Here comes the autumn 2016?

06 October 2016

It certainly has been a momentous year for the UK following the Brexit vote in June 2016. The immediate reaction from the UK public and the markets was one of shock – however, subsequent to this we have seen many markets recover significantly, with UK Equity funds seeing an uplift of approximately 10% at the time of writing. The FTSE100 Index reached above 7000 points for the first time in about 18 months (April 2015) and Sterling fell against the Dollar to lows not seen since 1985. This for some might raise the question - both now and into early 2017 - 'where are we for the time being?'.

Other investment areas, such as commercial property, initially did not fare so well post-vote, and we saw suspensions or fair value adjustments on many funds in this sector. These restrictions are now being removed by most funds.

With only three months of the year to go, the balance of 2016 is not going to be without its significant highlights. The obvious main 'headline' would be the US presidential election which will occur at the beginning of November and this is going to be a closely fought - and some would argue rather scrappy – election, with both sides attracting much support but also negative comment. It will be interesting to learn the result and to observe the subsequent fallout.

Something that is new to the agenda, although there has not been much comment in the UK press about this, is the Italian referendum called by Italy's Prime Minister, Matteo Renzi, which is due to take place on 04 December. Although this is effectively only a referendum on Italian Government constitutional reform, many are seeing it as a referendum on the tenure of the current Prime Minister, and possibly another signal that Italy, as a member of the European Union, may not be content with its current progress.

It will also be interesting to see how currencies such as the US Dollar, Sterling and the Euro are affected by these changes as the remainder of 2016 rolls out. For reference, Sterling fell, then recovered, and then has fallen further against the dollar, with exchange rates at approximately $1.27 at the time of writing (05 October 2016). 2016 will certainly be firmly on the investment agenda as a year of change and, some might argue fairly, controversy.

Focusing on the UK, we have a new Chancellor of the Exchequer in the form of Philip Hammond MP, and he will deliver his first Autumn Statement on 23 November 2016. I, along with many financial planners and investment managers, will watch this with interest to see if the strategy and policy for the new incumbent of the UK Government remains unchanged or seeks new paths. We have seen the Bank of England base interest rate fall from 0.50% down to 0.25%, with some indicating that we should anticipate further rate falls before the end of 2016. Also of note is the programme of quantitative easing continuing as an economic tool to help smooth the UK forward following the summer, although struggling in some markets to inject the capital they require for their purposes through the planned purchase of assets.

Changeable times, I am sure you would agree, and I have no doubts that the balance of 2016 will keep us all busy!

No individual advice is provided during the course of this Blog.

Keith G Churchouse BA (Hons), FPFS

Chartered Financial Planner

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