The UK election news this morning means that things will be fluid over the coming months. Here are some initial thoughts with more to follow next week.
1. Portfolio positioning is already in place, leaning to the cautious, with plans in reserve to take advantage of any volatility.
2. Diversification and adaptability will play a crucial role, and you are well placed for this.
3. Markets remain adaptable to a ‘Softer Brexit’.
4. The next few months will be fascinating, as May tries to form a Government with the help of the DUP. It creates a period of potential instability and future surprises. It’s messy and unpredictable.
5. Markets have remained calm due to a view that there will be some continuity and a possible ‘Softer Brexit’.
6. Markets have taken the view that there may be no immediate Conservative leadership challenge, but this situation is likely to be fluid.
7. Sinn Fein have confirmed they will not be taking their 7 seats in Westminster and will continue to abstain. This effectively reduces the technical 326 majority required to 319, but still creates governance issues for the Government.
8. History has been made in this election, with now more than 200 women MP’s , a very strong youth vote, and the impact of social media.
Markets have adapted to a possible ‘Softer Brexit’ stance because a key red line of the DUP is porous borders. For short term stability there may not be an immediate Conservative leadership challenge, however ‘vote by issue’ is fragile, so more political instability cannot be ruled out. Whilst US markets remain reasonably robust, long term contagion is ‘currently’ contained.