Investment Perspective Post Election

By December 16, 2019 ELEVATION BLOG

Some time ago, someone in our office, with obvious wisdom, suggested that everyone should write down, and put in a time capsule, what they thought the outcome of the General Election would be – not to be opened until 9 am on Friday 13th December 2019! Well, it’s 9.24 am at the time of writing.

Unfortunately, this ‘Great Idea!’ failed to get done because our office was so busy answering the reams of emails from clients about Brexit, no one had time to do it!

But here we are! A clear path! Brexit will be done! What do we talk about now? What is there to get in the way?

A boffin from a Russell Group University, apparently worked out that the time spent by Government Officials procrastinating about Brexit and doing Brexity things was equivalent to that of the total lifespan of the deepest deep water shark (450 years according to a marine biologist I heard speak recently!). Minor issues like the NHS, roads and dare I say it HS2, failed to get priority of time during the Brexit hiatus. Whilst crucial discussions and rafts of legislation were created around such crucial policy as ‘Why Pithiviers in France, although landlocked, should get fishing quota from its English twin town, Ashby-de-la-Zouch in Leicestershire (which is equally landlocked !), more urgent and closer to home issues seem to have gone walkabout.

Think of it – 450 years would take you and me back to nearly the time of the Battle of Bosworth and the Civil War. All you would be able to talk about from 1670 to December 2019 would be Brexit! No Waterloo, Churchill, Beatles, Stones, Peters and Lee, or Leicester City winning the 15/16 Premiership chat, just Brexit….aahhh !! Where is Back to the Future, Michael J Fox and the Delorean when you need them!

So is post-election an opportunity perhaps to get on and genuinely look forward?

In the investment markets, 2019 has been a year of volatility, welcomed by our managers as an opportunity to gain performance. Buying in and out of the UK, the use of Gold to hedge and riding currency fluctuations have all helped deliver strong annual returns this year. The political uncertainty appeared to have been factored in with the use of Gold and good asset diversification, particularly in global equities, helped ride out European issues.

Having just completed a round of meetings with our leading Managers, common sentiment appears to be that volatility is expected to continue into 2020. With our policy of active management, this is seen as a positive – which has certainly been shown this year. China, Vietnam and stronger global fiscal policy to match larger global spend are seen as reasons to be optimistic leading into next year.

A common theme across all of the independent managers at a recent Citywire conference I attended, was investment in sustainable commodities. With so much micro policy steering companies to act better, green investment is set to become the rule rather than the exception. That has got to be good.

So what will a post-Election, post-Brexit look like? Time will tell. The great European currency behind the euro and pound is produced by the “bank of Mercedes”. The UK is a key consumer of that currency, so the UK will remain important to Europe as indeed the UK will want to ensure UK product is still attractive to the Europeans. A Game broker told me in my local last night, that 90% of UK venison is exported to Belgium and the Benelux countries – we then apparently replace that with venison from New Zealand – so markets all round will want to work and that will need common sense negotiation. It is said that free markets drive outcomes, not politicians – be good to get them now all on one page!

A client with a fantastic Design business, based in 10 global sites, was intending to base the Head Office function all in London. His business needs to employ the best CAD designers, architects and interior designers – targeting Europe as the main supplier of skills for London. Because of uncertainty around residency due to Brexit, Europeans have been resistant to commit and so this idea has been shelved. I suspect this company is not alone. The effect of the Brexit uncertainty will not be resolved immediately, and some will say that damage done, is damage permanent.

However, I note this morning on my App that Sterling is driving up and so too are markets. A degree of certainty and an ability to plan ahead is positive.

So how do we see 2020 at Elevation?

We enter the year able to plan, we expect some of the 450 years that has been freed up now we have Brexit done (or nearly) can be used for forward and assertive thinking and critically positive action. The Government, by definition of the result, now has a mandate to be assertive and one hopes with wisdom. Our managers will probably be faced with a different landscape to manage next year. A probable stronger sterling, an increase in interest in UK equities as well as a possible change in the UK property market will all require proactive management. And pro-active management is what Elevation believes in and does.

Now that’s over, we can concentrate on Christmas! Wishing everyone a great time and happy new year.

Kindest regards

Tony Smith
Group Managing Director
Elevation Investment Management