Speaking on the tenth anniversary of the launch of the Optimal Income Fund, manager Woolnough said his economic outlook has not changed throughout 2016, but that he has noticed a growing trend away from the UK as a key financial centre.
In Woolnough’s view, UK capital markets are becoming less central to world finances, with a fresh move towards the US developing. His fund will therefore continue to gradually decrease the number of assets it holds in sterling in favour of the dollar.
He said: “The general mood is to move to America. New York becoming the financial capital of the world is a continued theme. Europe is a different place without us in it so it’s lost one of the great supporters of financial markets. Its position to compete with the US was better with us all together.”
Criticising the ECB as “too large”, he said it needed to “let the appropriate inflation rate happen” as opposed to consistently aiming to hit its 2% target.
On the UK he adds the economy is “fine”, with low unemployment and growth picking up. The real problems that could be caused by the Brexit vote would only be seen in two years’ time however, he warned.
Inflation will rise, Woolnough predicts, adding that “for many investors this could be their first real experience of an environment of rising inflation expectations, interest rates and bond yields.”
He added that he would like to see interest rates in the US rise in order to curb this inflation.