Re: Pound Goes Up and other events
Amercans take a differing view:
Originally Posted by Meg
After an initial dip due to the uncertainty of change the pound will soar once we get rid of the shackles of the EU ...
However, for investors a number of things are becoming clear. For US investors I would make two general points to start with.
The first is that in a world of expensive assets, the UK is perhaps the only major country that is entirely unloved by international investors. My experience is that international and American investors are curious about Brexit but are not ready to commit capital. As a result, many UK equities and real estate opportunities are in ‘value’ territory. An ‘agreed’ Brexit could be a catalyst for these, though a hard Brexit would deepen levels of uncertainty.
A second point is that with the dollar continuing its rise, and beginning to inflict financial pain on emerging countries, the risk reward for holders of dollars to start to diversify is rising. Amongst the other reserve currencies the euro and the pound are relatively cheap.
The pound is interesting because on a fair value basis it is cheap, and heavily speculated against (short positions are historically very high). In addition, we are now getting a sense of trading ranges – a hard Brexit would likely see the pound trade in the 1.15 to 1.18 range, whereas an ‘agreed’ Brexit would see the pound trade higher from 1.20.
Post the October 31st*deadline, American investors will also do well to look more closely at UK domestic equities, especially banks and the hard hit retail sector, as well as the real estate sector. Watch and wait for the moment.