Clearly, the Foreign Exchange market has been in the headlines for
quite some time as central bank policy around the world has affected the values
of many currencies as devaluations and currency weakness has led to a “race to
the bottom” in terms of values.
With regards to sterling anxieties over Bank of
England monetary policy, and more so, the outcome of the Brexit vote later in
the year has seen the pound weaken against a basket of leading global
currencies. Other reasons for sterling weakness might also be about concerns
over the UK’s budget deficit which is coming in at about 4.5 per cent of GDP.
In terms of investment opportunities a weak pound should
be good for our UK exporting companies but of course many of this business are
in sectors that are very much out of favour and have their own fundamental
issues to address. That’s not to say that we won’t find some good
So to summarise, there are still opportunities despite the potential for gloom around global growth, commodities and Brexit.
As planning led advisers we always suggest that investors stick to their original mandates and time horizons as market volatility whilst uncomfortable has historically proven to be relatively short-lived.
Thank you gentlemen, we look forward to the next one.
The investment market volatility and recent market correction can be contributed to a number
 Increasing evidence that the Chinese economy is slowing
more than was expected and the recent devaluation of the renminbi.
 Fears surrounding the forthcoming monetary tightening in
the US and is the Fed behind the curve.
 The effects from costlier cost of capital and the
likelihood of a stronger US dollar
 This being the case the already fall out of favour of
the emerging markets
 The fallout of commodity prices given the backdrop of a
slowing Chinese economy and weaker EM’s
 The worries that we maybe in the midst of a “currency
war” issue as central bankers constantly apply monetary policies that weaken
off their currencies.
 The markets are also showing some signs of fatigue after
a six year bull market and of course historically this month [September] is
reputed to be one of the worst in the calendar for shares and so far the
tradition has been upheld.
Clearly, China is experiencing “growing pains” that eventually comes from transforming itself from an emerging economy to fully developed. Chinas economy has been growing north of 10% for many years given its power to export; now it’s trying to transform itself into more of a consumer based economy, and given that it is already the second largest economy in the world, has led to a fall in its growth rate to near 7%, perhaps even lower if the truth be told.
In America we have lived through a period of QE and historically low interest rates which has acted as a huge tailwind to both US equity and bond markets. It also led to a bull market in the emerging and commodity markets, this is about to change as the Fed tighten which is acting as a headwind, particularly, for those aforementioned asset classes.