Outlook improves for long-dated gilts

Fund manager's comment

During the first quarter of 2004, we further reduced our allocation to UK equities and increased our...

During the first quarter of 2004, we further reduced our allocation to UK equities and increased our exposure to long-dated gilts. There were several reasons for this. First, higher interest rates. The Bank of England increased the base rate by 0.25% to 4% in early February, and we expect it to do so again. Although inflation is low, its main concern is that neither consumer spending, much of which is debt-financed, nor the housing market, shows any sign of abating. Second, the UK's economy, and, as a result, its stock market, is not as cyclical those in the US and is benefiting less from...