Oanda Senior Market Analyst Craig Erlam believes the GBP exchange rate depends on how the Brexit talks unfold and the political situation in the UK. Erlam says the US dollar is heavily sold and due for correction. He expects EUR/USD to revisit 1.10 handle.

Watch the full segment as Erlam details the key technical levels on the major pairs - EUR/USD, GBP/JPY and GBP/USD.

Tip TV Finance is a daily finance show based in Belgravia, London. Tip TV Finance prides itself on being able to attract the very highest quality guests on the show to talk markets, economics, trading and investing, keeping our audience informed via insightful and actionable infotainment.

The Tip TV Daily Finance Show covers all asset classes ranging from currencies (forex), equities, bonds, commodities, futures and options. Guests share their high conviction market opportunities, covering fundamental, technical, inter-market and quantitative analysis, with the aim of demystifying financial markets for viewers at home.

At the heart of the Queen’s speech today were an array of proposed bills that prepare the UK for a smooth exit from the European Union. Of 27 bills, eight pertain directly to Brexit and its implications for key sectors.

There are bills to convert EU laws to UK laws and some measures on immigration, fisheries, trade, nuclear power, agriculture and sanctions.

Below Tom McPhail, Head of Policy at Hargreaves Lansdown, discusses the proposed changes with Finance Monthly.

Given what a hash the Conservatives made of using the General Election to increase their majority, and given the overwhelming priority of Brexit, there were a least a few positive announcements in the forthcoming programme. The most important dog that didn’t bark was any kind of announcement on a savings and investment policy; we will continue to press the government on this issue and to look at the possibility of introducing a Savings Commission.

• Financial guidance body
• Unfinished business on pensions and savings
• Social care consultation
• Education
• Digital strategy
• Consumer markets, including the energy market

Financial guidance body

The creation of a new financial guidance body, merging the Money Advice Service, Pension Wise and the Pensions Advice Service into one single body was unfinished business from the last parliament. This guidance service is welcome and necessary, but there remain significant challenges in closing the advice gap and in helping consumers to get the guidance and information they need to make good financial decisions. This is an issue on which the Treasury needs to continue to focus and to work with the FCA and the financial services industry. We also believe that all investors should be encouraged to undertake a financial health-check at age 50 as preparation for their transition from work to retirement; for most people, this is an age when it they are close enough to retirement for it to seem relevant but also far enough way to make meaningful change to their eventual outcomes.

Unfinished business on pensions and savings

It is hardly surprising there was no announcement on the state pension triple lock, as it currently has no formal legislative status; this is something which the Conservative party will probably want to quietly revisit when it feels it has a little more pensioner goodwill in the bank. This could take a while. Similarly, it is hardly surprising there was no mention of any legislation to means-test the winter fuel payment.

In the meantime, there was a disappointing lack of any announcement on a savings and investment policy, something which this country and in particular the younger generations urgently need.

We are also disappointed the government has made no mention of plans to press ahead with a ban on pension cold-calling, something which would now be in train were it not for the General Election.

Social Care consultation

We welcome the announcement of a consultation on care costs. Given the structural damage the Tory party inflicted on itself in the election campaign through its mismanaged social care announcement, it would have been a wasted opportunity not to press ahead with a consultation on reform.

To put this in context, depending on assumptions used such as the continuation of the Triple Lock, we might see the cost of the state pension increase by perhaps 1% of GDP over the next 50 years (from around 5.5% today). The cost of long-term care can be expected to increase by another 1% of GDP over the next 50 years as a result of the ageing population (from 1% of GDP to 2%) and over the same period, the ageing population is likely to increase health care costs generally by over 5% of GDP from 7.3% to 12.6%.

Financial education

The Queen’s speech makes reference to government plans for school and technical education. As part of this programme, we believe greater prominence should be given to financial education and financial literacy. This needs to be addressed across all ages of the population, from those in Junior school through to investors of retirement age.

Digital Charter and digital ID

The government proposes to introduce a new digital charter to ensure the UK is a safe place to be online. We support this initiative and would encourage the government to work with the financial services industry to develop a private sector Digital ID to complement the existing public sector Verify system. Individuals conducting financial transactions, opening accounts, transferring money or using the pension dashboard in the future, need a simple electronic mechanism to prove they are who they say they are. A Digital ID is the answer to cutting bureaucracy, reducing costs and speeding up processes; the government’s new Digital charter may offer a vehicle to accelerate this process.

In this video, Mark Burgess, Chief Investment Officer, EMEA, talks about how the markets view the June 8th 2017, election result and its potential impact on the UK economy. He also discusses what the election outcome signals for the forthcoming Brexit negotiations.

Authored by Markus Kuger, Senior Economist at Dun & Bradstreet.

On Monday 19^th June, the UK is scheduled to enter negotiations for its exit from the EU, in discussions that will fundamentally shape the future of the country and its economy. Just two months ago Prime Minister Theresa May surprised the nation by calling a shock general election, seemingly with the aim of strengthening her position in the Brexit negotiations and bolstering her claim to represent a consensus in the UK. However, the election did not unfold as expected.

