Investment Newsletter - September 2014

Page 1

Investment Newsletter September 2014

The Last Queen of Scotland? By Mike Deverell Investment Manager

This week sees Scotland go to the polls to vote on whether to remain part of the UK. The pros and cons of independence have been discussed in great detail elsewhere and this newsletter is not long enough to cover them all! However, a “yes” vote could have an impact on markets and financial services in general, which could therefore have an impact on clients. The upcoming referendum has already had an effect on several markets, particularly after the recent YouGov poll put the “yes” voters in the lead for the first time. Since the poll, the pound has dropped quite sharply, after a period where it had already been weakening. From an investment point of view the major short term impact of this is that it pushes up the value of overseas holdings. We don’t typically hedge currency when we invest in overseas equity markets as this comes with associated

costs. This means that your American investments, for example, are exposed to the movement of the dollar. As the dollar has strengthened against Sterling of late, our US holdings have therefore increased in value. Part of the weakening pound is simply a reversal of a very strong run for our currency over the previous year or so. This was partly driven by expectations that the UK would be first to increase interest rates, with the US not doing so for some time. This has now changed and the market expects the UK and the US to increase rates early next year. The recent polls on Scottish independence have therefore exacerbated an existing trend. Longer term, a fall in Sterling could push up inflation through more expensive imports. On the flip side, it would also help British exports by making them cheaper. The other short term effect we are already seeing is in the UK stockmarket, with the FTSE 100 down 0.6%

Equilibrium Asset Management LLP (a limited liability partnership) is authorised and regulated by the Financial Conduct Authority. Equilibrium Asset Management is entered on the Financial Services Register under reference 452261. The FCA regulates advice which we provide on investment and insurance business; however it does not regulate advice which we provide purely in respect of taxation matters. Copyright Equilibrium Asset Management LLP. Not to be reproduced without permission.


Turn static files into dynamic content formats.

Create a flipbook
Issuu converts static files into: digital portfolios, online yearbooks, online catalogs, digital photo albums and more. Sign up and create your flipbook.