Sheldon MacDonald, Chief Investment Officer, said: “Equity markets were relatively unmoved by the Spring Statement, and anyone waiting for significant announcements about pension reforms or changes to cash ISA allowances will have to remain patient for a little longer.”

James Athey, Co-Manager of Marlborough Global Bond, said: “Rachel Reeves didn’t announce the level of spending cuts that some may have been expecting to address what is now forecast to be a breach of her self-imposed fiscal rules. In fact, while addressing the hole in the UK’s finances four years out, she’s actually increased near-term spending. As a result, the deficit is now forecast to increase by a combined £18bn over the next two fiscal years.

“That’s significant and it’s likely to act as a headwind for UK government bonds. The deficit will need to be financed through borrowing and if the government is issuing large amounts of bonds, then we’d expect that to drive up yields, which will mean prices move in the opposite direction.

“However, the Debt Management Office, which issues government bonds, has since reduced the amount of long-dated bonds it plans to issue, which has softened the blow to a degree and limited the immediate effect on yields.

“Overall, we continue to have a positive view on UK government bonds. This is because of the yields available, the fact that so much fiscal bad news is already priced in and, more than anything, because we expect the UK economy to weaken. That’s likely to lead to lower inflation and lower interest rates, which we expect to be positive for bonds.”

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This article is provided for general information purposes only and should not be construed as personal financial advice to invest in any fund or product. Capital is at risk. The value and income from investments can go down as well as up and are not guaranteed. An investor may get back significantly less than they invest. Past performance is not a reliable indicator of current or future performance and should not be the sole factor considered when selecting funds.

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