One secret of success in life is for a man to be ready for his opportunity when it comes. (Disraeli).

I wonder if Boris Johnson is feeling that his opportunity has now come as he picks up the reins from Mrs May. He has got quite some task to lead the country through this Brexit ordeal, and towards a socially acceptable, and economically flourishing future.

I guess it is excusable if he likens his own situation to that of Winston Churchill at the start of the Second World War. Certainly, in one sense, with politics as it has now become it must be more difficult today to tell friend from foe. It’s going to be interesting to see his cabinet selection and then to see how long that holds together as negotiations with the EU hot up.

Here at Saltydog it has become vital that we do not get diverted away from following the numbers and sector performance as we move towards the 31st October.

The following are some of the thoughts, and distractions, that are rock and rolling around my cranium at the moment; unfortunately, without any answers.

  • Will the EU wise up and admit to the internal economic pain that they will suffer from a no-deal Brexit, and soften their approach?
  • The EU has many other internal problems, both financial and political, to contend with at the moment. Another reason to soften their approach and make Brexit go away.
  • The UK stock market has not yet taken a dive at the thought of a Boris government intent on leaving with or without a deal. The question is why?
  • Does this mean that leaving without a deal will not be as harmful as the “Fear campaign and Hammond” are leading us to believe?
  • How much of an attraction to the EU, if at all, are the billions of euros offered as a divorce settlement for a trade deal?
  • Sterling has recently weakened against most currencies, but not down to the level immediately after the referendum. Does this mean that the markets believe a favourable solution to Brexit is possibly on the horizon with a Boris led government? Otherwise, why has it not fallen further?

The above are all questions to which today do not have a definite answer.

We should consider the consequences of the effect on Sterling of a successful outcome to the negotiations. One would expect it to rise in value, thereby impacting adversely on all funds in foreign denominated currencies. Bad news for many of today’s investments in Technology, U.S. and Global sectors.

This being the case it is probably the time for moving into reverse and re-examining the U.K. sectors.

A Brexit deal might liven up the inflow of inward investment from abroad. Perhaps car companies and financial houses might be more inclined to stay, thereby producing a knock-on effect on employment and a growth in the country’s technical skills.

Fingers crossed, we should be able to track these movements using our numbers and graphs. Then perhaps it will be “toe in the water” time for UK smaller and mid-cap funds.

Conversely, if the country falls out of bed and we leave without a Brexit deal, then our existing investments should continue to thrive as Sterling falls further in value, thereby boosting the worth of foreign currency denominated funds. I cannot see that a Brexit rout will affect the economies of the USA, China and the rest of the world outside of the European Union. It is going to be interesting to see whether a Boris led country will make the changes to taxes, infrastructure spend, education and to the NHS, which have all been indicated in the last few weeks.

As Robert Kennedy said, “We live in interesting times.”

Best wishes and good investing,

Douglas.

Founder & Chairman