Until the recent general election there was a degree of certainty supporting stock markets. This reflected the government’s intention to deliver what has become known as a “hard Brexit” which markets saw as being likely to create greater damage to the UK economy for at least a number of years until, and unless, trade deals could be negotiated with other countries. As a result, Sterling had fallen sharply since the referendum and interest rates are at rock bottom levels.

These apparent certainties provided comfort for fixed interest investors and potential gain for equity investors focussing on companies with significant overseas earnings, whether they be UK or overseas based. ‘Certainties’ were however swept away by the general election outcome and as pressure for a “soft Brexit” has been steadily mounting, reducing the pressure on Sterling and thus the attractiveness of investment for overseas income and gains. Furthermore, there are increasing indications that the rock bottom interest rate environment in the UK and elsewhere may be beginning to come to an end. These factors have caused both fixed interest and equity markets to slip back just a little from their highest levels seen earlier in the year but nonetheless equities remain well ahead of their pre-referendum levels.

We favour a business friendly, softer, Brexit. It is after all businesses that generate any nation’s wealth. If that means that the UK has a slightly stronger currency then we welcome it and our basic view on markets, i.e. underweight in fixed interest (vulnerable to rising interest rates) and overweight in more volatile equities which have greater long term potential, remains intact.