Uncertainty, while a much-overused word, does seem to be the root cause of inaction not just with investors but with central banks too.
Nobody knows what’s going to happen with Brexit or even with the make-up of the UK government after last week’s election, so the best choice for many seems to have been do nothing.
Is this the new normal?
Hargreaves Lansdown senior economist Ben Brettell said fund and portfolio managers may soon start revising their positions if inflation continued “apace” in order to adjust to the new state of play.
Nathan Sweeney, senior investment manager at Architas, has already begun to shift his allocation.
“Overall the UK stock market has seen a strong run since the referendum vote driven by a weaker pound and rebound in commodity stocks,” he said.
“Much of that is now factored into markets and after such a strong rally valuations look expensive, especially given the inflationary impact on consumer confidence.”
Sweeney added: “As such we are maintaining our underweight to UK equities and increasing exposure to defensive large caps at the expense of cyclicals and mid-cap stocks.”
Prepare now for an extended run of low rates and high inflation where diversification will be key but, ultimately, we will be for a long wait for rate rises.
