Trustnet Magazine 81 February 2022 | Page 70

YOUR PORTFOLIO

Bank to life

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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