This week we thought it would be useful for our readers to have a round-up of some broader global themes, all of which in this globalised and connected world economy can have an impact, direct or otherwise, on financial markets and hence on future returns. It will give you an insight also into some of the many topics we keep a focus on.
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The decision by the Bank of England's Monetary Policy Committee (MPC) to leave monetary policy and interest rates unchanged was not a surprise. But the vote underpinning the decision was. The vote was 5-3 in favour of unchanged policy, with three members of the committee opting for higher rates. The MPC has nine members but there is currently one vacancy. What does this tell us about policy?
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After the shock of the general election, resulting in a hung Parliament and minority Conservative Government, what are the implications for the economy and investors? In terms of the political outlook, three scenarios strike me as likely. First, and most likely, the Conservatives remain in power, with the support of the Democratic Unionist Party (DUP) - thus avoiding an early election. This would require a much watered-down legislative agenda. The country does not want another election, but the other scenarios would include this possibility. The implications for Brexit are covered below.
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The financial markets misjudged the election outcome. For the second time this decade, Britain has elected a minority Conservative Government - the last time from 2010-15 it ruled in coalition with the Liberal Democrats. This time it will be supported by the Democratic Unionist Party (DUP), albeit not in a formal coalition. This will add to political uncertainty, particularly ahead of the Brexit negotiations.
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The end of May marked the one year anniversary for our sterling portfolios. We’re happy to report that this has been a positive period across the board for our seven Risk Levels. Despite the volatile political backdrop over the past twelve months, markets have mostly been well behaved and our portfolios have performed well. A diversified approach across regions, currencies and asset classes has been key.
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With the UK General Election fast approaching on Thursday June 8th, what are the key issues for investors? And, in the case of a shock election outcome, what would be the implications for financial markets?
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Volatility is an important measure in financial markets. At times of stress or uncertainty, volatility rises. In contrast, low volatility is usually associated with stable or predictable conditions. In recent months, volatility has been relatively low.
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Britain’s wealth management industry is in need of big overhaul. The bespoke portfolio - which is more likely to underperform than a centrally managed portfolio and cost clients more - illustrates why this industry is ripe for change.
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Inflation is one of the key current domestic issues the UK economy faces. And in turn it drives monetary policy and has a major influence on the outlook for financial markets. Since the Referendum result last June, the UK economy has performed very much as we had expected - even though at the time our view differed from the consensus.
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The results of yesterday’s French Presidential election were broadly in line with the polls, as centrist Emmanuel Macron emerged victorious with 66% of the votes, emphatically defeating the far-right Marine Le Pen.
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