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Beyond Brexit

Tom Stevenson

Tom Stevenson - Investment Director

The Prime Minister won’t forget the last few days. If anyone has endured a long week in politics, it is Boris Johnson.

Beyond Brexit

The first Prime Minister since the Earl of Rosebery to lose the initial vote of his premiership, Number 10’s newest occupant doubled down by losing the second one too.

It now seems certain that the anti-No-Deal rebels will succeed in forcing the Prime Minister to request an extension to the Brexit process if he has not secured a withdrawal agreement by October 19.

To add insult to injury, they then rejected his call for a general election. Labour wants to go to the country in due course, but they will do it on their own terms when No Deal is completely off the table.

Having infuriated MPs by suspending parliament either side of conference season, the Prime Minister made even more enemies by sacking nearly two dozen of his own colleagues in a savage night of the long knives that claimed the scalps of Winston Churchill’s grandson and two former Chancellors.

If this is Taking Back Control, no-one will want to see what Out of Control looks like.

So where do we go next? What is almost certain is that we will be going to the polls again this year. What is harder to predict is when the general election will be held or how it will be triggered.

One intriguing possibility is the Government stages a vote of no confidence in itself in order to force an October election that leaves the option of a 31 October Brexit on the table. We are living through extraordinary times.

You might think that all this political turbulence would be bad news for investors, but it’s actually been a good week in the markets.

That’s because our obsession with the ups and downs of the Westminster soap opera is not shared by the rest of the world. If we raise our gaze above the parapet, there are bigger issues in play.

The most important of these is the ongoing US-China trade war that has clouded the outlook for the global economy for more than a year. The week started with the imposition of new tariffs but ended with hopes that talks will be back on next month.

With the clock ticking down on next year’s Presidential election, Donald Trump is thinking about a deal. The last thing he needs is a recession in 2020.

Add in news that the Italians are putting together a market-friendly coalition between the Five Star and Democratic parties, stir into the mix some positive noises from Hong Kong, and market sentiment feels a tad warmer at the end of the week than it did a few days earlier.

The S&P 500 is flirting with a new record. Safe havens are out of favour again. Crisis, what crisis?

There is still plenty to worry about. Many investors are fretting about what a Labour government might mean for their finances. A John McDonnell-authored manifesto for an autumn election might make chilling reading for anyone with a high income, uncrystallised capital gains, a rental property or shares in a utility.

A Labour government seems a lot more plausible than it did only a couple of weeks ago but it is still not the base case. British politics has become so polarised, and the country is now so divided on Leave/Remain lines, that it seems unlikely that either of the main parties can achieve a majority.

One of the ironies of Brexit is that Britain’s politics is looking ever more European. A future of shaky coalitions beckons. And that is not necessarily a bad thing for investors. Hamstrung Governments that are unable to drive through radical policies will be seen by many as a blessing.

The past week has been a reminder that sentiment can swing as quickly from bad to good as the other way round. When bad news has been priced in, it can sometimes be enough that things are getting no worse for markets to bounce back.

At times of great uncertainty, it pays to be well-diversified and to focus on long-term goals. The Fidelity Select 50 Balanced Fund was designed to support investors through just these kinds of challenging market conditions.

Managed by Ayesha Akbar, an experienced fund picker in our multi-asset investment team, it divides its investments between bonds, shares, commodities, property and cash. Its hunting ground is predominantly our Select 50 best buy list, a great starting point for high quality funds. And it invests in markets all over the world, putting its eggs in a variety of baskets.

It’s been quite a week in Westminster. And quite a week in the markets. Enjoy the weekend because on Monday it starts all over again.

Important information The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. Select 50 is not a personal recommendation to buy or sell a fund. Overseas investments will be affected by movements in currency exchange rates. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

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