If you read the newspapers – and especially if you follow the events in Whitehall – you could be forgiven for thinking there is an economic crisis waiting to happen.
While Brexit disruption may mean some of our politicians could find themselves out of a job in the near future, at Continuum, we take a more positive view. We tend to think that, the economy – and prospects for investments – may be a great deal brighter than they first appear.
The bad news
Of course, it may not all be plain sailing. There are some major challenges to economic stability.
The most obvious is of course Brexit. By the end of this month, the United Kingdom is set to have left the European Union. If a Brexit deal is pulled off at the last moment, it could all be business as usual. A hard Brexit might cause some disruption with EU exports as well as supplies from our European neighbours, even if the rest of the word might suddenly become our trading partners.
There’s Donald Trump and his trade wars with the rest of the world, unrest in Hong Kong, and even the attack on the oil field in Saudi Arabia.
All of these risks have the potential to escalate – but it’s not all bad news.
The surprising news
The fact is, whatever form Brexit takes, there could be a silver lining for investors. Probably the most obvious Brexit fallout so far has been the fall in sterling.
On the day of the 2016 referendum the pound was over $1.48. Since then it’s lost nearly 19% of its value. Last month it went below $1.20, its lowest since October 2016, before recovering a little.
But the surprising thing is that a weak pound can be very good news for investors. For those holding overseas shares (directly or through funds) the value of these investments has been boosted in sterling terms.
It’s not just overseas businesses that can boost your wealth when you convert it into sterling.
The largest names on the London Stock Exchange, companies like Shell and BP make a large proportion of their profits outside the UK – and these overseas profits are worth more in sterling following the fall in the pound.
The UK stock market as a whole has risen as sterling has fallen – and if Brexit means the pound falls further, it could do so again.
The good news
Even if things are not as bad as they seem at first, there still seems to be a lack of good news. But it is an old truth that good news is no news, and does not sell newspapers, or bring worried visitors to webpages.
The real news behind the headlines is that whatever happens with Brexit, the UK economy is looking positive, there are record levels of employment and inflation could well be under control. There could even be a Brexit boost, when certainty returns to the market.
What matters is confidence, and confidence is supported by job security and people’s ability to match their outgoings. If you have a job, and your wages are going up, you will spend money and the economy will continue to function. Of course, downturns do happen, often when there is too much debt that suddenly needs to be repaid. But with governments around the world wary of recession, the chances are that a downturn can be avoided.
What can you do as an investor?
At Continuum, we believe that things may be more positive than they first appear – and that even if there are some worries the best way forward may be simply to stick to your plan. Don’t panic, don’t buy assets that are suddenly looking cheap (there may be a good reason why) and above all don’t have all your eggs in one basket. A properly diversified portfolio with plenty of overseas holdings will help you weather the storms if there are to be any, and help your money grow if it is all plain sailing. You can keep track of your portfolio with our Personal finance portal, and keep up with the latest financial news with our regular articles.
Naturally, if you want any help in ensuring that your portfolio is balanced and as diversified as possible, at the Continuum team we will be very pleased to help.
Simply call us.
The value of investments can go down as well as up, past performance is not a guide to future returns. YOUR CAPITAL IS AT RISK.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
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Book an initial consultation with one of our independent financial advisers or call us on 0345 643 0770 if you would like to discuss further.
Sources:
https://www.ft.com/content/8d8a100e-38c2-11e6-a780-b48ed7b6126f
https://www.ft.com/content/051558ae-ce11-11e9-99a4-b5ded7a7fe3f
https://www.xe.com/currencyconverter/convert/?Amount=1&From=GBP&To=USD