Despite early polls suggesting a 20 percentage point lead for the Conservatives, the Tories lost 13 seats and thus their overall majority. Now, just days before talks with the EU begin, the Prime Minister is involved in domestic negotiations with the Democratic Unionist Party (DUP) to form a government. So, what will the ‘Hung Parliament’ outcome mean for Brexit negotiations – and how can businesses respond?

On the home front

Short-term political uncertainty in the UK has increased sharply. The Conservative Party must now enter an alliance with another party in order to pass the Queen’s Speech and form a new government. Overall, this process will be time-consuming, leaving businesses without a clear outlook in the coming days and possibly even weeks.

In the longer term, even with the support of the DUP, the Conservatives’ majority will be extremely slim – which will be problematic, given the wide spectrum of views within the party on a number of issues, including Brexit. Against this backdrop, the government is likely to need to tread a conciliatory line both within and outside its own party: all of which will fundamentally impact the Brexit negotiations. Taking all factors into account, Dun & Bradstreet has downgraded the UK’s Political Environment Outlook from 'deteriorating' to 'deteriorating rapidly’, although this indicator is likely to be upgraded again once a new government is formed.

At the negotiating table

The dynamic of the Brexit negotiations has changed fundamentally. After Article 50 was invoked on 29 March and snap elections were called in April, initial talks between the EU and the UK were scheduled for 19/20 June. However, this round of talks is unlikely to deliver any noteworthy results, as the yet-to-be-formed British government will not have had enough time to prepare its negotiating position.

The election result suggests that the UK lacks an overwhelming consensus on the sort of deal that should be brokered. Theresa May’s personal position has also shifted, and rumours already suggest that she could be asked to step down by her own party at some point in the coming months as a result of the disappointing election outcome. The UK government may need to placate a broader range of opinions in parliament – including those of other parties – to pass any legislation. The extra time this will take will make negotiations with the EU even more complicated: Article 50 sets a strict 24-month deadline within which talks must be completed, of which two months have already passed due to the election campaign in the UK.

We predict that in the long run, the election result could make a ‘hard’ Brexit – which our analysis suggests would be harmful for the British economy – extremely hard to implement. It’s now more likely that the UK could remain in a customs union with the EU, reducing Brexit’s impact on businesses. The election outcome has even opened up the very small chance of the UK remaining in the EU, although businesses should continue to assume that the UK’s exit from the EU will still take place in March 2019. With so many factors in play at home and internationally, it is currently difficult to predict how the negotiations will unfold.

From the business perspective

All of this makes for a complex environment for businesses. Our analysis indicates that uncertainty will remain high in the next 18 months, regardless of what happens in the wake of the election, and we are maintaining our risk rating for the UK at DB2d, with a ‘deteriorating’ outlook. Given the backdrop of an already slowing economy (the UK posted the lowest real GDP growth of all 28 EU economies in Q1 2017), it is not surprising that businesses are beginning to express a lack of confidence, as seen in a recently published survey for the Institute of Directors.

Businesses should continue to monitor the progress of negotiations, and use the latest data and analytics to assess risk and identify potential opportunities. Once a government is firmly in place and Brexit negotiations progress, organisations may get a clearer picture of the likely basis for future business relations between the UK and the rest of the world. Until then, a careful and measured approach to managing relationships with suppliers, customers, prospects and partners will be essential.

Navigating uncertain times

The general election result surprised most commentators, and more importantly it creates the prospect of greater uncertainty in the medium term – both domestically and for the Brexit negotiations, which will be one of the most significant factors in the future development of the UK economy.

However, it’s vital to remember that the UK remains a stable economy, with long-term economic potential that exceeds that of most other European economies. For now, businesses should continue to follow developments closely as the impact on the Brexit settlement – and the political landscape of the UK – becomes clearer.

Earlier this month, Finance Monthly had the privilege of interviewing the CFO of IBM UK & Ireland (UKI) – Vineet Khurana. Here he discusses his role within the organisation, Brexit implications and offers piece of advice to fledging CFOs.

You have been the CFO of IBM UKI for nearly a year now - what is your favourite thing about your role?

My favourite thing about the role has to be the breadth, reach and influence it offers.

I get to work extremely closely with our Chief Executive and the rest of the leadership team (Sales, Operations, HR, IT, RESO, etc.) not only on all financial matters, but also across a spectrum of other business matters that impact our business - both in the short and long term. As an example, I recently led a piece of work, in partnership with the Corporate Strategy team based at the Headquarters in New York, to re-define our Client coverage strategy in the UK.

As a CFO, I am also presented with opportunities to engage externally with Clients and share with them IBM’s point of view and value proposition, as it relates to Enterprise IT. I personally find this aspect of my role very enjoyable.

What would you say have been IBM UK & Ireland's major achievements in the past twelve months? What has been your involvement, in relation to them?

Our key focus over the last year has been to align ourselves here in the UK & Ireland with IBM’s transformation as a Cloud Platform and a Cognitive Solutions company.

This is absolutely key for us in order to fully leverage and benefit from the breadth of the Cloud-based cognitive offerings that are available. Associated with this, my role as the Finance Leader for UK & Ireland has been to ensure that our resources and investments are (a) prioritized and (b) deployed appropriately in support of this initiative. Of course, we’ve also had to make sure that we have a revised set of operational/performance metrics and reporting capabilities in place.

Finally, as mentioned above, the work we led as a Finance team in regards to re-defining and making our Client Coverage strategy more effective is something I am particularly proud of.

