Investors in the UK have generally done well to date since the Brexit vote. Equity investors in particular have seen the value of their holdings increase in a way that offsets Sterling’s depreciation in international purchasing power terms, while fixed interest investors have benefited from the Bank of England’s base rate cut. Losers have been those with substantial cash deposits where the full impact of Sterling’s depreciation is likely to be seen as and when higher inflation works through, while previously tiny interest rates on offer have been cut even further.
Looking ahead, Brexit negotiations are yet to begin (the process so far, on both sides, has been around gaining an understanding of what has to be done over the next few years), and uncertainty will remain with us quite possibly until near the end of the decade while wider ranging trade deals by the UK (should we leave the Single Market) may very likely take longer again.
Our opinion for medium and longer term investors is that greater opportunities are to be found among equity markets generally and for this reason we continue to aim to overweight this sector within portfolios, at the expense of fixed interest investments. The latter have clearly performed well in recent years and the Bank of England’s latest quantitative easing programme has and will continue to support it further, but there surely will come a time when this process finally concludes.