Brexit continues to claim the headlines. Yet, as mentioned in our previous quarterly update, it is not a doomsday. For every perceived negative, a positive arises.
The past few months have seen politicians re-iterate that they will abide by the Brexit vote, expecting to trigger the required Article 50 by April next year.
As an economy, the overriding desire is for a clear direction and stability above everything else. The announced deadline for triggering Article 50 has to be welcomed, along with the most recent announcement to adopt the current EU rules into UK legislation until such time as they can be reviewed; Both announcements clearly demonstrate momentum is building and, as such, give confidence to businesses and investors over the UK’s future outside the EU.
The fly in the ointment is exchange rates. The step towards Brexit has coincided with a dent in the value of Sterling on the world stage. The Pound has fallen in value against both the Euro and the US Dollar.
Whilst poor exchange rates aren’t the best thing for someone planning a holiday overseas, nor for overseas companies selling goods to the UK such as Apple, the lower exchange rates can prove very fruitful for UK companies exporting goods or UK companies whose businesses profits are earned overseas.
It is the drop in exchange rates which has caused the FTSE 100 to surge above 7000 recently which is welcome news for any existing investor.
Even more encouraging than the FTSE 100 surge has been that index’s ability to maintain the highs and not immediately fall back. This has allowed the other UK indices, such as the FTSE 250, to catch up.
Some of the best performing funds over the past few months have been smaller company equity based investments.
Equally property funds have started to lift their temporary suspensions as the concerns about panic selling of commercial properties has failed to materialize.
Looking ahead, there are reasons to feel reasonably optimistic yet not to be overconfident. There will, no doubt, be many opportunities for reasonable investment returns but it is also a time not to get over-enthusiastic.
The largest changes to portfolios we envisage making is a move away from overseas income producing assets such as overseas corporate bonds, and a move towards UK income producing assets like property and equities focused on taking advantage of the more favorable export markets.
For our clients, we are gradually looking to tweak investment portfolios over time, if appropriate for that individual client, as will be apparent when we carry out our regular reviews.
Equally we await the first Autumn statement from the new Chancellor of the Exchequer, Phillip Hammond. We will obviously keep you updated if this has an impact on our outlook.
In the meantime, as always, please get in touch with Platinum if you would like to discuss your investment strategy or if you have any concerns.