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Political factors continue to influence the UK stock market, with the latest developments being the resignation of Prime Minister Theresa May and the ascendance of the Brexit Party in the European Parliament elections. The Brexit party took the greatest share of the vote in the UK and gained the most seats.

Theresa May’s resignation follows the end of Brexit talks with the opposition Labour Party, which officially concluded without agreement. She will step down on 7th June. A leadership contest is now underway, with the winner set to become the next Prime Minister.

The mixture of the unwillingness of the EU to re-negotiate, the rise in appetite for hard Brexit amongst some voters and politicians and a potentially harder stance on Brexit by the new prime minister creates uncertainty and the possibility of further volatility for the UK market. Somehow the Brexit issue must be resolved before 31 October. A general election is also a possibility. We will continue to monitor our UK fund holdings closely.

We are pleased to have made some adjustments to the level of UK exposure within our model portfolios in 2018. For the remaining holdings patience is key. A reasonably healthy economy and the likelihood that interest rates will remain on hold in the coming months creates some support for UK markets.

Sterling has fallen in comparison to the US Dollar and the Euro in the last month. This is a positive development for our Global, US and European sector fund holdings because once their returns are translated over from Euros or Dollars into Sterling they increase simply because weak Sterling means more Pounds to the Dollar or Euro.

This article is for information purposes only. It does not constitute investment advice and is not a recommendation for investment. The value of your investment and the income from them may go down as well as up and you could back less than you invested.

28/05/2019

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