We have written about the various scenarios for GBP over the next three months several times in the past weeks and it is fair to say that the market continued at least until this week to ascribe a 10% chance of a NoDeal Brexit. That has now changed with 30% ie 3 times the probability now accepted by most market participants. This morning Blackrock has raised the likelihood of GBP reaching parity with the USD which of course implies somewhere between EUR 0.8 to 0.9. It is not a wise option to ignore this scenario and we are helping a rising number of our clients put hedges in place to guard against this eventuality.
The USD74 Trillion Investment management industry-a trillion is one million million or 10 to the power of 12:
Failure to outperform and having generated sub benchmark returns while charging substantial fees in particular in the past 10 years since the financial crisis, the industry is at a crossroads as investors desert managed investment in droves to follow passive investment strategies. Given the paltry returns, the thinking is that it makes sense not to pay fees and simply to use tracker funds: pick the benchmark index and pick up ALL the returns. If this continues as it appears to show every sign of doing, this will represent a major change in investor behaviour and will increasingly increase volatility as managed investments are redeemed.
Listening to this Los Angeles radio station through TunedIn Radio at an early hour this morning, I was treated to that old favourite by the Bluebells-Young at Heart: as you will see below, you really had to be there, but I have been trying to convince new SGM-FX recruit Nick that in the 80s this was a club standard guaranteed to get everyone throwing shapes. Fresh from a Thursday night on the tiles socialising with, he claims, “100 of my closest friends” while making up for 4 years study in Edinburgh, he seemed to be coming round to it (over his hangover) although the only likely celebratory Bells in prospect at present for Nick are out of a bottle….:
Young at heart, Young at heart
Young at heart, yet what a start
Old before their time, they married young
For love at last was their only crime
Discussion and Analysis by Humphrey Percy, Chairman and Founder