The UK’s snap election and your investments – Kerim Derhalli in The Independent

by | Apr 20, 2017

Invstr CEO and Founder Kerim Derhalli has been featured in The Independent, discussing how the newly announced snap election (set to take place in June) in Britain may affect investors portfolios: 

The starting gun on the next general election has been fired so unexpectedly that the report has been felt throughout the country. But the first tangible response was a swift rally in the pound, putting pressure on the UK stock market.

“The pound was the big winner from news that a UK general election is in the pipeline, as currency markets bet on the current Government winning a greater majority,” says Laith Khalaf, senior analyst at Hargreaves Lansdown.

“The rising pound helped heap pressure on the UK stock market, which was already on the back foot thanks to declining iron ore prices hitting the resources sector. Of course the benchmark FTSE 100 is far from a pure barometer of the perceived health of the UK, given the global nature of the companies that constitute the index.”

Canny investors may be wondering whether they can capitalise on political events. Yet given the recent unexpected election and referendum outcomes, many will be nervous of gambling on the doing so.

And Khalaf believes the election is a distraction that most people should look beyond. He says: “The big risk investors face from an election is that they let it disrupt their financial plans. In the short term, market sentiment can be driven by political events, but investors should look beyond any noise as politicians hit the campaign trail, and keep focused on their own long term savings goals.”

Danger and opportunity

Nevertheless, some people are suggesting there could be opportunities ahead. Adrian Lowcock, investment director at Architas, says: “General elections create uncertainty and markets do not like uncertainty. The market has begun to price this in and there is likely to be an ‘uncertainty discount’ on the UK stock market until the election result is known.

“Given that the FTSE 100 is trading close to all-time highs and we are seeing an increase in geo-political uncertainty investors should prepare for increased volatility over the coming weeks and hold a diversified portfolio of equities and bonds as well as property and gold.  Having some cash set aside at times of uncertainty will give investors the flexibility to act as more information becomes known.”

Of course, everyone has a political opinion and it may be hard for some investors to prevent that from colouring their predictions and strategy. Kerim Derhalli, CEO and founder of invstr, says: “Politics are one of the most important considerations in making investment decisions. Political decisions affect economic policy and economic outcomes which, in turn, impact financial markets.

“In an increasingly divided world, elections are proving to have a big impact on financial markets. The resulting strengthening of the pound has led to a fall in the UK stock market, just as the fall in the pound last June led to a stock market rally. The key to investing is not to impose one’s own beliefs on the market, but to try to understand how other people will interpret political events.”

Gambling with politics

However, many commentators argue that it is simply too dangerous to plan an investment strategy around the election.

Mike Neumann, head of investment management at boutique wealth manager EQ Investors, says: “Attempting to second-guess short term market moves is a dangerous game. Betting on short term moves is more likely to lead to probabilistic outcomes – heads you win, tails you lose – rather than form the basis of a solid investment strategy.

“We’d urge investors to look beyond political events and build portfolios based on their needs rather than focus on the rhetoric of political banter.”

And KPMG’s head of investment strategy, pensions, Simeon Willis agrees that speculating on political events is a risky game. “Not only are you unsure of the political outcome you are betting on, but you cannot be sure of the market’s response even if that outcome materialises. As we saw with Trump – the markets were concerned in advance but proceeded to rally after.”

Some investors will consider it sensible to fly to safer assets given the current national and even international uncertainty. However, any sudden movements can carry risk – even when they seem safe.

Russ Mould, investment director at AJ Bell, argues: “While it may be tempting to head into cash or stock up on supposed haven assets such as gold, the last thing investors should be doing is making any hasty decisions just because Theresa May has called a general election.  Short-term trading incurs transaction costs and could lock in losses due to short-term market reaction to what was a surprise announcement. If there’s one thing markets don’t like, it is surprises…

“Share prices are influenced in the short term by many factors, including politics, but in the long term the ultimate drivers of company share prices and valuations are profits, and particularly cash flow. So, unless investors think the election result due on 9 June will lead to government policies that could directly and materially affect a company’s cash flows, then they are probably better off doing as little as possible.”

Diversify, diversify, diversify

Even investors who shy away from adapting their strategy to take advantage of upheaval may take current events as a warning to diversify.

