UK Investment Markets: Weekly Update – March 18th 2019

UK Investment Markets: Weekly Update – March 18th 2019

The British pound paused for breath last Friday after the UK parliament voted overwhelmingly to seek a delay in Britain’s exit from the European Union. Sterling fetched $1.3253, having slipped further from Wednesday’s nine-month high of $1.3380, with its fall of 0.76 percent on Thursday. Against the euro, the pound retreated to 85.25 pence from Wednesday’s 22-month peak at 84.725.

British lawmakers approved a motion setting out the option to ask the EU for a short delay if parliament can agree on a Brexit deal by March 20, or a longer delay if no deal can be agreed in time. The pound was mostly steady after the motion was passed late on Thursday.

There has been a soft consensus in the market that the Brexit will be delayed and currencies have been moving in line with that. But tail risk has not completely disappeared yet. This week’s EU summit will probably be the climax, mainly because all 27 EU members must approve any extension before a delay to Article 50 can be granted.

Before UK Prime Minister Theresa May meets EU leaders on Wednesday and Thursday, a new vote on her twice-rejected deal is likely to take place tomorrow. Lawmakers must now decide whether to back a deal they feel does not offer a clean break from the EU, or reject it and accept that Brexit could be watered down or even thwarted by a long delay.

With Brexit Approaching UK’s Voice in Brussels Grows Quiet

For years a British foreign minister has shuttled once a month to Brussels or Luxembourg to meet their European counterparts. The crises of the world have crowded the agenda: from the Arab spring to the annexation of Crimea, coups, stolen elections and intractable wars.

Today, in theory, could be the last time the United Kingdom name plate is on the table. While a Brexit extension is a near-certainty, the official departure date is still 29 March. Uncertainty over exit day requires careful diplomacy. Today the British minister will have the chance to weigh in on the EU’s China strategy, ahead of a summit with Beijing on 9 April.

While British officials remain involved in discussions, the UK will hang back on strategic questions about how the EU should approach China. Nobody wants to be seen as lecturing European allies, while sitting in the EU departure lounge. A government spokesperson said: “The UK will continue to take a full part in discussions at the [Foreign Affairs Council], focusing on those issues that matter most to the UK and EU.”

Other day-to-day EU business provides a jarring contrast with the government’s Brexit strategy: one of Theresa May’s last acts as an EU leader will be to sign a routine communiqué on strengthening the single market – the one she insists Britain must leave.

Meanwhile, the UK’s 73 MEPs do not know if they will be out of a job in a fortnight, or in three months. “It is really unsettling, but we are the least people to worry about,” said the Liberal Democrat MEP Catherine Bearder, speaking just outside the chamber in Strasbourg under the strident ring of a voting bell.

The uncertainty facing MEPs is nothing, she adds, compared with the unknowns confronting business. “A politician’s life is always uncertain, you never know if you are going to come back for the next mandate.”

Although delay is on the cards, wheels are in motion for the long-planned Brexit day. British MEPs have been told to clear their offices by 29 March, as their passes will stop working soon after. Redundancy notices have been served to British MEP assistants, although contract renewal notices are now in the works for some.

“It’s uncertain, it’s unnerving that we still don’t have an answer,” one assistant said. “If there is any kind of extension that is a bonus, but for me I’ve always been planning on 29 March.”

It is noteworthy that the British presence in Brussels is not scaling back. About 50 Foreign Office staff work at the UK’s permanent representation in Brussels, a 50% increase since 2016. Officials are now thinking hard about how to preserve British influence, when there is no British voice or vote in the room.

CHOOSING THE SAFEST OPTIONS FOR YOUR INVESTMENTS AND SAVINGS

There is still no likelihood of any stability in the near future neither in the UK or the EU. With the focus on the UK, it is easy to ignore the mess that the EU is in economically and how the sudden withdrawal of Britain’s investment will impact it even more. From an investor’s point of view, it’s almost too risky looking for opportunities anywhere at the current time.

However, that can sometimes be a very narrow view to take as there are always anomalies when there’s economic uncertainty. In fact, when there’s market volatility, more millionaires are created than at other times in economic cycles. That said, it is definitely not a time to be greedy in terms of expecting high returns without any risk exposure. These opportunities seem to exist everywhere but they are absolutely worth avoiding, particularly if you are investing for a particular milestone such as buying a home, funding university or retirement.

At Investor Live, we are always looking for the kind of anomalies that represent safe and sound investments when there’s any kind of instability. From my point of view, it is important that the opportunity to cherry-pick exciting investments with a low-risk profile is not restricted only to those with bulging bank accounts. I represent the “normal” investor and on that basis, any recommendations I make are purely based on independent judgement.

Fixed income opportunities that are backed by tangible assets are the safest possible option for your investment strategy at the current time. You want to be sure you’ll be receiving a determined amount back for your investment and that there’s something underpinning it of significant value. One of the things to consider is not how much the asset you’re invested in is worth but how much of it is owned by the issuer behind the investment opportunity.

Investment over the short-term is always a better idea when markets are volatile and there are a few opportunities to enter the British hotel and hospitality sector for 1- to 2-year terms. One such opportunity comes from Liverpool-based hotelier Signature Living which has a proprietary investment vehicle called a Secured Partnership Investment (SPI). You can find out more about how to invest in this award-winning hotel brand that is rapidly expanding its portfolio of heritage hotels by contacting Investor Live.

About the Author

Amanda Wright is a former risk analyst at Bankers Trust, with specific experience of mergers & acquisitions and corporate finance. As a contributor to Investor Live, Amanda provides valuable insights into the technicalities of fundamental analysis in a way that is easy to understand, to provide retail investors with the tools to make considered investment choices.

 

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