Good morning!
As we all know, political events can have a big influence on markets. So it was interesting to watch what happened yesterday, after Mrs May announced that she's holding a snap general election on 8 June.
This triggered a big move upwards in sterling, which currently stands at just over $1.28. I'm flagging this point because a surprisingly large number of shares have been boosted by weak sterling. Dollar earnings make up the bulk of the FTSE 100, for example - hence its plunge yesterday. However, plenty of smaller caps also have seen their sterling earnings boosted considerably by forex.
Therefore, I am currently reviewing my portfolio, and considering whether to bank profits on shares which have received a large boost from forex in the last year.
Looking at the sterling:dollar chart below (courtesy of IG), you can note the big moves as follows:
June 2016 - a sudden devaluation of sterling from the Brexit vote
Oct 2016 - another sharp plunge in sterling, although I can't remember any specific reason for that at the time
Oct 2016 - Apr 2017 - sideways range, around £1 = $1.25
Now - who knows, but sterling is looking stronger, in the short term anyway
Importers have been struggling with weak sterling, as it's increased the cost of imported goods. Hedging arrangements only defer the pain. So weak sterling has been one of the woes hurting shares in UK retailers.
IF that pressure is now alleviating, then this could perhaps be a good time to reconsider whether it's time to snap up some bargains in the retailing sector? As mentioned previously, the only conventional retailer that interests me at the moment is Next (LON:NXT) - whose shares seem bizarrely cheap to me at around £42.
I think there could be a better outlook for Next than its extremely gloomy outlook of a few weeks ago suggested.
Going back to the election, markets seem to be anticipating Mrs May winning a bigger majority than her current, wafer thin majority of 17 (per the TV news last night). A bigger majority should make Brexit negotiations (and implementation) easier, so I think the market is probably right to cheer this move.
Anyway, it's a good time to monitor sterling, and to consider how your shares may be affected. Looking at the chart above, by Oct 2017, the year-on-year movements…
