UK politics, particularly UKIP’s anti-Europe stance, has been a huge focus for media on St George’s Day, and this will only intensify as we edge closer to the European elections and the Scottish vote in the autumn.
“It’s quite likely that we will have market wobble in the run up to the vote in September, though the market believes independence will not happen,” Buxton Said.
“Either way it will reinforce the sense that sterling strength is unlikely to remain sustained, particularly if we have to face the mechanics of how a separation would happen.”
While dismissing UKIP as a “sideshow” with no heavyweight politicians besides leader Nigel Farage, Buxton insists that uncertainty about a Labour or Conservative victory in 2015, or indeed the possibility of another collation government, will move the currency.
While the strong currency has curtailed any hopes of an export boost for the economy, any weakening could open up opportunities for savvy stockpickers.
He added: “Strength in sterling has eroded profits growth for many multinationals, though it remains to be seen how this currency strength will be as we approach the general election in May 2015 and the uncertainty surrounding the outcome.
“But it would be almost impossible for economic growth to be as positive as is likely over the next two years without feeding through to growth in corporate profits. Investors may need to be patient, but it should be worth the wait. Once we exceed the previous stockmarket peak – after 15 long years – history suggests we will enter a new multi-year bull phase.”
Buxton’s UK Alpha Fund current positioning incorporates around one-third in financials, including Barclays, while he has also been upping his exposure to the likes of Rio Tinto and Clencore Xstrata with miners now accounting for 8% of the portfolio.
