Have you settled down after the election yet?
I think it’s fair to say that the shock General Election returned a huge shock of a result, no matter what you political affiliations.
The political correspondents are really earning their money at the moment and the TV satirists are having a field day with the fresh new material they’ve all been supplied with.
If your head is still in a spin with regard to the outcome and it’s implications on the economy and Brexit, just imagine how the markets must feel. Not just here in the UK, but in Europe as well as the rest of the world.
I’m not sure uncertainty quite sums it up.
Will Teresa May be able to hang on in a hung parliament?
The implications of a hung parliament are huge. There’s a great deal of horse-trading going on behind the door of Number 10, with alliances being formed in order to ensure that the Queen’s Speech passes smoothly. However all of these deals come with a cost, in both financial and political credibility terms.
On top of all of that are the noises coming from the more vocal dissatisfied conservatives, as well as telling silences from very senior members of the party. So all things point to a leadership challenge looming large on the horizon.
Not the most ideal way to launch into Brexit negotiations. But we are where we are. We live in the greatest democracy on the planet and the British people have spoken to the Mother of Parliaments – and she must listen.
Who would be brave enough to predict the next six months?
Well none of the political or economic experts feel that they are in a position to comfortably give an opinion of what the next six months might look like. To say that we face a period of instability and choppy waters is about the only thing they can say, with a degree of certainly.
So what do the market’s think?
We know that the one thing that the markets love more than anything else is stability. We also know that that is something that will return at some point; but seems to be a little way of at the moment.
With that in mind, from an investment perspective now might be the time to sit tight, ride things out and see how the markets look when things settle down. We are a few days into this period of turmoil and a wise captain never plots a new course from within the eye of the storm. Far better to let the turmoil play out and re-asses things once the maelstrom has dissipated. And dissipate it will. It always does.
Political and economic history shows us that things calm down. Politicians will do deals, or elections will be called. Either way, a new normality returns; and from the new status quo, the markets settle and return to the long-term trends of growth.
So what are the smart investors doing right now?
Well sometimes the best course of action is no action at all. Leaving your investments alone and waiting for the markets to settle back to a steady state is a proven a strategy that has worked in the past when the markets face ‘interesting times’.
Consider the medium to long-term performance of the markets. They are robust and they unrelentingly move forward, despite what the politicians across the world try to do to stop them.
So, unless you need to liquidate your portfolio because your circumstances have changed, the consensus of opinion seems to be to hang on and let things settle.