What is the best advice you could share with Fledging CFOs and Finance Directors?

With the role of finance constantly expanding and finance increasingly needing to play a central part in all business decisions, I really don’t think there has been a more exciting time to be a finance professional.

Technological advances are disrupting the status-quo. Companies are utilising technology to transform their business and the way they interact with their clients and employees. This is being done while industry convergence is producing new agile rivals at breakneck speed. With all this change afoot, the role of the CFO needs to change as well.

CFOs need to embrace business strategy in addition to the financial strategy, understand the changing market/client needs in addition to regulatory changes, and deliver business insight in conjunction with data reporting and analysis.

Therefore, my advice is to embrace this change, as it is key to ensure your increased effectiveness in the role and your ability to deliver enhanced value at the leadership table.

In light of the recent triggering of Article 50 - what is your outlook for the future of IBM UK Ireland in next twelve months and beyond?

IBM has been operating in the UK for over 100 years and as such it is an important market in the context of our global business. We have always done and continue to make significant investments here in support of our business and economy. As an example, we recently announced the establishment of four new UK cloud data centres, tripling our UK cloud data centre capability.

In summary, we are making sure that we are well-placed to help our clients as they transform their businesses by improving their competitiveness, as they prepare to exploit new opportunities.

What are the implications and challenges of global Brexit uncertainties faced by CFOs?

I think we all recognise that we are facing an extended period of uncertainty during the exit negotiations. So at this early stage of Brexit, the approach of the CFO should be to understand the potential exposures their organisations could face.

I believe two significant uncertainties centre around import/export of goods and data and the free movement of resources across the continent. The magnitude of these uncertainties will obviously vary by sector and individual organisation. CFOs should look at mapping the relative exposure of their organisations to these elements by carrying out the data analytics work now. This analysis will then allow for quicker action and informed business decisions to be taken, once the negotiations are concluded and changes in regulations are clear.

At the current rate of fluctuation, with socio-political uncertainty reeking chaos in the markets, the pound’s performance leaves little to desire. Currency experts are now warning that further in 2017 we could see the pound hitting the same value as the euro.

According to the Sun, analysts have advised towards this possible plunge due to the general election, which resulted in a hung parliament, and the closing on the Brexit deadline.

Holidaymakers that are worried about the potential currency volatility ahead are being told to buy half their currency now and half closer to their break, as the pound could even break below the euro.

Finance Monthly has heard Your Thoughts on the possibility of a British value parity with the euro and included a few of your comments below.

Jonathan Watson, Chief Market Analyst, Foreign Currency Direct:

The prospect of the GBP/EUR exchange rate reaching parity or 1 GBP = 1 EUR has been raised many times over the course of recent events, before and after the Referendum vote. Throughout 2017 analysts have been split as to which direction rates will take, I believe there are two key features which explain why we are here and which will ultimately shape the likelihood of it being achieved.

Parity was almost reached in December 2008 when GBP/EUR hit 1.0227, since then the July 2015 high of 1.4345 had seemed to indicate such lower levels were confined to history. However, since 2016 and the result of the EU Referendum, politics has become the big driver on Sterling. Political concerns too have reached Europe and the failure of Le Pen and Gert Wilders to win any victory has seen the Euro strengthen. There is a German election in September and potentially an Italian vote too to be called in September, but, for now it seems the Euro has survived and this has helped it gain against the politically scarred Pound.

Economic data is the second factor and here too we see the Eurozone outshining the UK growing 0.5% in Q1 2017 against the 0.2% for the UK. Divergence in monetary policy is also key as the UK and the Bank of England could potentially raise interest rates to combat rising Inflation, threatening consumer spending and lowering GDP. Meanwhile the European Central Bank are looking to withdraw stimulus and maybe raise interest rates in the future, helping to further boost the positive sentiments towards the Euro.

Ultimately the prospect of parity is not going away and the outcome of the UK election is vital to determining how likely, as it effects who is on the UK side of negotiations with the EU and how strong their mandate is.

We are only 2 months into the Article 50 window and just coming up to the one year anniversary of the vote on the 23^rd June. We have in the grand scheme of history just begun on this path and looking at what is ahead the prospect of parity for GBP/EUR this year remains a very real possibility.

Owain Walters, CEO, Frontierpay:

Ahead of the election, some analysts warned that the value of sterling will reach just £1 to €1. The political uncertainty following the election hasn’t eased the short-term risks to the Pound. However, I would argue that this result will, in the long term, be good news for sterling.

What I believe we will see next, as the Conservatives are forced to form a coalition with the DUP, is that Theresa May’s plan for a ‘hard Brexit’ will be diluted, if not taken off the table entirely. Since the vote to leave the European Union last year, the currency market has, on the whole, not responded well to the dialogue around a “Hard Brexit” and with the influence of a more liberal party in a new coalition government, the idea of a ‘softer’ Brexit will provide support to the Pound and we will see a period of strength.

The significant losses that the SNP has seen will also reduce the chances of a second Scottish independence referendum. While the notion of another Scottish referendum hasn’t done irreparable damage to the pound, taking it off the table at least for the foreseeable future will certainly give the Pound an extra boost.

