Mike Coop: So, we saw yesterday the defeat of the government's proposal on Brexit based on the EU withdrawal agreement negotiated back in November. This leaves us with a wide range of scenarios from a hard Brexit whereby at the end of March we drop out and move to WTO terms through to no Brexit if there is a referendum and a decisive majority in favor of remain through to some other negotiated form of deal. Of course, it's also possible that there could be a change of government and with it some new economic policies.
This uncertainty means that investors are concerned about what could happen in the near term. In terms of the economy though, the major global economies of the US, China and Europe will still have a pretty big impact on what happens here in the UK. And when it comes to the major investment markets here, the UK equity market, the pound and gilts, the link is somewhat weaker.
So, UK equities still get majority of their revenues from outside the UK But because of this uncertainty, they have been shunned and the valuations are attractive relative to other equity markets. The pound has also been shunned and is sitting at long-term valuation lows. And gilts have been the safe haven in terms of how people have priced it and it too is pricing in a pretty negative scenario which for us makes it unattractive. So, for people who can afford to take a long-term perspective, we think that UK equities and the pound are attractive if you can look past the political noise and you should be careful about your exposure to UK gilts.
