This morning revealed yet another political gamble that has not paid off for the dice roller. The UK has a hung Parliament, with no party holding an absolute majority. Such is the unpredictability of a parliamentary democracy. If you ask the people of the UK what they want, be prepared for the answers that you might receive!
The last few weeks has highlighted the divide in opinion in the country of the role and size of the state in our lives, with further austerity and a shrinking state on the one hand, and a material rise in spending (and taxation for some) on the other. Each of us has our own feel for what we believe to be best for ourselves and the country, which we were able to express at the ballot box yesterday. We also remain, as a nation, somewhat divided on the Brexit issue, although perhaps mostly united in the reality that it is going to go ahead, in one form or another.
Certainly, it is an awkward time for such political turmoil, with the start of the Brexit negotiations just days away. We will leave the ramifications of this result and the speculation of what we might expect next to others. We don’t want to add to the noise.
Strong and stable portfolios (if not government)
What we do want to do is to reassure you that your portfolio is well positioned to weather any storms both now and in the future. It is worth remembering the following:
- Your portfolio is highly diversified through the thousands of equities and bonds that it holds and the countries that it is invested in.
- Your non-UK equities are unhedged, which means that you hold this portion of your portfolio in non-GBP currencies. In the event of a fall in the value of Sterling (GBP), as we have initially seen, these overseas assets will be worth more in Sterling terms.
- Your bond holdings – which are hedged – are diversified across global markets, reducing the impact of any rise in the cost of borrowing that might occur on account of the greater uncertainty that the UK faces at this time.
- While markets don’t like uncertainty, the UK is a small player in the global pond and this morning’s result is just a ripple.
- Portfolios go up and down; they always have and they always will.If you don’t need to spend the money today, don’t worry about what happens in the coming days, weeks and months.
Although this morning’s result may feel uncomfortable for some, let’s keep it in proportion. We live in a tolerant, open society – and by the look of the greater level of engagement in the election by the younger generation – a great democracy that cares passionately about its future. Celebrate that.
This article is distributed for educational purposes and should not be considered advice or an offer of any product for sale.