by Alexander Beard, on Oct 26, 2016 2:13:35 PM

One aspect of investment management that never fails to amaze me is that events don’t take a ticket and wait in line.  Any number of crises or threats can run simultaneously and there is nothing to prevent a number risks from all blowing up at the same time like a well-coordinated firework display.

Another aspect of investment management that constantly surprises me is that many of these risks are ‘caused’ by people – as opposed to being the result of a technical financial factors, or even natural disasters.  People, and their behaviour, are extremely difficult to predict with any accuracy, and the recent Brexit referendum is a prime example.  When referring to people, the driver of events can be one person as much as it can be an entire people.

At the time of writing it does feel a little like the early stages of a firework display.  We fully expect a few loud bangs and flashes, but that doesn’t stop us from being startled when they actually happen.  So what could go ‘bang!’ as things currently stand?

We cannot be sure how the Brexit negotiations will proceed, there are many people and peoples involved.  The US election also seems capable of throwing up the same sort of unexpected result that Brexit did.  The result of Brexit and the US election will show us whether the world will take a more protectionist trading stance.  Perhaps of greater concern, though, is the number of world leaders content to wave their fireworks in a more menacing fashion.  Events in Syria are perhaps more symptomatic of a wider malaise, yet to flourish.  Meanwhile, the Asia Pacific region (the birthplace of fireworks arguably) has its own simmering tensions.

It is a healthy reaction to be startled by bangs and flashes, they normally signal danger after all.  But for the most part firework displays are fun, and all the explosions are followed by appreciative ‘ooh’s and ‘ah’s  from onlookers.

Brexit made us all jump, but markets have on the whole made appreciative noises afterwards.  There’s many other bangs and flashes to negotiate.  Let’s hope the right noises follow.

Andrew Moore
Investment Director and Partner