Good morning!

Yesterday's report didn't really get off the ground I'm afraid, my apologies for that. So I'm building up more thrust as we speak, and looking forward to achieving escape velocity imminently!

The big news of course is the "coronation" of Theresa May as our new PM, with removal men apparently scheduled for Downing Street tomorrow. As usual, I'm not interested in discussing the politics of it here, that's a discussion for elsewhere. All that matters for our purposes here is the impact on markets. Perhaps readers could consider that before posting comments below, as it gets very boring when people start ranting on about politics here.

There was a very strong rally yesterday, with the Mid Caps Index (MCX) up about 3.5%. Amazingly it has now recouped nearly all of the Brexit falls. So those of us who held our nerves through the last few weeks, are not looking quite so daft now.

Note also that sterling has recovered a little from recent lows, currently at $1.315.

Markets hate uncertainty, so I think it's clearly a good thing that we actually have a new PM, rather than a lame duck situation until the autumn (what were they thinking?). Also, there seems a general feeling that the grown ups are back in charge now. May seems professional, calm, and experienced. So hopefully she'll make a success of Brexit negotiations, and bring the country together.

Also, I was delighted to hear May talk yesterday about detailed measures to improve corporate governance, such as making remuneration votes binding, and reining in widespread Director greed, which is proving so corrosive for social cohesion. She also favours adopting something like the German model, of bringing in e.g. an employee representative onto Boards, etc.

The nice thing about small caps, is that there are always laggards when the market generally rallies. So even if you've missed the rally, there are (selectively) still some good buying opportunities out there, in my view.

Mind you, if you're gloomy about the outlook for the economy, and hence earnings, then strong bounces such as we've seen this week are the ideal time to be selling into strength. That approach is much more profitable that panic selling during the big plunges.


As mentioned before, I'm scrutinising the trading updates of larger caps too, at the moment, to get a better sense of what the economy is doing. Obviously Brexit has caused a shock to the system, but…

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