Our Research Team at Investec has reviewed this month’s global investment outlook, assessing the uncertain landscape on both sides of the Atlantic.
The Prospects for Brexit
- Uncertainty caused by the EU Referendum in the UK is not only affecting the value of Sterling, but also the performance of shares in companies with close ties to the UK economy
- A vote either way could open up a range of market issues, though a Leave vote is likely to create a larger number of problems due to the continued uncertainty it will lead to over trade deals and immigration
- The UK is especially vulnerable to uncertainty due to its persistent current account deficit, which was 7% of GDP in Q4 2015. Bank of England Governor Mark Carney has said that that the UK currently relies: “on the kindness of strangers”, which might not continue in the event of Brexit
- In the event of a UK Leave vote, protesters might spark a series of similar referendam across Europe. Conversely, Scotland could hold a referendum on the issue of whether to re-join Europe, which might lead to independence from the UK
- The possibility of Brexit remains a significant risk for the UK economy, and evidence suggests that many investments are being held back until the results of the referendum are known
The US Presidential Election
The polarising effects of the US presidential election – with candidates Trump and Clinton now confirmed – has the potential to cause a great deal of market disruption in the coming months.
US Interest Rate Changes
The Federal Reserve system raised interest rates in December 2015, for the first time since July 2006. This move will remain under close scrutiny for the foreseeable future.
The Effects of Terrorist Attacks
Now we have seen the effects of recent terrorist attacks, we are able to say that markets have shown remarkable calm so far. However, it’s clear that local economies, particularly in Brussels and Paris, have suffered.
At Investec our Investment Managers will always use market information to balance portfolios to ensure they are a suitable balance of risk and reward for our clients. Although investing has entered a period where balanced portfolio returns are going to be harder to achieve than since the financial crisis, our teams remain confident that remaining patient will be rewarded when it comes to investing.
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