Amidst the ongoing political furore, Jason Hollands, managing director for business and communications at Tilney, urges investors to keep calm and carry on.
With heightened expectations of a snap General Election, we are clearly in a period of peak anxiety for UK politics. This is reflected in renewed weakness for Sterling which this morning tested levels against the Dollar not seen since the mid-eighties.
“Every potential outcome from this week’s events offers uncertainty, whether that be kicking the Brexit can further down to road for many more months of parliamentary squabbling but with no clear end state in sight, a potential disruptive no deal exit on 31 October or an election that could result in a radical left-wing government propped up by the SNP.
“In this environment, short-term volatility has to be expected but it is important for long-term investors to keep calm and not take rash actions. Making major investment decisions based on “what if” political scenarios is fraught with risk. For example, while Sterling is likely to remain under pressure in the near term as political events unfold, an eventual rebound in Sterling from multi-year lows could prove painful for any UK investors who decide to make a wholesale exit out of UK assets and switch into overseas investments at this current weak point. Currencies move a lot faster than most investors do.
“Making major investment decisions based on “what if” political scenarios is fraught with risk.”
“Instead, it makes sense to focus on the things we do know that might help mitigate potential changes that could stem from political events. Anyone concerned about the impact of a possible change in government to one with an appetite for higher taxes, should consider securing valuable tax allowances that are currently available and a known quantity today, such as Individual Savings Accounts (ISA) and pensions.
“Whoever is in government, there is no guarantee that such allowances will remain available in their current form in perpetuity, but we do know they are available today and how much can be sheltered in them from the tax man. Securing such allowances ahead of any future Budget does not require an immediate decision on where to invest, as subscriptions made can be held in cash. In the case of ISAs, there is complete flexibility in the ability to make withdrawals if you later change your mind. So, keep calm and carry on.”
Jason Hollands, managing director for business and communications at Tilney