Earlier this month, the Bank of England (BoE) announced a new stimulus package designed to address the deteriorating UK economy. With this in mind, I have written this blog to try and explain the situation so you can make a more informed choice in regards to your investment portfolio.
Bank of England Actions in Light of Brexit
In light of the Brexit vote the BoE’s Monetary Policy Committee introduced a package of measures. It cut interest rates to 0.25% and it reintroduced Quantitative Easing (QE). On top of this, they added a Term Funding Scheme (TFS) to ensure the rate cut is passed into the real economy.
QE has resulted in £60 billion of assets added to the Central bank’s balance sheet. This brings the total stock to £435 billion. This will be expanded to include corporate bonds worth around 10 billion.
Prior to the EU referendum, the BoE took the stance that the Brexit vote would result in a hit to GDP, and it is on this basis that the BoE has developed its measures. The forecasts of 2% loss in GDP fall short of recession and recent survey data seems to confirm this. The idea was to head off serious consequences of unemployment and a downturn in consumer spending.
Your Investment Portfolio
The aspect that came as a surprise from the BoE was further QE. This has largely been discredited as a driver of economic stimulus and although the inclusion of corporate bonds is seen favourably, there could be consequences down the road as it were. In many respects the success or failure of the BoE’s stimulus measures will need a softening of the current austerity stance.
With this in mind, and like many other financial planners, I feel a cautious approach to investment is warranted at this time. As such you may want to consider cautiously positioning your portfolio in equities and bonds, and increasing exposure to absolute return funds and physical gold.
As prior to Brexit, how you invest depends on your overall aims and your appetitive for risk. Post Brexit, however, more caution is advised, and using a financial planner if only for a second opinion is prudent.
With this in mind, click here and complete the Call Back Service form. I will contact you and together we can look at your portfolio, the market, factor in the current economic conditions, and determine the most profitable investment for you.
Source: Tilney
For more information, please contact Michele Carby at Holborn Asset Management on +971 50 618 6463 and on e-mail at [email protected]
