Virginia Holmes will take over as chair from 31 December following David Hardie’s retirement from the board. Two non-executive directors have also been appointed: Gregory Eckersley and Wendy Colquhoun.
In its half-year results to the end of June, posted at the end of last week, the company announced two interim dividends of 2.4p (2022: 2.4p)
The net asset value (NAV) total return, with net income reinvested was 2.2% compared with 7.9% for the company’s reference index (the FTSE All World TR Index). Over the six-month period, the share price total return was -2.5%, reflecting a move to trading at a small discount to the NAV.
Mr Hardie said: “During this review period, there was little respite from the inflationary concerns and interest rate hikes that have dominated the financial backdrop for over eighteen months now.
“Despite energy and commodity prices significantly declining from this time last year, most consumer-driven economies in the developed world continue to be squeezed by higher food prices, rising mortgage rates and dwindling disposable incomes.
“With the impact of higher bond yields translating into higher debt servicing costs, genuine fears over future asset quality are beginning to emerge, with all areas of bank lending attracting scrutiny.
“For financial markets, the divergence between the performance of bonds and equities proved extremely pronounced: the former constantly fretting over wage inflation and the erosion of real incomes; and the latter apparently ignoring the reality of rising recession risks and downward revisions to growth and corporate profitability.
“For individual investors and savers, the holy grail remains capital appreciation and real returns; the quandary- where to find them.”