Media Centre

28th November 2017
Market Commentary November 2017

London news

The recent budget contained great rallying cries for inward investment, infrastructure spend outside the South East, embracing technology, and funding skills and training. We applaud all these initiatives and believe this rhetoric will land well with voters. Delivery of visible movement on Brexit progress will also help restore some credibility; but behind the words were the independent Office of Budget Responsibility (OBR) forecasts on falling UK GBP growth: 1.5% -1.4%-1.3% in the coming years. This is well ahead of the Brexit "Remain" campaign's Project Fear predicting immediate recession and an immediate emergency budget; and whilst some growth is better than recession, this helps explain why we have been increasing weightings to overseas markets away from the UK.

Even taking away the politics and Brexit uncertainties, UK GDP growth is now expected to be at the bottom of the G20 league. Eighteen months ago, we were at the top of the G7 table. This again steers our thoughts towards reducing direct exposure to the UK economy. Our economy is very dependent on consumer spending and whilst employment rates are the highest for years, wage growth is minimal and below inflation. Personal debt levels are reportedly hitting pre-financial crisis highs; and without major real wage growth, consumer spending will not cushion the UK economy this time. 

In contrast with the rest of the world, global growth is expected to increase to 3.5% next year with all major economies growing significantly faster than the UK without the political and Brexit risk. Therefore, we have been increasing our overseas exposure in recent months, using leading funds to gain exposure to the US, Europe, Japan and Emerging Markets. We still have significant UK exposure but mainly through leading companies that have significant overseas earnings to again benefit from the greater global growth prospects. We will also retain a defensive stance using bonds, property, alternatives and cash, since many leading economists continue to predict an end to the bull market. Leading forecasters have been doing this for some years now; and so maintaining a balanced portfolio prepared for all scenarios is more important than ever.

If this article gives rise to any further questions, please do not hesitate to contact us.