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The high street banks plummeted in the financial crisis and the likes of RBS and Lloyds have done little in the intervening decade or so in share price terms . More bad news came when Covid-19 forced a hiatus of dividends , causing many leading names to bolster their coffers ; yet these are now ready to spill their contents in the direction of shareholders .
Around half of Matthews ’ income book is from direct equities , now mostly from financials . Having been underweight banks for roughly 10 years , the Rathbone Income team started reintroducing the sector in 2020 . With interest rates finally moving up , the banks are obvious beneficiaries , yet Dobbie stresses the importance of seeing “ both sides of the coin ”, saying his rationale for buying banks was driven by their valuations and business models , rather than inflationary forces .
“ A big part of the bank story over the last 10 years has been cost-cutting , which becomes harder when costs are rising faster ,” he adds .
1982
– the last time US inflation hit 7.3 %
Diversification is a prevailing feature for income-seekers . Paul Flood , lead manager of the BNY Mellon Multi-Asset Income fund , has been reducing his bond allocation for several years now , favouring the income available through alternatives . He says it wasn ’ t the pandemic , but the reliability of government-backed thematic plays that influenced his thinking . Since the financial crisis , Flood ’ s view has been that the world will become more inflationary as it moves away from “ disastrous ” quantitative easing and towards fiscal easing . “ Of course , we couldn ’ t forecast a pandemic , but we ’ ve been seeing more fiscal spending , more realeconomy spending and money
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