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21st April 2016

Don't worry about Brexit – it won't happen

“For the past 18 months I've been saying 'don't worry about Brexit, it won't happen'”. This was the bold statement from Richard Buxton, manager of Elite Rated Old Mutual UK Alpha fund, at an event hosted by the company last night. “I remain adamant that that is the case,” he continued. “Take a look at the bookies odds, not the polls. Despite all the campaigning, the odds have hardly changed and it's 2-1 on that we remain in the European Union.

“The right wing of the Tory party simply don't represent the British public, who rarely vote for radical change. Most people take the view that it is 'better the devil you know'.

“So while the Brexit debate hots up, and both sides release increasing numbers of hurried statistics to support their case, let’s keep our focus on life beyond the referendum.”

Five common myths of Brexit

Monetary policy has reached the end of the road

“If more stimulus is required to keep the global economy alive, negative interest rates aren't the answer,” he said. “They are counterproductive and unhelpful.

“Global fiscal stimulus (such as increasing government consumption or lowering taxes) is an option, and one that is already being openly discussed by world policy makers, but frankly I don't think any more stimulus is needed.

“Back in the 'real world' it's fascinating talking to company management at the moment. There is such a disconnect with their view on the outlook for their businesses, which is generally positive, and the way the stock market is behaving. The world just isn't as bad as stock market jitters and volatility is suggesting.

“Yes, the pricing environment is tough, with companies having to adjust through greater incentives for customers, or by keeping costs low. But while consumers are cautious over their purchases, that’s not to say they have stopped spending altogether.

“The key to propelling UK growth forward is corporate sector confidence – reflected through investment and innovation. As a country, our ability to innovate pervades the pharmaceutical, digital engineering, electronics and automotive industries. While the labour market is tighter but the cost of finance pretty low, there is a highly favourable environment for British industry to invest and enhance productivity.”

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Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Richard's views are his own and do not constitute financial advice.

©2016 FundCalibre Ltd. All Rights Reserved. The information, data, analyses, and opinions contained herein (1) include the proprietary information of FundCalibre, (2) may not be copied or redistributed without prior permission, (3) do not constitute investment advice offered by FundCalibre, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and (5) are not warranted to be correct, complete, or accurate. FundCalibre, shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, this information, data, analyses, or opinions or their use.