0161 448 4755
Begin Scroll
Down Arrow

Until last week it looked as if China and the US were steadily negotiating a trade deal. However, President Trump took to Twitter once again and then increased tariffs on $200 billion of goods. This move sent shockwaves across global markets. Whether trade talks have broken down or whether this is a last minute “strong arm” negotiating tactic by the US administration is not yet clear. We are keeping a close eye on the situation.

On the positive side of things, both the US Federal Reserve and the Bank of England have confirmed their interest rates will not increase in the short term. In fact, the Bank of England has suggested rate rises will be “limited and gradual”. This will help support both equity and bond markets.

Exchange rates continue to be a significant influence on the returns of funds which invest internationally. These funds pick up performance from both the price movements of the companies which they invest in and also from currency effects. If the Pound strengthens against the other currency the effect is detrimental to performance, but if it weakens against the other currency this is positive.

Since the Brexit vote in June 2016 the Pound has been notably weak against the Dollar and Euro. This has been positive for funds which invest in US and European companies because when the fund returns are translated over from Euros or Dollars into Sterling they increase simply because currency weakness means more Pounds to the Dollar or Euro.

In our view, currency effects can help increase the diversification of a portfolio. If diversification is defined as reduced correlation between assets, investing in a currency other than Sterling will increase the diversification of the portfolio. The benefits of diversification are well-documented with empirical evidence.  Nevertheless, we carefully monitor Sterling exchange rates against other major currencies and do give due consideration to whether to opt for a hedged or non-hedged version of the funds included in our model portfolios. Hedged funds aim to neutralise the effects of currency movements and are typically more expensive than non-hedged versions, which is an important consideration because costs cut into returns.

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.

Latest news

Keep up with our latest news, views and market commentary

View All News

Politics in Play

The last three months have brought a series of political shocks ranging from on-going political manoeuvring around Brexit, US-China trade...

Looking to the future - long term investment themes

As you know from our regular updates, we keep a close eye on the economic and political outlook and how...

Keep Your Head (When All Around Are Losing Theirs)

It is easy to feel rattled with the continued political wrangling around Brexit in the UK, faltering trade talks between...

A Bumpy August

Equity markets proved volatile in August, especially at the beginning of the month.  Whilst the S&P 500 reached new highs...

The Boris Factor

The new Prime Minister has promised lower taxes, including cuts to income tax and stamp duty, and higher government spending,...

Market Update: Mixed Economic Data; Dividends Are the Sweet Spot

Global equity markets have made headway in the first half of 2019, the MSCI World index has advanced 19.6% in...

Woodford Equity Income and the benefits of Active Management

The benefits of our active management approach and the importance of having a well diversified portfolio with a number of...

Brexit Rumbles On

Political factors continue to influence the UK stock market, with the latest developments being the resignation of Prime Minister Theresa...

We would like to thank you for providing our clients with such a great service and always putting their needs first.
Samantha Private Client
I would like to give my appreciation for all the support and assistance that you have provided for me over the last 6 months.
Mrs S Miller Private Client
As soon we met you we felt in safe hands. You advised us on the state and worth of our current pensions clearly and simply.
Sean & Lisa Private Client