The pound crashed yet again! #finance
This week we seem to be seeing a change direction for the government. Teresa May, was by any standards impressive when she made her speech to the party conference. She did, however, praise the record of the Cameron government and still seems a little out of touch. The pound crashed this week down to 1.2454 this morning. She hasn’t got a vote of confidence from the market.
Besides watching the value of the pound, I have been watching the oil price which has been rising this week. This could eventually affect petrol prices as the dual effect of a falling pound and a rising oil price impacts on the cost of importing oil.
Companies like GlaxoSmithKline are benefiting from the low value of the pound as much of their revenue comes from exports. Companies paying their dividends in dollars are also a good investment at the moment.
Investors have low expectations and are accepting lower returns. Assets do well with quantitative easing but that is a one-off boost. QE is meant to be a quick fix and not a sustainable solution to economic problems. With such uncertainty and intervention in the markets, private investors can benefit but only if they monitor the volatility and respond to it.
The need for diversification is more important than ever in a market where risks are constantly changing and the risks are diverse too. Political risks seem to dominate and the next big event will be the triggering of Article 50 to begin the process of Britain leaving the EU. I don’t think that will crash the market again, but it will bring uncertainty. The actual finalising of the departure from the EU will, hopefully, be a gradual process and so less painful.
The next investment
I’m always looking for my next investment and with a rising oil price, oil companies are worth watching. I have recently bought Royal Dutch Shell B and I am monitoring Premier Oil. I have high hopes for my investment in Solo Oil too. If the pound keeps falling or the United States raises interest rates, then the banking sector will be worth looking at. I already have bought Lloyd’s but have Barclay’s on my watch list too.
M & A
Mergers and acquisitions could come into focus as the pound continues to fall. Premier Foods has been making progress and it is thought Nissin is increasing its stake. Premier Foods has a lot of upside and I think a pound a share is possible by next year. One economist has today suggested the pound could fall to below 1.2 against the dollar and so acquisitions from overseas are quite likely.
I hope some of my investment ideas and analysis can help predict market trends but shouldn’t be considered recommendations or advice. If you would like to subscribe to this blog just enter your email address at the top of the sidebar or follow me on Twitter for updates. You can also find more ideas on my Facebook page.