Patrick Leahy, CFO, JML:

If the political events of the last two years have shown us anything, it is that situations that are improbable are certainly not impossible. Sterling/euro – or even sterling/dollar – parity is not out of the question. Whether you are an importer or exporter of goods or currency, CFOs across the country would rather the whole thing settled down and we had some certainty; but that’s unlikely. So what can you do?

Being in the FMCG market, JML’s short-term retail price is fixed, and it takes a good year to adjust prices. Just look at the large drop in sterling, post Brexit; it is only now that the inflation effect is really starting to trickle through to business and consumers. So, as a CFO with no concrete forecast on what will happen with the rates, you must try to minimise the impact any movement has on your pricing and margin strategy.

As a net importer, UK businesses and especially retailers are always susceptible to falls in rate, pushing up our costs, reducing margins, or lowering volumes. In some ways, the best strategy any business can have to manage exchange risks is to sell to other parts of the world – it’s a natural hedge. But, it is not that simple, because margins in each country are important and you can’t always point to your exchange gains when discussing gross profits with your invoice discount provider.

For retailers, the key is to not overstretch yourself if hedging on currency movement. Regularly and accurately forecasting your business performance is key to achieving this. It’s impossible to know exactly what your currency requirements are in 12 months’ time, but you know you will have some. You might win and lose on currency movements along the way but by slowly building your hedged positions you will have minimised the risks and helped the business achieve its margin along the way.

We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!

“If there’s one thing that’s certain in business, it’s uncertainty” – Stephen Covey, US author. You’ve probably heard this a few times in your life. Here Ed Thorne, UKI Managing Director at Dun and Bradstreet, talks Finance Monthly through the current situation in the UK, the uncertainty that looms, and the confidence that is being pushed throughout.

We are without doubt a nation sitting in a world in flux. Business confidence is shaky, as recent geopolitical and economic issues have created an uncertain business landscape. For the UK, the vote to leave the European Union has created a volatile UK market; with the pound’s value dropping, inflation is at its highest point since September 2013, and reports that the cost of some imports could rise by eight per cent after the UK finally leaves the EU. But where does this leave businesses?

A recent survey by the London Chamber of Commerce and Industry found that business confidence is actually growing despite increasing cost pressures (including raw materials and oil prices) and the devaluation of the sterling still lingering. It’s also been reported that business confidence among the UK private sector is now at its strongest level since mid-2015, thanks to a strong economic backdrop and improving client demand.

There are businesses that are thriving in the UK despite the uncertainty; in the past few months, the tourism and manufacturing industries are experiencing an all-time high. The Office of National Statistics revealed that tourism to the UK has increased by 13% from November to January year-on-year. The reduced cost of visiting the UK for American and Eurozone tourists, appears to have caused tourism to skyrocket. The same applies for British manufacturing; CIPS’ latest figures from February reported solid growth of output and new orders. These factors suggest that many UK businesses are actually doing well at the moment, despite Brexit.

It might not all be plain sailing, though. UK businesses need to keep one eye on the global currency; as the pound fell precipitously after the Brexit vote and the dollar could very well strengthen. If this does happen, it could affect the fortune of both net importers and exporters – so definitely something to watch closely!

And it’s important to remember that the UK hasn’t fully left the EU yet, and much is yet to be worked through before the June 2018 deadline. Failure to negotiate a good trade deal, or indeed any deal, with the EU could have a significant impact on business confidence. Our Dun & Bradstreet economists have advocated a calm and cautious approach for businesses, recommending continued monitoring of developments rather than responding too quickly. The impact of Brexit on migration, interest rates, house prices and even food prices, could have considerable effects on business confidence in both the short and long term.

Business confidence in the UK is not solely centred on national companies. For decades, the EU has simplified trade regulations to allow labour, capital, goods and services to move freely across borders. Companies across the world that rely on the UK as a base for business in Europe can no longer take these benefits for granted when Brexit is set in motion. This could certainly impact the growth potential for UK businesses and stall opportunity for those companies looking to expand. Global companies operating in the UK and Europe also face greater compliance and regulatory challenges, as uncertainty plays an increasing role in the market.

Stephen Covey’s words about business uncertainty ring louder right now than any time in recent memory. Although risk and uncertainty is an accepted part of our increasingly complex global environment, it doesn’t make it any easier to deal with for the modern business. Against a backdrop of uncertainty, companies doing business with or in the UK can use data and analytics to stay abreast of market trends, and effectively manage relationships with customers, suppliers and partners to minimise risk.  Business confidence in the UK is likely to continue on a rocky road for the foreseeable future and companies need the right tools and information to help them stay ahead and navigate to success.

Last week Brexit Secretary David Davis said the UK will not be paying the EU’s expected €100 billion ‘divorce bill’ in order to leave the Union. Michel Barnier, the EU’s Chief Negotiator said it’s not a punishment, simply a settlement of accounts.

This ‘divorce bill’ is expected to be the most fought over and sensitive areas of the Brexit negotiation process between the UK and the EU.

Below Finance Monthly has heard Your Thoughts and listed comments from various expert sources.

Ben Martin, Founder, The Brexit Tracker:

A €100bn EU exit bill, paid upfront represents 18% of all income earned in the UK in the first three months of 2017. Or 239% of the annual increase in UK income earnings (12 months to March 2017 vs March 2016.) [Source:  ONS GDP March 2017.]  Either way it’s a huge figure.

