Ross shares his thoughts on prospects for the Sabre Global Value & Income Fund following Friday’s referendum result:
We will be avoiding the UK and underweight Europe for some time, unless really attractive value emerges (arguably as in housebuilders today). Sterling cost base, dollar revenues are probably the correct set of economic exposures going forwards. Our focus will therefore be on Asia and to an extent the US.
I foresee significant political uncertainty in UK/EU markets for several years. I would expect the Scots to vote for independence and to remain in the EU; this would have obvious implications for Northern Ireland, and economic consequences for Sterling. The position of London also raises interesting questions. So go long real estate in Dublin and Edinburgh?We will see a new PM, likely a new leader of the opposition and quite possibly a general election before the end of 2016. Political turmoil in Europe is likely to be on a similar or even greater scale.
This is likely to result in significant economic uncertainty and delays /cancellations of investment decisions by UK and overseas corporates and I would expect at least a mild recession in the UK with knock on consequences for other European countries at a time when the global economy is still in recuperation. Short term I would expect significant volatility, financial, economic and political. Unpicking this in the medium term (2-5 years) is likely to take significant effort, be massively costly and fraught with difficulty. Longer term (10 years) I would expect the economic consequences to be negative but much more moderate.
Politically the UK now has two paths open to it. The first is to continue to be the strong global voice for liberal democracy, tolerance and economic common sense that it has mostly been historically, and is still possible outside the EU. The second 'Farrage/Trump’ option is an altogether different prospect, and one which will be very much encouraged in other countries by the events of the last few months.
Ross.