Justin Urquhart Stewart, co-founder of Seven Investment Management, says: “For investors, the course of this election will only underline the need for broad diversification across asset classes and currencies. Good investment is about managing the risks of the unexpected, and here is a great example. The consensus view has been for a weaker pound, which would benefit the overseas heavy FTSE 100 as we headed towards a harder and harsher Brexit.

“However, just when everyone is facing one way (the consensus way), then it is usually the time to look the other way and manage the risks of exactly the opposite. This scenario could be a higher pound and a falling FTSE 100 – it seemed so unlikely, but so did the UK referendum and US presidential election results last year.”

Willis concludes with advice that is relevant no matter what the political or market landscape: “Taking political views can be an interesting part of managing your portfolio but can go badly wrong.  A good rule of thumb always is: don’t make bets you can’t afford to lose.”

Click HERE for the link to the full TI article

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Oil's Slick Upward Move

Technocratic officialdom just declared UBS, Zurich Insurance, Nestle, and in fact, the entire Swiss stock exchange, 'off-limits.' They've done what, now?

Once upon a time, a complex myriad of red tape allowed Swiss stocks to be traded across the European Union (EU). Brussels said enough's enough to that and decided to craft one deal to rule them all. While that was being drafted, a Swiss subplot started to boil. Elections, euro-skepticism, and trade unionists became a focal point, and the EU's immovable deal hit a Switzerland's unstoppable sentiment. The treaty crumpled.

In short, the EU just sent the bloc's fourth-largest exchange packing. The SIX, valued at $1.7 trillion with Nestle and Novartis on its register, is out it's own bounds. We can't invest in it anymore!

It's hard to tell who has this worst. For a start, Swiss companies may be forced to other stock exchanges outside Switzerland. A few already have. Investors still with access could end up paying more for shares as, with a European third of orders gone, brokers recoup money by setting higher asking prices. And the officials behind all this? Truly at each other's throats. 

Within the political mire, many hoped both sides could iron out their differences and keep the "equivalence" agreement going. Nope. Switzerland is furious with the EU for what it sees as a flex of power in front of Britain, still in its Brexit muddle. Creating a theatre, it sounds like Brussels is shouting 'don't mess with us!' in the direction of the UK, now teetering closer to a no-deal cliff edge. As Brussels endures its own leadership merry-go-round, Downing Street doesn’t even know to whom it should address its strongly worded letters…

All this couldn't happen to British stocks, could it? Could it?!

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Risk Disclosure:
Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.

Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.

Brokerage services of US-traded securities, including fractional trading, are provided to Invstr users by DriveWealth, LLC a registered broker-dealer and member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. 

DriveWealth provides no tax, legal, or investment advice of any kind, nor does DriveWealth give advice or offer opinions with respect to the nature, potential value, or suitability of any securities transaction or investment strategy. DriveWealth acts as the clearing firm for securities transactions entered on the Invstr mobile platform. DriveWealth is not affiliated with Invstr. Invstr does not participate in DriveWealth’s decision-making.

There is no minimum initial deposit required to open an investing account with DriveWealth. Expenses and Fees associated with the DriveWealth platform in conjunction with Beanstox includes either a monthly membership fee of $4.99 with a commission charge of $0.01 per share* or, in the event the membership fee is not paid, a commission charge of $0.0125 per share applies, subject to a minimum of $2.99 per transaction. There are no monthly minimum fees, or required ongoing minimum account balance. For non-resident aliens, there is a one-time tax verification fee of $5.00 (representing Form W-8BEN pass-through processing cost). View a full list of our fees at http://bit.ly/DWFees

The monthly subscription charge is four dollars and ninety-nine cents (US$4.99) per month plus one cent (US$0.01) per share traded (as examples, for a Transaction of 0.90 shares, the per share traded charge is one cent (US$0.01), and for a Transaction of 1.6 shares, the per share traded charge would be two cents ($0.02), and the quarterly subscription charge is fourteen dollars and ninety-nine cents (US$14.97) every 3 months plus one cent (US$0.01) per share traded. The monthly and quarterly subscription charges may be greater or less depending on additional services offered by a DriveWealth partners as part of the subscription model offering, or based on any subsidies provided by a DriveWealth partner as part of the subscription model offering. For non-resident aliens, there is a one-time tax verification fee of $5.00 (representing Form W-8BEN pass-through processing cost).View a full list of our fees at http://bit.ly/DWFees

This communication is not an offer or solicitation to purchase or sell securities. Investing in securities carries risk, including the loss of principal. Past performance is not indicative of future returns, which may vary. Online trading has inherent risk due to system response and access times that may be affected by various factors, including but not limited to market conditions and system performance. An investor should understand such facts before trading. The risks associated with investing in international securities, including US-listed ADRs and ETFs that contain non-US securities include, among others, country/political risk relating to the government in the home country; exchange rate risk if the country's currency is devalued; and inflationary/purchasing power risks if the currency of the home country becomes less valuable as the general level of prices for goods and services rises. Before investing in an ETF, an investor should consider the investment objectives, risks, charges, and expense of the investment company carefully. ETF prospectuses are accessible within the mobile application via a link under each company’s “Description.”

