It would seem timely to offer input in respect of the effect of the UK General Election results on the markets. The hung parliament result has further complicated the political backdrop and increased uncertainty surrounding the UK’s forthcoming Brexit negotiations. A weakening of sentiment initially put UK equity markets under pressure, but sterling’s declines have since supported the FTSE 100 Index. On the other hand, the domestically-focused FTSE 250 has experienced minor declines. This situation can be explained by the FTSE 100’s large multinational constituents deriving a benefit from sterling’s depreciation, as it boosts the value of the revenues they earn overseas, while the FTSE 250 is perceived to be more exposed to domestic political risk
The balance of factors looks less supportive for domestic UK equities, but stocks with earnings overseas should continue to benefit from the boost to earnings provided by a weaker Pound.
With 321 seats needed in practice to form a majority, a second election in the autumn looks possible, with a left-wing Labour government a conceivable outcome.
The results were as follows from 8 June 2017:
Liberal Democrats 12
Democratic Unionists (DUP) 10
Sinn Fein 7
Plaid Cymru 4
Meanwhile, the EU may see the current situation as an opportunity to be tougher in terms of departure. However, lower support for the SNP also means that the threat of Scottish separatism appears to have diminished.
Outlook for Investors
We are extremely positive on the prospects for value equities. Trump’s presidency means that active management, including stock picking, will come into its own. The key is to maintain liquidity to ensure tactical moves can be made. Since the Spring of 2016 US equities have performed well, whilst European equities have lagged behind somewhat. As ever with equities, the price you pay is a key determinant of the returns you can potentially make. In our view, European equities now look attractive from a valuation standpoint.
One reason why European equities have lagged other regions is that we have witnessed several years of earnings declines. Some of this has been due to pressure on the financial sector, as well as the effects of low commodity prices.
However, we think 2017 could see European corporate earnings grow at their fastest rate in five years and so for our clients it’s important that we have sufficient exposure to European equities to take advantage of this growth.
Always consider your investments as a whole and make sure your adviser is rebalancing your portfolio as appropriate in order to take advantage of the current economic climate. Low risk usually leads to lower long term returns, interest rates on savings accounts have been at an all-time low for some years and this trend is likely to continue to worsen. Of course, everyone should have some cash for emergencies and unexpected events, but for those with a longer term investment outlook (5 years or more) this should be supplemented with investments in other asset classes and geographical spread that offer better potential for real capital growth and/or income.
Speed Financial Solutions are a highly qualified financial services provider on the Costa del Sol looking after clients throughout Spain and the UK. We provide a discreet and comprehensive service to individuals, our service is tailored to your needs. We seek innovative solutions for our clients and employ our skills, based on many years of experience, to apply tax legislation to our clients’ advantage. Our relationship with clients is built on trust and mutual respect. We are accessible and approachable, and ready to answer your questions, giving you the confidence you want when dealing with a sensitive issue such as discussing your pensions, investments and savings.
Our Principal, Andrea Speed, is a Fellow of the Personal Finance Society (PFS) which is the professional body for the financial planning community. The PFS is part of the Chartered Insurance Institute (CII), which is the world’s largest professional body for insurance and financial services in the world.
Fellowship is the highest qualification awarded by the CII and is universally regarded as the premier qualification. It is a major achievement in the financial industry and demonstrates the acquisition of skills and knowledge at the highest of levels.
Along with a Fellowship, Andrea is a CII Chartered Financial Planner specialising in Taxation and Trusts.
Please take a look at our website – www.speedfinancialsolutions.com for further information and contact us (Tel 951 315 271 or 951 318 529) – we are happy to discuss your own situation in more detail. One of our advisers would be pleased to spend some time with you either in your home or at our office to review your current savings, investments and pensions, so do call to make an appointment. Meetings with us are free and without obligation.
Andrea J Speed FPFS(DM), M.A.
Principal, Fellow and Chartered Financial Planner
Speed Financial Solutions
14 June 2017