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27 Sep 2019

Brexit: The long and the short of it

Brexit continues to generate news headlines, but in our recent client call we considered its place in historic events. Our experts outline where it sits in relation to long-term drivers of investment returns and what steps you can take to manage your finances.

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We hosted a call with clients to discuss this week’s latest Brexit developments and look to the future. Our experts drew on the long-term history of Coutts, and its research into what the future may hold, to put Brexit in perspective.

Monique_Wong

Lord Waldegrave, Coutts Chairman

Monique Wong, Executive director, Portfolio Management

Sven Balzer, Head of Investment Strategy

Great institutions think long term

Coutts Chairman, Lord Waldegrave of North Hill, invited clients to consider the extraordinary events that have occurred throughout the bank’s history. 

“During the history of Coutts there have been far more dangerous events than this. King James II fled the country because the opposition, with help from the Dutch secret service, imposed a new king on us, for example, and threw the Great Seal into the Thames in order to try and stop executive government altogether. 

“There have been world wars, and habeas corpus suspended before and after the Napoleonic wars because we feared revolution, and perhaps came quite near to it. Coutts takes the long view, and so should we all.

“The Supreme Court decision has annoyed some people and was surprising to many judges, including the Lord Chief Justice and the Master of the Rolls, and others with whom they disagreed. But, it showed once again the strength of the rule of law in this country. We have very strong institutions in the UK built over many hundreds of years, and one of them is Coutts & Co.”

 

stay ahead of opportunities

Sven Balzer, Head of investment management, explained that Coutts investment strategy is focused on longer-term drivers of investment returns but that we also keep a close eye on short-term factors.

“From an investment and economic point of view we look at longer-term trends and analysis. 

"A long-term global theme we are currently focused on is the topic of fiscal spending and fiscal stimulus. If you look across the Atlantic, you can see that trend there. Democratic candidates are all profiling themselves along these lines.

“And this has happened in the UK as well, with all parties underlining the degree that they want to increase fiscal spending. So that is going to be a long-term theme that will definitely have an impact on our view on bonds for example.”

“During the history of Coutts there have been far more dangerous events than this. Coutts takes the long view, and so should we all.”
Lord Waldegrave of North Hill

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Shorter-term, Brexit is certainly part of our thinking.

“We are focused on how the next two or three months will go in terms of the potential Brexit outcome and must not forget that if there is a change in the political coalition or in government, it may change the longer-term economic framework under which the UK economy has to operate. That obviously has an influence on how we value UK assets.”

 

a sound strategy to weather the ups and downs

Monique Wong emphasised the importance of putting money to work over the longer-term.

“We’ve spoken a lot about what we do in investment portfolios and what’s happening in the global economy, but from a financial planning perspective it’s important to make your money work for you over the long term.

“Inflation is not high, but the interest earned on cash deposits doesn’t compensate you for it, and it’s a drag on your purchasing power. It can become quite significant.

“There’s concern about recession, about investing now, about taking market risk, but investing is not just about stock markets. If you have a diversified portfolio you hold equities and bonds, and you might hold other kinds of assets as well. You have a mix of both defensive assets and risky assets.”

 

don't be put off by short-term noise

There’s no doubt that Brexit presents significant challenges for the UK. But investors and savers need to make sure they are viewing events in a larger global context. A sound financial plan can help you weather future events, whatever comes your way.

To find out more about investing with Coutts, contact your private banker.

When investing, past performance should not be taken as a guide to future performance. The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your original investment.

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Key Takeaways

While the Brexit process is causing substantial political noise, it’s important to understand it from a longer-term perspective. It is not the first – or even the worst – constitutional crisis Coutts clients have faced in the bank’s 300 year history. And its impact on your finances is likely to be less profound than longer-term factors driving the global economy. The most powerful action you can take is to ensure you have a sound financial plan in place to preserve and grow your wealth.

About Coutts Investments

With unstinting focus on client objectives and capital preservation, Coutts Investments provide high-touch investment expertise that centres on diversified solutions and a service-led approach to portfolio management. Our investment process is as disciplined as it is creative – ensuring tailored solutions with robust results.

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