A fractional share is a share of equity ownership that is less than one full share. Fractional share investing has certain limitations and restrictions that investors should understand prior to purchasing fractional shares: ownership of less than one full share does not give the fractional share owner the right to vote on company matters; fractional shares are non-transferrable, meaning they cannot be transferred to another brokerage firm; and fractional share orders will be accepted as market orders only. For more information and details on fractional shares, and any associated limitations or restrictions please visit: https://drivewealth.com/fractional-shares-disclosure

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ALL RIGHTS RESERVED © INVSTR LTD. 2018

Risk Disclosure:

Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.

Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.

Brokerage services of US-traded securities, including fractional trading, are provided to Invstr users by DriveWealth, LLC a registered broker-dealer and member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. 

DriveWealth provides no tax, legal, or investment advice of any kind, nor does DriveWealth give advice or offer opinions with respect to the nature, potential value, or suitability of any securities transaction or investment strategy. DriveWealth acts as the clearing firm for securities transactions entered on the Invstr mobile platform. DriveWealth is not affiliated with Invstr. Invstr does not participate in DriveWealth’s decision-making.

There is no minimum initial deposit required to open an investing account with DriveWealth. Expenses and Fees associated with the DriveWealth platform in conjunction with Beanstox includes either a monthly membership fee of $4.99 with a commission charge of $0.01 per share* or, in the event the membership fee is not paid, a commission charge of $0.0125 per share applies, subject to a minimum of $2.99 per transaction. There are no monthly minimum fees, or required ongoing minimum account balance. For non-resident aliens, there is a one-time tax verification fee of $5.00 (representing Form W-8BEN pass-through processing cost). View a full list of our fees at http://bit.ly/DWFees

The monthly subscription charge is four dollars and ninety-nine cents (US$4.99) per month plus one cent (US$0.01) per share traded (as examples, for a Transaction of 0.90 shares, the per share traded charge is one cent (US$0.01), and for a Transaction of 1.6 shares, the per share traded charge would be two cents ($0.02), and the quarterly subscription charge is fourteen dollars and ninety-nine cents (US$14.97) every 3 months plus one cent (US$0.01) per share traded. The monthly and quarterly subscription charges may be greater or less depending on additional services offered by a DriveWealth partners as part of the subscription model offering, or based on any subsidies provided by a DriveWealth partner as part of the subscription model offering. For non-resident aliens, there is a one-time tax verification fee of $5.00 (representing Form W-8BEN pass-through processing cost).View a full list of our fees at http://bit.ly/DWFees

This communication is not an offer or solicitation to purchase or sell securities. Investing in securities carries risk, including the loss of principal. Past performance is not indicative of future returns, which may vary. Online trading has inherent risk due to system response and access times that may be affected by various factors, including but not limited to market conditions and system performance. An investor should understand such facts before trading. The risks associated with investing in international securities, including US-listed ADRs and ETFs that contain non-US securities include, among others, country/political risk relating to the government in the home country; exchange rate risk if the country's currency is devalued; and inflationary/purchasing power risks if the currency of the home country becomes less valuable as the general level of prices for goods and services rises. Before investing in an ETF, an investor should consider the investment objectives, risks, charges, and expense of the investment company carefully. ETF prospectuses are accessible within the mobile application via a link under each company’s “Description.”

A fractional share is a share of equity ownership that is less than one full share. Fractional share investing has certain limitations and restrictions that investors should understand prior to purchasing fractional shares: ownership of less than one full share does not give the fractional share owner the right to vote on company matters; fractional shares are non-transferrable, meaning they cannot be transferred to another brokerage firm; and fractional share orders will be accepted as market orders only. For more information and details on fractional shares, and any associated limitations or restrictions please visit: https://drivewealth.com/fractional-shares-disclosure

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