A minefield of uncertainty

In theory today’s article was going to be easy:

A significant Tory win in the UK general election, confirmation that the UK remained strong and now had the weapons to deal with Brexit and terrorism.

The results are sadly very different: 

Theresa May managed to run a terrible campaign and as a result the UK is now in trouble.

But what are the consequences for investors? 

The answer is rather simple and not very positive:

More uncertainty and less safety in Europe

We will now see a weak government in Britain when in fact the UK needed a strong leadership to allow it to face professionally and correctly major challenges such as Brexit and terrorism.

• The question of security 

Let there be no doubt in people’s mind that the UK has just became less safe than 24 hours ago and yet that country has recently suffered three terrorist attacks in the same number of months. Jeremy Corbyn is the person who during the week before the election made the following statement: 

“Those who support ISIS should NOT be prosecuted - it's a political view'”

 He is also a know IRA sympathiser and yet his position has been strengthened by this election.

This does not bode well for safety and security in Great Britain or Europe and an environment that is less safe is also more volatile when considering financial markets. 

• Then comes the question of Brexit

Brexit was always going to be a difficult negotiation. To avoid confusion and procrastinated negotiations, the UK needed a leadership that was strong and that had a clear majority. The EU all together is a formidable machine and you need your best team to tackle it. Instead, and using a football metaphor, the UK has just decided to replace its Premier division team with a second division team. 

Result: Mess, confusion and any other negative name and adjective that you wish to add.

Brexit will now be very messy, very complicated, cost more and probably drag a lot longer.

Consequence for the markets: Uncertainty and lack of clarity and visibility.

In fact this is neither good for the EU or the UK.

So where does this leave investors?

A new level of turbulence and uncertainty has just been added to what was already a rather complex picture. The European malaise has now spread to the UK 

Analysing countries or significant geopolitical areas:

1. The USA is struggling but the administration battles on 
2. China’s debt issues are causing concern 
3. Europe is not well

For financial markets

1. Stock markets are all close to their highs 
2. Crude oil has come off hard this week 
3. Gold remains firm 
4. Currency volatility is increasing and pound Sterling has of course weakened overnight
5. Base metals are not performing well

On the whole the picture is uncertain and difficult to digest.

This leads to the only possible conclusion:

• The potential for stock markets price drops continues to increase 
• Low yields are better than none 
• Key to success in an investment portfolio this year comes through diversification and going back to basics and safe havens.

Basic needs mean 

? Energy

We all consume energy. With oil and natural gas on the lows, there is upside in these two sectors. Alternative energies are not as easy to pick. 

? Food

We all need food. Investing in this sector is prudent management although a portfolio approach via the stocks & shares of a company in the sector is an easier solution than picking individual commodities.

? Housing

We all need a roof to live under. Housing and property markets around the world are offering interesting investment opportunities (Read my article on Switzerland the Swiss Appeal).

? Last but not least gold 

A recognised safe haven for decades. Gold appears to want to break above $1300 but current prices are volatile and there is downside potential. Gold should be considered with some protection such as a put. As for the form of your gold investment I believe that physical gold is the most attractive solution.

Clearly everything is not lost. There are solutions to today’s difficulties and answers to secure a portfolio in a manner that will protect you and your family from the ongoing and growing uncertainties that will continue to plague 2017. You have to invest wisely and you must diversify to avoid the minefield that lies in front of you.

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