After a short summer hiatus I thought I would have a closer look at what has been going on since our last communication and the Brexit vote?
I hope you have all managed to get away to somewhere sunnier than it has been here over the last month or so.
I have been here right the way through keeping a close eye on the post Brexit vote landscape and how it is not only impacting on investment portfolios but also speaking to our clients to find out what impact it is having on business, which is probably a better indicator of the real economy.
Firstly lets have a look at the performance investment portfolios as this has been one of the strangest outcomes of the vote in June.
I asked Lothar Mentel CEO of Tatton Investments for his opinion
Equities are still looking somewhat better, particularly as ongoing earnings announcements around the world tell us that corporate profits continue to improve, whereas such income upside naturally does not exist for any fixed interest bond one can buy right now.
However, the fact that UK stock markets have experienced a very similar step-up in valuations as the rest of the world feels increasingly odd, given economic indicators are beginning to come through which inform us that the outlook for the UK economy has deteriorated, while everybody else is continuing on the upwards trajectory pretty much as before.
Against this backdrop, the market implied expectation of healthy near-term corporate profit growth only makes sense if there is either a significant increase in economic stimulus measures or a disproportional benefit of UK corporates and the economy as a whole from the post-Brexit £-Sterling devaluation.
Both are hopes, rather than realities and so UK equities are likely to run out of ‘fuel’ for further upward momentum in the foreseeable future.
This certainly highlights the need for a well diversified portfolio. We have been delighted with how our investment managers have held up during this period and have captured the uplift since the end of June, but we must remain vigilant as events unfold over the coming months.
Closer to home
As you know we like to engage with you at a business level and as such it’s really interesting having those b2b discussions, as we are as exposed to the economy and political upheaval as you are.
I have been asking some of our clients what is happening on the ground for them and sharing some of our experiences too.
As the economic figures released the other week showed there has been a slowdown in economic activity across a number of sectors with construction and manufacturing particularly badly hit.
We will be watching the Monetary Policy Committee closely this week to se if they drop interest rates and what effect (if any) that has on the real economy.
As we all know uncertainty is not great for business and we all have to monitor those inflows of orders, enquiries, etc to watch for any patterns emerging.
From my conversations, I would say most of us are still quite positive about our businesses with perhaps a note of caution, depending on what comes down the line.
Something I have been keen to stress to our clients in recent weeks is that during difficult times the worst thing you can do is nothing.
Continuing to plan, design and implement your strategies is the best way to ensure you are prepared come what may.
This applies both to financial plans and to business plans alike.