News this past week:
- Oil prices continue to decline
- Brexit negotiations begin
- Bank of England split over policy rate moves
- MSCI adds China A shares to All Country World Index
- Brexit bills dominate UK Queen’s speech
James Klempster (CFA) from Momentum Global Investments shares his view:
First anniversaries are generally a time to celebrate and reflect on the past 12 months fondly. Last week saw the one year anniversary of the UK’s decision to leave to European Union and few in government would likely have such a rose tinted view of the intervening period. One year on from Brexit there is arguably greater uncertainty about the likely path of the extraction of the UK from the European Union than there was at the time. This is not least thanks to Theresa May’s disastrously run snap general election which has resulted in a chastened minority government and a resurgent labour party under Jeremy Corbyn. A majority government speaks more credibly for the will of the people than a minority one. As a result it is likely that the government will face many scraps at home which risks distracting from the job in hand; namely securing the best deal possible. It is ironic that the general election was seemingly called in order to secure a greater Conservative majority thus reducing the influence of Tory backbenchers aiming for a ‘hard’ Brexit. While the negotiations are progressing it is unlikely that we will be treated to much of the detail, as both sides will be reluctant to give away their stance on critical issues. As an investor, therefore, we cannot anticipate having enough information to be able to make high conviction positions in portfolios. Indeed that may be the case once the two year time limit for negotiations has elapsed.