Industry experts have said the Chancellor’s Budget contained few surprises for markets, leaving investors focused on the factors they believe will have the greatest influence on returns.
Financial markets showed little reaction to the Chancellor’s Autumn Budget, with commentators pointing to limited movement in equities, gilts and sterling following the announcements.
Barry Jones, chief investment officer at Isio, said: “The Budget has prompted little reaction from financial markets, with the Chancellor’s announcements largely remaining within the existing fiscal framework and offering few surprises for investors.”
He noted that gilt markets had been particularly subdued, while equity markets and sterling were also little changed following the Chancellor’s speech.
A similar view was expressed by Hetal Mehta, chief economist at St. James’s Place.
“Overall, I’d say there were no big surprises – no showstoppers, and little in terms of major macro announcements,” she said.
“The package of announcements was broadly fiscally neutral as had been increasingly expected.”
James Lynch, investment manager at Aegon Asset Management, also described the Budget as largely meeting expectations.
“The market and the government both wanted this budget to be a non-event and it delivered on the low expectations,” he said.
“The market quickly became more interested in any changes to the Gilt remit for this year, and again it was reassuringly in-line.”
For fixed income investors, attention remains focused on inflation and the path of interest rates.
John Stopford, head of managed income at Ninety One, said the Budget was “unlikely to change the near-term path of interest rates”, with the Bank of England still expected to tighten policy amid persistent inflation and stronger economic data.
However, he added: “Market forecasts of rate increases of more than 1% in the next 12 months look much too aggressive however. As such we see reasonable relative value in the gilt market.”
Mehta likewise pointed to limited implications for monetary policy, commenting: “There are little immediate implications for the Bank of England. High inflation and some near-term fiscal support are likely to smooth the path to higher rates in the coming months despite the downgrade to 2027 growth.”
While commentators agreed the Budget had little impact on broader markets, several argued that investors should avoid placing too much emphasis on fiscal announcements when assessing equity opportunities.
Jo Rands, portfolio manager at ClearBridge Investments, said: “UK equities have rallied almost 40% since the first of Rachel Reeves’ two tax-raising Budgets. That’s not a vote of confidence in her policies, but a reminder that the stock market is not the economy, and Budgets aren’t what drive returns.”
She added: “The Chancellor may have played it safe, but there’s nothing timid about the case for UK equities. This globally exposed market is driven by the same long-standing strengths: attractive dividends, buybacks and profit growth.”
A similar point was made by Stuart Widdowson, co-portfolio manager of Odyssean Investment Trust, who argued that smaller companies are often less dependent on the UK economic backdrop than investors assume.
“The instinctive response from many investors is to shun UK small caps. In practice, though, the medium-to long-term value creation prospects of high-quality smaller UK firms are largely independent of UK fiscal changes.”
Widdowson noted that many smaller companies generate a substantial proportion of revenues and profits overseas, while others are driven by company-specific operational and strategic developments.
He went on to say: “Despite the UK’s persistent growth challenge, pockets of genuine earnings growth remain available for selective stock-pickers, and international buyers are increasingly recognising this value, with rising overseas interest and M&A activity offering a sign that domestic pessimism may not be fully justified.”
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