Good morning!

Mark Carney, Governor of the Bank of England, gave a speech yesterday (video link) which triggered a further fall in sterling. The key points I jotted down were;

  • Economic outlook for UK has deteriorated
  • More monetary easing may be needed over summer, have tools at their disposal
  • Limits to what the BoE can do

Therefore, it's looking like sterling may remain low for some time. This further reinforces my current strategy of trying to buy bombed out shares where there are considerable overseas (esp. dollar) earnings. Also companies which are UK exporters. So for example I bought some Portmeirion (LON:PMP) yesterday, as it should benefit from the weaker pound.

I think this is also quite bullish for the domestic property market. Anecdotally, I've heard that some buyers are pulling out of house purchases. Although I'm also hearing that overseas buyers are steaming into the London market, seeing cheaper sterling as a buying opportunity.

Ultimately, house prices are driven by demand & supply, and the cost & availability of mortgages. The bottom line is that, with interest rates this low (and likely to stay low), then buying a house is more affordable than renting (if you can come up with a deposit). For this reason, I'm looking closely at housing-related shares which have been sold off heavily. I currently hold Persimmon (LON:PSN) . Rightly or wrongly, my current view is that any downturn in the housing market is likely to be temporary. In my lifetime, house price crashes have only happened when interest rates are so high that mortgage repayments become onerous. We couldn't be further away from that scenario now if we tried.


Indices

A lot of people expected a massive sell-off after the Brexit vote, and are now confused to see the FTSE 100 hitting a 9-month high. As mentioned before, that is mainly because the index is dominated by companies which generate earnings in dollars. 

I thought it would be interesting to see how the various indices have performed over the period since Brexit. Here are the figures as of last night;

(table corrupted, so here are figures manually)

FTSE 100 +2.6%

Mid Caps (MCX) -6.1%

Small caps (SMXX) -5.9%

Aim (AXX) -2.6%

(from CoB June 23 to CoB June 30 2016)


As you can see, whilst large caps are up, mid and smaller caps are down about 6% in the last week.

AIM…

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