Please find below our Weekly Market Update for the week ending 22nd November 2019.
Blue Sky Comment
Your holidays could be cheaper next year!
According to Bloomberg, the pound has risen against the Euro for 11 out of the last 15 weeks – a period which has seen UK index linked gilts fall and UK smaller companies respond positively. Conversely, over the same period, the FTSE 100 has fallen, despite odd days when the index has risen strongly. As we write this, the FTSE 100 has risen by nearly 1.4% recovering the losses of the last 4 days.
With a ‘no deal’ seemingly off the table (never say never!) the pound has responded strongly with the general outlook being for a stronger Sterling. We predicted that domestic stocks would perform well and of late we have had a good rally as much of the ‘doom and gloom’ was factored into the price.
When investing globally we will have to consider the likely impact of a stronger pound, remembering of course that the FTSE 100 has a majority exposure away from these shores. An ability to hedge positions within portfolios will be increasingly important in our opinion. For example, LGT Vestra (one of our investment partners) have added their exposure to US Treasuries on a hedged basis.
Driving most things however is the US, with record highs being posted for technology companies. Both US Smaller companies and technology have very strong weightings in our in-house Momentum portfolio, as has UK smaller companies, which are now responding positively. There is no doubt that UK domestic stocks appear to offer great value and don’t be surprised to see many tactical switches away from international stocks into the UK, if the pound continues to rise in value.
A bit of stability here in the UK would be nice and to boot our holidays probably won’t cost us as much!