Markets buffeted by political risk and economic realities;  Historic low of £-Sterling necessitates a revisit of BoE’s Brexit forecast;  US Fed: Rate hike “relatively soon”;  The growth of political risk;  UK stock market flotations: Choppy waters ahead;  Virtual and Augmented Reality the next big productivity drivers?

Markets buffeted by political risk and economic realities

The continued decline of £-Sterling against the US$ – now over 20% – tells us that large parts of the international capital markets are increasingly seeing a ‘hard Brexit’ with all its pains for the UK’s long term trade position as an inevitability.

There is little reason to expect £-Sterling to strengthen significantly from here and indeed depending on how ‘determined’ politicians want to appear to be pushing through national interests, there may be additional downside to the value of the UK’s currency.

Historic low of £-Sterling necessitates a revisit of BoE’s Brexit forecast

It is more unnerving that the much ridiculed forecasts of the BoE from May for the Brexit case are increasingly materialising. The renewed currency adjustment was driven by politicians’ conference speeches rather than actions.

This politically induced currency risk for £-Sterling was one of the main drivers behind our recent decision to crystallise some of the recent UK equity gains across Tatton’s investment portfolios and re-invest them further away in Asia.

US Fed: Rate hike “relatively soon”

We do not think that the Fed would wish to raise rates just days before the US Presidential election on 8 November, as it could cause a level of nervousness in markets, but instead it is preparing investors for a move in December.

The growth of political risk

Analysts are beginning to factor in political risk when assessing growth prospects for the developed world, as they have done for developing markets for some time.

Policy uncertainty slows investment and consumer confidence, inevitably dampening prospects for growth – sometimes quite substantially.

Even if all the markets’ favourite candidates win the upcoming votes, the policy environment for businesses and investors could very well still be shrouded in a veil of uncertainty.

UK stock market flotations: Choppy waters ahead

All eyes will be on these two, Misys and Telefonica: success could pave the way for 2017 to see an IPO resurgence, failure will almost certainly signal to other potential firms that the time is not right.

Virtual and Augmented Reality the next big productivity drivers?

We think that these two technologies could become as ubiquitous as smartphones have become today.

While these initial devices are targeted at gamers, who more easily accept new technology, many analysts believe that the potential markets for VR and AR will be worth many tens of billions over the next decade.