So, whatever the eventual EU exit bill - €65bn or a net €42bn cost (or lower) – it’s going to take time to agree.  Or continue to not agree.

Both sides have set out their negotiating stalls; the UK is looking for a parallel track (let’s talk about the terms of the exit and the bill together) vs. the EU (pay your bill first.)  This will take months to resolve, even without the French and German elections. The sign off process will be arduous in the extreme as no individual will want to go down in history as the person who got it wrong. Agreement on what ‘Exit 2019’ looks like is a long way off.

The biggest losers of this head to head are businesses who need to plan for what the 2019 exit will mean for their operations. Employees will also suffer, due to the continued uncertainty surrounding EU workers right to remain, reduced investment spend and lower associated hiring as firms delay strategic investment.

What should businesses do now?  We’re encouraging them to assign Brexit responsibility to an individual in the firm; to review Brexit through the firm’s lens; to establish a reporting procedure to keep the CEO/Board/entire business + employees up to date on the changes Brexit may bring. And to create Brexit Key Performance Indicators. What can be measured can be improved – so we’re helping business start that measurement process.

Businesses must navigate Brexit by accepting continued uncertainty and actively tracking the possible implications.

Markus Kuger, Senior Economist, Dun & Bradstreet:

Although Article 50 has been triggered, it's still far too early to say how the negotiations will unfold - particularly as the general election results in June could change the government's priorities. Currently, it's clear that the UK is keen to present a firm negotiating stance and avoid any political damage from the prospect of a hefty Brexit bill. It's almost certain that some compromises will need to be reached, but where the UK will make concessions, and the size of any potential settlement, remain to be seen.

Positively, real GDP growth is still reasonably solid, labour market conditions sound and stock markets are rallying. However, forward looking indicators have deteriorated somewhat over the past months, pointing towards more challenging operating conditions as Brexit negotiations unfold. As a result, we are maintaining our DB2d country risk rating, down from the DB2a before the referendum, and the 'deteriorating' risk outlook. The best advice for businesses is to monitor the progress of negotiations and use the latest data and analytics to assess and manage risk during this period of uncertainty, and identify any potential opportunities for the post-Brexit world. A careful and measured approach to managing relationships with suppliers, customers, prospects and partners is key.

Charles Fletcher, Head of Analysis at Cogress:

The UK is caught in the midst of uncertainty surrounding Brexit, now compounded by Theresa May’s snap election. Brexit is unfamiliar territory and presents potential risk to the future of the UK, but so far the economy has remained resilient and this should continue to instill confidence in the country’s future. Papers have been reporting various figures for the UK’s so called ‘Brexit Bill’ ranging from 50bn to 100bn euros, but this remains conjecture as no hard facts have been made clear yet.

Until more information about the nature of the negotiations is released, the exit cost will remain a guessing game and potentially a dangerous one, as speculations on the Brexit bill can only fuel unnecessary anxiety around the future of the UK economy.

However, I would argue that although the "divorce bill" will be one of the most sensitive points during the negotiations - at least for the general public - it's the trade deal that the business community will be watching closely. As a safe harbour in a storm, the property market has always shown great resilience especially at times of uncertainty, and some foreign investors might even benefit from more favourable exchange rates. However Brexit may well cost other sectors dearly, especially those such as manufacturing which can afford uncertainty the least.

We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!

Given that it has been more than a month from the date Article 50 was triggered and the two front runners in the French presidential race are confirmed, just how well are UK markets doing and how are global ones faring in a time of such regular change? Michelle McGrade, Chief Investment Officer at TD Direct Investing lists for Finance Monthly her top ten tips on investment pre/post Brexit.

Time for a bit of sense and sensibility

As we got closer to Article 50 being triggered, investors were becoming a little more confident about what Brexit could mean for their investments. Over a three-week period, concluding the same week Theresa May finally penned her letter to President Tusk, the number of our customers who didn’t know whether the decision would be positive for their investments dropped from 44% to 35%, suggesting that investors were initially a bit spooked by the uncertainty, but as things became clearer, their sentiment became more positive.

UK equity market valuations look attractive

That is if we look at price to earnings (P/E) ratio (this measures the market price of a company's stock relative to its corporate earnings). The below chart represents equity market valuations of five geographical regions based on P/E ratios. We can see that the FTSE All-Share index is priced just above MSCI Asia and MSCI Emerging Markets, both of which are considered attractive right now.

Past performance is not a reliable indicator of future returns.

Source: Bloomberg to 31^st March 2017

So did global markets reflect this positivity as well?

The US market looks a bit stretched

Using the same chart from above, it clearly shows that US equity market valuations are looking a little stretched. This trend is mirrored in the below chart looking at price-to-book (P/B) ratio (which measures a company's market price in relation to its book value); again using the same five geographical regions.

Past performance is not a reliable indicator of future returns.

Source: Bloomberg to 31^st March 2017

Does this mean that the US bull run is about to come to an end?

The equity bull market is entering its eighth year, and for US stocks this is the second longest bull market since WWII (the longest having been between 1987 and 2000).

