Is your portfolio ready for the chancellor? Here’s my advice

Do you remember where you were on March 19, 2014? I was in the newsroom of a different newspaper, eating too many Percy Pigs while watching George Osborne deliver his fifth budget in Parliament.
It was widely expected to be a bit of a non-event — no big announcements, no white rabbits out of the hat, all copy filed and on our way home by 6pm. It turned out to be the start of the biggest shake-up of pensions in a generation.
This was the budget that brought in the pension freedoms. Previously, unless you were very wealthy, you had no option upon reaching retirement other than to trade in your pension pot for an annuity: an insurance product that pays a guaranteed income for life.
Now, Osborne said, pensioners would be free to manage their own finances in retirement — to leave their money invested, to draw income from their pots as they needed it, or to blow the lot on a Lamborghini (as was, strangely, widely predicted).
It was a great day for savers, and not a great day for annuity firms. I vividly remember some of their share prices falling as much as 40 per cent. Anyone invested in those companies, in a UK fund or a FTSE 100 tracker, would have felt the reverberations.
Another date that should have been a quiet day at the office: September 23, 2022. The date of the infamous Liz Truss and Kwasi Kwarteng mini-budget that crashed the bond market and wiped £30 billion off the public finances thanks to tax giveaways and inflated borrowing costs, according to the Resolution Foundation, a think tank. Surely every investment portfolio in the land felt the effects of that one?
So, yes, budgets can have an impact on our personal as well as the public finances. Does that mean that you need to prepare your portfolio for Rachel Reeves’s first offering at the end of the month?
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Probably not. Investing is for the long-term and you should not be chopping and changing to try to second-guess what the government will announce and the effect it could have on financial markets. Therein lies the path to madness.
But that is not to say that the budget will have no effect. October 30 will bring perhaps the most widely anticipated — and widely feared — chancellor’s statement in a long time. We are expecting some unpopular, and potentially brutal, decisions.
Or all the fearmongering could turn out to be completely overblown. Either way, you could certainly be forgiven for wanting to take action ahead of the event.
If this is you, then you will need to consider which sectors could do well under a Labour government, and which may not.
With much talk about the need for more homes and and increase in building targets, construction companies and house builders could be boosted. Investment trusts that own assets such as roads and bridges, schools, hospitals and power plants, would be one way to tap into an infrastructure spending boom.
The government has talked of the need to fix the NHS. This could be a boon for pharmaceutical companies and medical equipment makers. Susannah Streeter from the wealth manager Hargreaves Lansdown thinks that Primary Health Properties, a real estate investment trust focused on providing purpose-built doctors’ surgeries, could be a beneficiary. “Labour plans to create another two million appointments and wants to offer more face-to-face GP time. These pledges look set to provide a stable growth environment for the trust,” she said.
Oil and gas companies, on the other hand, may be braced for bad news. A windfall tax or additional levy would be an easy way to boost the government coffers in the short-term, as well as keeping on message for promises of net-zero.
And any changes that curtail how much savers can put into their pensions and Isas could hurt investment firms such as AJ Bell and Hargreaves Lansdown, said Ben Yearsley from Shore Financial Planning.
The government has committed from 2027 to start raising the legal smoking age so that anyone born from 2009 will never be able to buy tobacco products. Any acceleration to these plans, or suggestion of tighter regulation around vaping, could hurt tobacco stocks.
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The retail, hospitality and leisure sectors are enjoying a 75 per cent discount in business rates in a bid to stave off the decline of the UK high street and shore up the pub industry. Any unwinding of this relief could harm the prospects of high street retailers and many more besides.
There are so many unknowns and variables that there really is little you can do to prepare. A week after the budget we have the US election and a Bank of England interest rate decision — these are likely to have a bigger impact on your portfolio.
If you do insist on doing one thing ahead of the budget, let it be taking advantage of your tax-free allowances. There are murmurings that some of these could be reduced. If you are on track to use up your annual £20,000 Isa limit, children and grandchildren’s £9,000 Junior Isa limit, or the £60,000 pension annual allowance, it may make sense to do so sooner rather than later. You don’t have to deploy the money immediately, it can sit within your account in cash until you want to invest.
I’m not in danger of using up any of these allowances so I shall be sitting tight for now. A monthly direct debit adds cash to my global tracker fund each month, and I’ll be sticking with that plan regardless of what markets do before, after or during the budget. If markets do dip, it could be time to add a little more.
There is always something that could knock your investments sideways. The worst ones — a global pandemic, a war, a surprise government announcement that kills the annuity industry or skewers the bond market — are always those that you didn’t see coming. Unless you need to access your money very soon (in which case, consider whether you should be investing at all), it is best to do nothing.