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Emily’s exchange: a busy week for markets

This week has been one of those where Monday feels like an age ago. With so much news impacting the financial markets it is easy to overlook certain events. I find that the oil price is one of those things; my family would struggle without a car, so the price at the pump is something we have to accept. But this week Royal Dutch Shell and BP released their third-quarter results. The reason this matters is because many UK pension schemes are exposed to these companies. These pension schemes, often set-up by our employers, open us up to a range of assets that we might not usually pay attention to. So whilst a drop in price at the pump might help today, it might be doing quite the opposite for our future.

High court ruling on Article 50

Yesterday had quite the impact on UK financial markets. First, the High Court ruled that the government needed to hold a parliamentary vote before triggering Article 50. Then the Bank of England announced that it would be leaving interest rates unchanged at 0.25%, whilst raising growth expectations for the UK in 2017.

This is a change in tack from the Bank of England. Back in August there had been talk of further cut in interest rates later in the year, but because the economy is stronger than anticipated that guidance was revised. What is clear is that there is still a large amount of political risk in the UK, and this is showing no sign of abating. The value of the pound improved in response to the news and was up close to 1% against the dollar and euro by the end of the day. It’s unlikely that this volatility will disappear any time soon, despite the governor of the Bank of England, Mark Carney, announcing that he will remain in post until 2019. Remaining globally diversified will be key for investors.

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US election

By Wednesday next week we should have the result of the US election, and this week it has been hard to avoid the headlines on the Donald Trump vs. Hillary Clinton battle. The race is seemingly neck and neck, after scandals on both sides have had a huge impact on the polls. A US election is always interesting for investors, but with this one there is a greater level of uncertainty; Trump doesn’t have a track record in politics making it less clear for markets what a Trump presidency could look like. Equity volatility has risen quite sharply this week; global equity markets are down 2.5-3% on the end of September. There are anticipations of a rally should Clinton win, and further drops should Trump emerge victorious. As I realise how quickly the week came and went, I remember how important it is to focus on the long-term and not get too distracted by the short-term noise.

Should you have any questions on how either of these events could impact your investment, please get in touch. This column only works if it helps you.

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