The current bull market is different from the 1987-2000 period, in that interest rates have fallen throughout. Bond yields have also declined to historically low levels, as demonstrated in the next chart. The major concern this time is that the majority of recent equity returns have been driven by investors bidding up prices in a global hunt for yield while earnings have remained flat. This might also have something to do with the way investors react to volatility; different to how they have done so historically.

Past performance is not a reliable indicator of future returns.

Source: Bloomberg to 31^st March 2017

What is the VIX telling us?

The Volatility Index (VIX) (market sentiment indicator) remains at depressed levels. The chart shows that the opposite trend between S&P 500 and VIX has reached an extreme level: 2364 vs 12.

Historically, spikes in the VIX coincide with sharp drops in the S&P 500 but as the chart demonstrates, huge spikes are a rarity in the last five or so years.

Past performance is not a reliable indicator of future returns.

Source: Bloomberg to 31^st March 2017

What can we deduce from this?

The data shows market valuations are stretched in some geographical regions. This comes against a backdrop of the potential threat of rising interest rates and occasional volatility, triggered by events like Brexit.

Despite the fallout from Brexit and upcoming elections in France and Germany, the outlook for global equities over the medium term remains cautiously optimistic. With global economic indicators strengthening and earnings picking up, global equities could deliver modest returns but with higher volatility. Additionally, there is the prospect the new US administration will push through pro-growth policies that are likely to provide a substantial boost to corporate earnings, but these are yet to be confirmed.

Despite high valuations of US equities, they are still attractive to hold due to the high-quality nature of the US market. The longer-term outlook on emerging markets looks potentially positive as they are cheaper than developed markets.

So, what 10 things should investors do as Britain secures its long-term future?

1. Have a clear investment strategy

Martin Cholwill, fund manager of the Royal London Equity Income, recommends that investors go for ‘dull and reliable’ instead of being dazzled by what seems ‘exciting’. Richard Buxton, fund manager of Old Mutual UK Alpha, agrees that having a clear investment strategy is important. He said: “The key to unlocking any investment reward is to have a high conviction approach and a fair bit of patience.”

2. Invest for growth

If you’re investing for growth, it’s normally recommended that you think about a minimum time horizon of five years or more.

3. Invest for income

If you’re looking for income, consider funds which invest in high-quality companies which are backed by cash flows, giving them the ability to pay dividends out of cash reserves.

4. Stay calm & stay invested

Remember: it’s about time in the market, not timing it! Use regular investing to take the emotion out of investing and not over-commit. Should any opportunities arise, you’ll also be well-positioned to take advantage of them.

5. Run your winners

It’s difficult to do, but the aim should be to buy at, or close to, the bottom and sell at the top. Run your winners. This basically means holding on to your investments that have done well, although it can be a good approach to take some profits - known as 'top slicing'.

6. Cut your losses

Don’t be afraid to cut your losses if an investment is clearly not going to gain in value. But remember, you only crystallise a loss if you sell, so if you think the value will rise again, hold your nerve and stay invested.

7. Don’t get trigger-happy

The most skilled fund managers don’t expect instant success. When we asked our Best of British fund managers how long they typically held onto stocks for, the average period was three to five years. See what stocks the Best of British Fund Managers are holding most.

8. Don’t believe the hype

Investors stand to benefit from not buying into the hype around particular shares or sectors, and to stick to their guns and invest regularly. Investors’ tendency to follow performance, which frequently sees them buy at the top of the market and sell at the bottom, can be painful and costly.

9. Back the Best of British

You can’t ignore a solid track record. Our Best of British Fund Managers list contains some core fund managers who have been there and done it through market ups and downs, riding out difficult times to deliver long-term outperformance.

10. Embrace opportunities

Take your time, think about your long-term investment goals, but embrace any opportunities that arise.

Last week Governor of the Bank of England and Chairman of the G20's Financial Stability Board, Mark Carney said London is “effectively, the investment banker for Europe.”

Many believe companies and financial institutions should move their trading to the continent, while others believe this is non-sensical given London’s capital position globally and in the markets. Some companies, such as Goldman Sachs, HSBC and UBS, have already confirmed the eventual moving of staff and trade abroad, once the UK leaves the EU.

At the same time, the UK is faced with a lack of skilled labour, and due to the uncertainty surrounding changes in immigration law and the movement of employees or recruitment across the continent, bosses of big companies such as Barclays are calling for the freedom to recruit freely outside of the UK.

This week Finance Monthly hears Your Thoughts on the moving of business to the EU post-Brexit, and below are some comments from reputable sources within the business sphere.

Bertrand Lavayssiere, Managing Partner, zeb:

For those institutions with EU clients in their roster, it is more than likely that they will have to move to the EU post Brexit. However, there are a few buts…

One of the critical aspects is ‘passporting’. At present, banks can operate within the EU under UK regulations with relatively light approvals required from local regulators. This is of key importance for large sectors of the industry, such as asset management, where more than a trillion GBP is under management for EU-based investors, corporate lending, reinsurance and securities trading platforms, to name just a few. If this is maintained - which seems unlikely today - then the need to move is not crucial.

The long-standing cooperation between EU and UK regulators could ease some of the pain if governments agree that joint efforts to maintain alignment will help the overall goal of financial stability. Furthermore, many of the pertinent regulations are global anyway - those from the Basel Committee or the IASB, for example.

