Brian’s Brainstorm
The General Election Fallout
Once again the majority of pollsters and bookies called the general election wrong. But easier to call was the drop in the pound that followed news of a hung parliament and the subsequent gains in the FTSE 100 index.
Meanwhile parts of the media are jumping to some irrational conclusions. The general election was not an anti-Brexit vote. Parties that supported the adoption of Article 50 attracted 84% of the popular vote. Parties that campaigned against the Brexit verdict notably the Lib Dems and SNP lost votes.
Indeed Mrs May called a general election to boost her power within the Conservative party, rather than her bargaining position with the EU. After all our EU counterparts, who are more than familiar with coalition governments, will not take much store on the scale of her majority. But the upshot of Mrs May’s failed gamble will be to force her to listen to a wider range of opinions which can’t be a bad thing.
At the same time how the currency markets will react to the ebb and flow of Brexit negotiations is anybody’s guess. It took Canada seven years to reach a trade agreement with the EU; so it is hard to believe that a departure from the EU will be signed and sealed within two years. The most likely outcome is a fudged interim solution. Obviously there will be scope for surprises. If the EU makes life difficult for the UK out of spite, the pound may have further to fall short term.
All things considered the most appropriate investment stance is a geographically diversified equity portfolio combined with a fixed interest exposure which will serve to dampen the effect of any correction in stock markets from their currently stretched valuations.
Staff Matters
- As we start to get into the swing of British “summertime” a lot of our staff are looking forward to heading off in pursuit of relaxation and for better weather away from home.
- All sorts of trips are planned over the next two months of summer from visiting the South of France where Mark will be sampling the produce of the local vineyards, all the way to Ian’s climbing of mountains in the Alps, and an array of breaks in between.
- In fact two members of our Paraplanning team have already spent a long weekend in Nice and would thoroughly recommend the city to anyone interested in going.
Statistical Information
| Last Month | This Month | Change | |
|---|---|---|---|
| CPI | 2.7% | 2.9% | +0.2% |
| RPI | 3.5% | 3.7% | +0.2% |
The Consumer Prices Index (CPI) continues its climb and now stands at its highest level since June 2013.
As the Pound continues its recent post Brexit referendum slump, the impact of the weakened currency on inflation becomes more and more noticeable. The increased expense of importing goods has been passed on to the consumer and nearly all sectors have seen an increase in inflation as a result.
| May 2017 | Jun 2017 | Change | |
|---|---|---|---|
| Base Rate | 0.25% | 0.25% | 0.00% |
As CPI looks set to breach the 3.0% barrier over the coming months, the last meeting of the Monetary Policy Committee (MPC) saw several members shift their stance on the Base Rate question. Michael Saunders and Ian McCafferty voted along with Kristin Forbes to increase the Base Rate to 0.50% but were outvoted 5-3.
The MPC is next due to meet on 18th July.