Hi All, Well after today’s huge rally I confess that I have been wondering where we go from here. Today has been a really great day for anyone invested in sectors that have been unloved for a very long time now, notably UK Banks and Property of any form (housebuilders and REITS in particular) while things that have foreign earnings and have previously prospered have been punished. The GBP has soared about 3.5% against the USD and the EUR in the last few days so any overseas investments have taken a bit of a hit, even though those markets have actually been up in general – in fact some quite strongly.
Thinking about any brexit deal, while I personally would be delighted if whatever BJ has planned came off and all of the uncertainty of the last 3 years was ended, I just can’t see it. Even if the EU dont scupper the deal then the numerous factions in Parliament seem to me to be almost certain to do so. I just can’t see it happening, even though I would REALLY like it to. The coming week will be critical, we should know by the end of it if there is a deal that the EU will go with and on Saturday we will see if Parliament will agree to it without further delays or referenda. My guess is not and we will head off into a General Election and maybe a second referendum and more uncertainty. But I suppose if BJ does come up with a deal at least he might be championing that rather than a No Deal brexit ?.
So what does this mean investment-wise ?. My personal views are as follows:-
- That the current rally in unloved shares may continue next week (or not) and the GBP continue to rise perhaps, but if no brexit deal is agreed next week then it could all unwind VERY quickly. So selling or setting a stop loss on any really significant gains might be a good idea just in case they slip away. However if a brexit deal IS done next week then at least some more of what we have seen today is likely and correct market positioning will be important – noting that today some things have done very well and others pretty badly.
- Personally I should think about perhaps reducing some of my overseas exposure just in case the GBP returns to 1.30 – 1.40. If that should happen then I might be looking at a 3-4% loss on my portfolio which I would prefer to avoid.
As always I could be totally wrong and what I have described cannot in any way be guaranteed to come to pass. But as usual I think that it pays to be prepared and have some form of plan.
I would be interested to hear the views of others on this subject. But I would be obliged if we can keep responses to be investment strategy focussed, as I would not want the topic to disintegrate into a brexit wars type discussion.