Advertisement

Lord Rothschild: stocks could be on thin ice

Can firms maintain their currently high levels of profits against this backdrop? Lord Rothschild is sceptical.

961-Rothschild-634
Lord Rothschild,chairman, RIT Capital

2018 David M. Benett

The stockmarket could be on thin ice, notes Lord Rothschild in the latest half-year results for RIT Capital, the investment trust he founded in 1961. Rothschild, 82, who steps down as chairman next month, notes that "valuations are, on many metrics, at the upperend of historical rangesat a time when geopolitical risks abound; creditquality is deteriorating;and global economicgrowth is weakening".

Advertisement - Article continues below

Can firms maintaintheir currently high levelsof profits against this backdrop? Rothschild is sceptical. "The last decade has seen a confluence of factors which have benefited companies' earnings to an unprecedented extent." These features, which include the "lower cost of capital, reduced taxes, stagnant wages and the influence of globalisation", are "unlikely to be sustained". As a result, Rothschild's trust is "cautiously positioned".

"We are seeking toinvest in situations thateither give us a degree of protection in potentially deteriorating conditions or in areas where structural growth rates are sufficiently high for valuations to hold their own or indeed prosper." Recent examples of such investments include privately owned US-based logistics firm KeepTruckin', while South Korean online retailer Coupang "continues to grow strongly".The trust, which is part of MoneyWeek's model investment trust portfolio (see here for more about this), returned 10% over the year to 30 June, and 73% over five years.

Advertisement
Advertisement

Recommended

Visit/517688/the-british-equity-market-is-shrinking
Stockmarkets

The British equity market is shrinking

British startups are abandoning public stockmarkets and turning to deep-pocketed Silicon Valley venture capitalists for their investment needs.
8 Nov 2019
Visit/511212/reasons-for-investors-to-be-bearish-but-stick-with-the-stockmarket-bulls
Stockmarkets

There are lots of reasons to be bearish – but you should stick with the bulls

There are plenty of reasons to be gloomy about the stockmarkets. But the trend remains up, says Dominic Frisby. And you don’t want to bet against the …
17 Jul 2019
Visit/510684/good-news-on-jobs-scares-stockmarkets
Economy

Good news on jobs scares US stockmarkets

June brought the best monthly US jobs growth of the year, but stockmarkets were not best pleased.
11 Jul 2019
Visit/510135/trade-war-ceasefire-boosts-stockmarkets
Economy

Trade-war ceasefire boosts stockmarkets

Stockmarkets sighed with relief after the G20 summit in Japan brought a handshake between Donald Trump and Xi Jinping.
4 Jul 2019

Most Popular

Visit/investments/commodities/industrial-metals/601401/money-printing-infrastructure-base-metals-copper
Industrial metals

Governments’ money-printing mania bodes well for base metals

Money is being printed like there is no tomorrow. Much of it will be used to pay for infrastructure projects – and that will be good for metals, says …
27 May 2020
Visit/economy/eu-economy/601422/heres-why-investors-should-care-about-the-eus-plan-to-tackle-covid-19
EU Economy

Here’s why investors should care about the EU’s plan to tackle Covid-19

The EU's €750bn rescue package makes a break-up of the eurozone much less likely. John Stepek explains why the scheme is such a big deal, and what it …
28 May 2020
Visit/investments/funds/601385/in-support-of-active-fund-management
Funds

In support of active fund management

We’re fans of passive investing here at MoneyWeek. But active fund management has its place too, says Merryn Somerset Webb.
25 May 2020