May 2017: Markets voting against the UK

The punning opportunities last month are almost behind us.

In fact election polls have suggested that even May might be behind us. The Prime Minister that is. If she ends up with a reduced majority, or even just a marginally higher majority, then she’ll have the Tory attack dogs at her heels in no time.

The big news in geo politics was Macron winning the French Presidential election. Markets had mostly priced this in, but the Euro climbed slightly and the Eurozone equity markets rose over 2% too.  Over two months a Brit investing GBP in Eurozone equities has returned almost 10%, including currency movements.

In the meantime, with Labour’s goalkeeper being almost absent from the pitch, Theresa ‘week and wobbly’ May has suddenly looked like she could even miss an open goal. Markets have marked the pound down.  For FTSE-100 this has been a bonus, as it has heavy exposure to the Eurozone, so FTSE-100 is up 4.4% on the month, reaching record highs.

In other news Australian equities continued their slide. And Fixed Income had a slow and steady month – as it often does.

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Why investing beginners should consider stock markets

I am fortunate to know a lot of smart people.  Many of these smart people are successful, and make decent money.  Many of those have significant positive net worth.  But a surprising amount of them – I would guess over half – don’t choose to invest in publicly quoted equities. They are investing novices, and proud to admit it.  This blog post is for them, and their friends/family.

Imagine you are under 50, and have £1k to add to your savings. I don’t mean in your pension, which I think most people handle differently to savings.  I mean ‘put aside’ but retrievable on a rainy day / for a house deposit / for school fees / similar.

Where would you put your next 1k of savings?  Or more to the point, £10k of savings? Or £50k of savings?

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April 2017: elections & returns

I returned to London from my Easter break to the surprise announcement that Theresa May has called a general election on June 8th.  Normally I love elections and am a news junkie about them. Personally I think the PM has missed an opportunity to lance the Scottish nationalist boil by calling a simultaneous #indyref2.  So instead of that excitement, I find myself agreeing with piece in The Sunday Times today arguing that for once a foreign election, in France, is more exciting than the anticipated Tory landslide in the UK’s general election in June.

Certainly Macron’s win in the first round of the French election lifted European stocks considerably. The European index I use as my proxy for ‘international (i.e. non UK/US/Oz) equities’ rose 3.5% in April, well ahead of the English-speaking stock markets.  While we can’t ignore the prospect of a Le Pen win, it doesn’t appear likely from opinion polls. Much as people are knocking pollsters right now the only result they got wildly wrong in the last few years was the 2015 UK General Election result (where First Past the Post makes predictions particularly tricky). So most likely European markets are going to get better rather than worse.

2017 04 returns by asset type.jpg

The other big news in the markets for Brits was the jump in the pound, attributed to the prospect of ‘stronger and stabler’ UK leadership post the general election. Forex markets clearly haven’t clocked that the European leaders who do best in EU negotiations are those with credible domestic oppositions to appease, not those with autocratic majorities. In any case, the pound is still below $1.30 so the Brexit Brainfart hasn’t blown away yet.  But the pound rose against the whole basket, particularly the AUD (+5.8%). This led to FTSE, a foreign-dominated stock market, dropping about 1%.

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