Investing in a world of (Brexit) uncertainty
• Recent history is rich with examples of misjudgements about the outcomes of political events.
• Markets do not always react in the way experienced market participants might expect them to when outcomes of events surprise them.
• Instead, one can navigate elevated uncertainty surrounding outcomes and reactions, by focusing on the value available for the risks that prevail, and retaining ‘dry powder’ to take advantage of opportunities that arise.
Most investors focus on a top-down ‘forecast’ or ‘view-based’ investing approach. They seek to identify the path of key economic variables, the push and pull of political and central bank policy stresses, and to anticipate what they may mean for markets. They then use those expectations to determine primary investing decisions in their allocations to asset classes, interest rates, yield curves, country preferences, and even currencies.
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