Elsewhere, between now and the year end, Italy are due to hold a significant constitutional reform referendum which poses some risk to the present government while the Austrian Presidential election is due to be re-run on the same date. After two inconclusive elections, Spain has agreed upon a minority government: how long it will be before further Spanish elections are needed is a matter of conjecture and stability there cannot be taken for granted.
Thinking not too far ahead, elections are due in Holland and France next Spring and in Germany later in the year: particularly in France the status quo looks to be under challenge and none of these developments look set to facilitate straightforward Brexit negotiations.
All of this makes the UK’s Autumn Statement by the Chancellor, on the 23rd of this month, appear to be of almost passing significance in the wider scheme of things. However, the UK’s overall deficit is rising, unemployment looks to have stopped falling, manufacturing growth appears to be slowing, while overseas investors, whose buying of UK Government stocks is essential, are beginning to require higher rates of interest given inflationary pressures and currency instability. This does not provide an easy background for Mr Hammond who has to both keep the show on the road ahead of an increasingly uncertain period and at the same time reassure markets that the UK is dependable.
This all reinforces our previously held cautious view on fixed interest markets, other than in respect of index linked holdings. Therefore we continue to overweight equity investment, focussing on UK companies with overseas earnings and on selected international markets. We are encouraged in this by indications of relatively strong US third quarter company earnings figures and some relatively sound results from larger UK companies benefitting from overseas earnings.
Investors have to take a degree of risk in order to have a prospect of achieving a decent return on capital. We believe that this can be ameliorated to an extent by the use of absolute return investment. Achieving an overall balance that bests suits each individual client’s needs, length of view and approach to overall risk, remains our key objective.