With regards to the London market, there are a number of platforms for specific product lines (foreign exchanges, swap contracts, equity derivatives, etc.) to facilitate compensation, settlements of trades among market players, and volumes to ensure liquidity. In simple terms: London is the place for such platforms. Disagreements have already taken place with regards to whether those platforms could remain in London. If the decision is yes, it will be business as usual. If, however, the answer is no (the most probable outcome), then the trading platforms and back offices of stakeholders have to move. This includes the day traders and market makers who are crucial for the liquidity of the market.

There is a whole list of further variations on this issue. But all in all, it is essential that a financial institution with clients based within the EU considers its strategic options as of now. Establishing a presence in the EU needs at least 18 months from a regulatory stand point. As many EU regulators require a fully-fledged decision making unit through proper governance, the analysis of the changes in delegation of authority schemes and the assessment of potential human resources impacts must be considered early on in the process.

Paramount in the decision-making process should be the institution’s business potential, to follow their customers, and ongoing requirements, rather than solely the regulatory aspects.

Ben Martin, Founder, The Brexit Tracker:

Moving your business away from the UK is a major undertaking. Perhaps you were considering this prior to the Brexit referendum or more likely, you believe leaving the EU will make your business operations untenable. But before taking action, we suggest you calculate and monitor the financial impact of Brexit on your firm and compare this to the emotional ‘pull’ of moving to the EU.

Here’s our 5-point plan:

1. Calculate how Brexit has already impacted your firm. From over 390 economic indicators we’ve reviewed, the biggest market-related change has been GBP Sterling dropping 15% (now 12% weaker.)  How has this impacted your business?
2. Continually assess and record how new facts surrounding the UK/EU relationship will impact your £ calculations
3. On relocation – consider how you will continue to serve your UK customers.  With a weaker GBP, your UK sales are likely to be worth 12% less
4. A move will impact your business banking.  UK banks/lenders will need convincing of the merits of a move (and the enforceability of their security) to continual their financing
5. Consider your existing and new competitors – will a move provide an advantage to you or them?

In summary, firms need the full “Brexit facts” before undertaking a move to the EU – as the facts are in short supply, they should start their own Brexit monitoring system.

Oliver Watson, Executive Board Director for the UK and North America, PageGroup:

As is to be expected, multinational businesses are more cautious than UK SMEs when it comes to hiring in post-Brexit Britain – and, as I see it, there are two reasons for this.

With a variety of other investment opportunities elsewhere across the globe, large international businesses – who are under no obligation to invest in the UK – have the ready option to divert investment to other more certain markets. As a result, their talent acquisition will naturally become focused in a different direction or geographical location.

However, where SMEs generate the bulk of their revenues in the UK don’t have that option – they just have to get on with it. This means while multinationals are feeling cautious about UK hiring, for SMEs it is often business as usual. This is a pattern we’ve seen time and time again in the face of uncertainty.

Mary Wathen, Partner and Head of Agriculture and Rural Affairs, Harrison Clark Rickerbys:

The Agricultural sector relies heavily on EU workers. Around 15% of the total workforce is from outside the UK. The uncertainty around the status of EU workers threatens to hit the agricultural sector hard if the status of EU workers isn’t clarified.

Despite the uncertainty, there are steps which savvy agricultural employers can take now to minimise the disruption. Taking action ahead of time will help maintain the flow of workers for each harvest, protecting both the business and the livelihoods it supports.

Employers need to ask themselves some key questions about their workforce:

• how many migrant EU permanent or seasonal workers do you have?
• how many are key staff, responsible for driving production, harvest or sales?
• how many have been in the UK long enough to acquire permanent residence?
• How many of your workforce are committed to remaining in the UK?

For smart agricultural employers, the so-called crisis provides an opportunity to build their employer brand.  Employers are enhancing their working relationships with key employees who meet the requirements for permanent residency and want to remain – introducing them to specialist agricultural immigration advisers and supporting employees through the application process.

But this isn’t the solution for the seasonal workforce shortage. The fruit-farming industry employs 29,000 seasonal workers, who go back to their home countries after six to nine months in the UK. They won’t be eligible to apply for permanent residency. Virtually all of them come from the EU, mainly Romania and Bulgaria, but also Poland and Hungary. If the Government ends freedom of movement, a return to the old-style permit scheme seems the only option to protect the harvest and UK agriculture.

Richard Thomas, Employment Partner, Capital Law:

One key issue for the forthcoming Brexit negotiations will be the issue of EU Immigration following our exit from the UK. There is no doubt that the UK Government will seek to put in place some form of “controls” on EU immigration after the UK leaves the EU but it is entirely unclear as to what form these controls will take and/or who they will apply to. Will the controls apply to unskilled, semi-skilled or skilled EU migrants? Who makes the decision as to what constitutes a semi-skilled or skilled role? Is there any appeal against this decision?

It has also been suggested that the UK will allow all current EU nationals working in the UK to remain in the UK after the UK leaves the EU but it is not clear whether this will be indefinitely and whether it will apply to non-working spouses and/or children. Ultimately no promises have been given and it is a matter for negotiation between the EU and the UK, although it is hoped that the issue will be resolved quickly.

