Conversations with clients recently have often started with the question: “Why are the markets continuing to perform well when there is so much uncertainty in the world?”
It is a natural enquiry with conflicts in Ukraine and Iran while, closer to home, we now have the instability at the top of the UK Government and a question mark over whether Keir Starmer will still be Prime Minister by the end of the summer.
Despite all of this, client portfolios continue to deliver robust results, emphasising as ever the importance of a sensible, long-term and diversified financial plan
For all the short-term shocks to the economic system such as disruption to oil supplies and upward inflationary pressures being invested remains the right thing to do.
While the outbreak of the Iran War caused dips across the global markets, these were quickly righted and, whether it is Asia, the United States or elsewhere, the current picture remains largely positive.
The jockeying for position at the top of the Labour Party and the likelihood of a leadership challenge has brought into focus the potential for a shift in economic strategy should Prime Minister Starmer have to step down and be replaced by a leader with a different outlook.
The bond markets reacted badly to the suggestion last week that one of the candidates to replace the Prime Minister, Andy Burnham – should he be successful in the Makerfield by-election on June 18th – might move away from the fiscal rule book.
In interviews over the weekend, Burnham sought to reassure the markets when he said, “I have never said you can just ignore the bond markets”. While there may be changes in policies, the reality is that it is economic style rather than substance that will change should there be a different PM in Downing Street.
In its annual survey of the UK economy, the International Monetary Fund warned that any future government needed to prioritise spending restraint, stressing that the current fiscal rules were crucial to Britain’s “policy stability and credibility”. It went on to observe that Britain needed to remain firmly on the course of deficit reduction.
The IMF forecast that the UK economy would slow from annual growth of 1.4% to 1% this year, far from spectacular but a small upgrade from the 0.8% forecast in April.
As is the norm at this time of year, we will be writing to clients over the next couple of weeks regarding the rebalancing of portfolios, which provides an opportunity for us to take stock and ensure that the balance remains the most appropriate for you.
In the meantime, we will continue to watch closely events at home and abroad and please do get in touch if you would like to talk through anything with a member of our team.