30 August 2016

Lazy Summer Days

Summer has arrived late this year for we home dwellers. At last it is possible to enjoy the hot and sunny weather – and to do so without having to worry too much about what is taking place in markets.


Frankly, not much is happening right now. There is a scattering of company results and the odd economic statistic or two, but little to dislodge investors from their current summer torpor. Still, that’s summer for you.

All this promises to change, of course. Aside from the upcoming party conference season, likely to be followed by renewed speculation on just what Brexit might entail, there is a small matter of the US Presidential election to consider. All the noise coming out of America suggests neither of the two options facing the electorate there are particularly palatable. Markets favour a maintenance if the status quo through a Clinton victory, but nothing is ever certain in investment or politics.

Indeed, politics will be playing a large part in investment sentiment in the months and years ahead. Both Germany and France are due general elections next year, while the ongoing discussions over the UK’s relationship with the remaining European Union members will have more than a tinge of political influence bearing on the outcome. The fact that the EU’s trade discussions with the United States appear to be foundering will hardly help.

There hasn’t been much excitement in commodity and foreign exchange markets, which have quietened down for the summer. Oil hovers just below the $50 mark, while the pound has settled, even if it hasn’t managed to recapture any of the ground lost in the immediate aftermath of the referendum result. A cheap pound should help our economic wellbeing, through encouraging exports, but it is too soon to see if this turns out to be a proper plus for UK plc.

As it happens, statistics published this week disclosed that Britain has seen record inward foreign investment, though to be fair, this covers the period to shortly before the vote to leave the EU. We do know that the fall in the pound has encouraged some overseas firms to pursue a UK focussed acquisition strategy, but it is too early to know whether this trend will continue. The prudent course of action looks to be to sit back and enjoy the sun, in my view.


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