In addition, in April 2017 the UK Government introduced the Immigration Skills Charge imposing a charge of £1,000 per year for employers sponsoring a worker from outside the EU. It is quite possible that the UK Government will extend this charge to EU workers who do not have rights of permanent residence once the UK leaves the EU.

Given the current uncertainty and potential cost the best advice to SME’s with EU workers who have been working in the UK for at least 5 years is to get them to make an application for Permanent Residence as this should provide a guarantee of an individual’s continuing right to work in the UK.

However, individuals making the application will have to complete an 85-page form and provide huge amounts of supporting documentation confirming what they have been doing in the UK for the last 5 years. This is an arduous process to say the least but there appears to be little alternative as (unlike some EU countries such as Germany) the UK has no central register of the identities or even the numbers of EU citizens currently working in the UK. The Home Office has stated that it is looking to use an online application process but there does not appear to be any additional funding for this.

Katherine Dennis, Associate in the Employment, Pensions and Immigration team, Charles Russell Speechlys LLP:

The EU referendum has caused a lot of uncertainty for EU nationals and their employers as to what their position is in the UK and what will happen when the UK exits the EU.  This is clearly an important issue for many SMEs, especially as sponsorship of overseas workers through the UK’s points-based system becomes increasingly expensive.

Importantly, free movement will continue to apply until the UK formally leaves the EU. This process was started on 29^th March 2017 by the UK government giving notice under Article 50 of the EU treaty. There will now follow a two-year negotiation period, which could be extended by agreement of all member states. The earliest the UK would leave the EU is therefore the end of March 2019. Until then, EU nationals are still free to work in the UK.

The UK government has clearly stated that it wishes to control migration from the EU, while still attracting those whom it considers have the most to offer the UK. It is highly likely therefore that the UK will introduce measures to restrict free movement. It is also therefore likely that it will be harder for employers to recruit EU nationals and it may be difficult for EU nationals to work in the UK on a self-employed basis.

At the moment, there is no firm indication as to the type of system which might be put in place and much depends on what the UK government is able to negotiate with the EU.

Possibilities include a new work visa system for EU nationals or expansion of the current points based system, which enables employers to sponsor skilled workers in the UK (although it is currently limited to professional roles at a certain salary). It is unlikely visas will be required for short business trips. Other possibilities include retaining limited free movement with measures to cap numbers, such as quotas or temporary ‘cooling-off periods’. Concessions may be made for sectors where there is a recognised labour shortage.

The UK government has stated that it intends to consult with businesses and communities to obtain the views of various sectors of the economy and the labour market. It is therefore crucial that employers and business-owners who are concerned about the impact of Brexit on their workforce respond to the government’s consultation when it is issued.

In the meantime, EU nationals who are eligible to apply for permanent residence (i.e. those who have been resident in the UK for five years or more) or British citizenship should do so now to ensure their continued right to work in the UK.  EU nationals who have not reached the five year point when the UK exits the EU are in a more vulnerable position.  It is sensible for those EU nationals to apply now for an EEA Registration Certificate, which confirms that they are currently living and working lawfully in the UK under EU provisions, in case this fact becomes important in any future transitional arrangements.

We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!

The snap UK election in June and the second round of voting in France in May are galvanising investors to buy physical gold to protect against the uncertain election outcomes, according to investment firm The Pure Gold Company.

Chief executive Josh Saul said: “This past week has seen a surge in gold buyers, and this morning especially, our clients are looking to take advantage of a drop in the gold price as the French presidential polls favour moderate candidate Emmanuel Macron.”

“People purchasing gold this morning and taking advantage of a lower price remember that Clinton lead Trump in the polls and the Remain camp led over the Leave voters. The polls have been an unreliable indicator in the last few momentous votes and the general sentiment is that if people can find a way to hedge themselves with gold at a discount then they will heed the opportunity. We've seen many clients who purchased last week place orders this morning in order to reduce the overall average price that they have bought at.”

“43% of people purchasing gold have been first time investors who say their motivations for buying gold is to remove exposure to equities. They’re worried that a Marine Le Pen victory in France, uncertainty over the UK's general election in June or an escalation in hostilities between N Korea and US could result in a considerable decline in global stocks. People are purchasing gold as a hedge against these events occurring whilst hoping that they don't. This is especially true for retirees. We have seen a 105% increase in people purchasing physical gold through their SIPP or Pension in the last seven days to protect their investments from election uncertainty.

“Our largest order last week was a single purchase of £1.3m of 1oz gold Britannia's. The client was driven to invest in gold by "elections everywhere he looks." He is convinced that somewhere, at some point (soon), there will be a crash and he wants to ensure that some of his wealth has been removed from the financial system. His motivation is not to make money but instead to protect himself against financial volatility. Still, he does believe that the gold price will perform similarly to last year, and he wants to ensure that if the value of his gold grows he manages this growth in a tax efficient manner, hence his preference for tax free UK gold coins.”

(Source: The Pure Gold Company)

Business insurance firm Hiscox recently produced a resource that might be useful for businesses pre- and post-Brexit. It is a side-by-side comparison table of the UK, France and Germany and displays how easy it is to do business in each country.

It features all the main tax rates, employment laws, costs and incentives in each of the three biggest economies. The resource is designed for those businesses in the UK considering relocating to an EU country after Brexit.

You can view the full table in a pdf here.

(Source: Hiscox)