Good morning, it's Paul here, suitably refreshed after my sickie yesterday (thanks for covering, Graham).

Well, what a roller-coaster it's been of late.  My view is that markets in the USA just got too expensive, and needed to correct. I don't see any particular read-across for UK small caps. Actually, it's felt quite bearish in UK small caps for several months now, with many shares having fallen considerably from previous highs.

I'm reviewing the debris of recent market moves, to see if there are any bargains on offer. Sometimes when people panic sell, they sell off good things, too cheaply. My hedging strategy worked very well, which was a relief. It's great to have some short positions generating profits in a market downturn, because that gives you peace of mind that you won't become a forced seller. So you can keep a clear head whilst all around are panicking.

Anyway, a correction from excessive levels, and a bit of fear coming back into the market, is a very good thing, in my view. Markets that just rise inexorably, without a pullback, are crashes in the making. I think it's important to remember that bear markets don't just happen randomly - they are caused by the market anticipating economic slowdowns/recessions, and hence reduced corporate earnings. With the world economy now doing well, almost everywhere, these seem very good conditions for businesses. Sure, there's a bit of fear over Brexit, and probably more fear about a Corbyn Government, here in the UK. Jacking up Corporation Tax to 26% (as their first move upwards, probably to be followed by further rises), that would make a dent in UK company earnings. That would hit share prices across the board here. So it's a big worry.

I can't think of a worse time to consider increasing Corporation Tax, than when Brexit uncertainty is probably already making some companies consider whether to stay in the UK or not. Our low taxes, and flexible employment laws, plus a population who speak English as their first language, are big attractions for companies to stay in the UK. So I fear that a Corbyn Government would be absolutely disastrous for the UK economy. In a globalised economy, you can't tax the rich - they just move their money somewhere else, to avoid being taxed. Or they just leave, with their money, and we get precisely zero in tax revenues…

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