Touchbutton 87 – Hold fast
Anyone in doubt about the perceived wisdom of Kwasi Kwarteng’s so called mini-budget need look no further than the foreign exchange markets.
“…the Bank of England is indeed determined to tackle inflation.”
The pound, already reeling last week, has suffered again today and is coming closer to levels that some commentators expected might occur in 2023, if at all. There is talk of an emergency interest rate hike this week, but betting against the tide of global market opinion is a losing battle in the short term. All it might achieve is evidence that the Bank of England is indeed determined to tackle inflation.
“This is not a time to be making widespread changes to long-term investment strategies…”
This is not a time to be making widespread changes to long-term investment strategies: we already have a substantial commitment to US dollar assets, and although the US stockmarkets also fell last week, losses for a sterling-based investor were entirely mitigated. We expect this to remain the case, although at levels getting close to parity against the dollar suggest that we are pretty close to the nadir for sterling.
“We have not given up on the UK altogether.”
Looking on the bright side, UK plc now offers eye-watering bargains for overseas investors wishing to acquire fundamentally sound businesses at a 25% odd discount to the beginning of the year. Our commitment to the UK is, and has been for a while, very modest, but our underlying managers are focused on strong companies and the potential for some increased M&A activity could turn out to be a bonus. We have not given up on the UK altogether.
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