Guernsey investors should have diverse global portfolios to mitigate the risks caused by Brexit, a visiting leading economist has said.
An invited audience at Julius Baer’s Financial Market Outlook event heard about the recent performance of the global economy and the trends that are predicted to shape the future.
Christian Gattiker, Head of Global Research at Julius Baer, updated the audience on global economic performance, the projected economic impact of various Brexit scenarios and the changing shape of the Chinese economy.
“The world is still in an industrial recession,” Mr Gattiker said, “but this is being mitigated by other forces such as consumer spending. Overall the picture is still a little gloomy but there are glimmers of hope for investors and there are ways of safeguarding wealth and outperforming the markets.”
Brexit uncertainty, both in the short-term outcome and the longer-term timeframes, continues to impact the UK economy – as indicated by the currency market, which showed a drop in the value of the pound in July and August but a slight recovery in September.
“The probability of a no-deal Brexit seems to recede by the day and a further delay to the process seems the most likely outcome,” said Mr Gattiker. “This of course means more uncertainty for the investor and it’s almost impossible to construct an investment plan in these conditions.”
Guernsey’s continued economic prosperity depends on how the UK positions itself when it does eventually leave the European Union, Mr Gattiker advised: “If the UK sets itself up as an international finance centre, which is just one option, then that could of course impact Guernsey and the business the island does.
“Guernsey’s economy is strong and quite durable so it’s in a good position relative to Brexit, but it remains to be seen what the UK will do once it is out of the EU.”
Craig Allen, Head of Investment Management at Julius Baer in Guernsey, also spoke at the event and provided insight into where Julius Baer is investing for its clients.
“Traditional staples of investment portfolios, such as cash and government bonds, are currently offering little value so we’ve had to explore alternative options to find value and protect our clients’ wealth,” said Mr Allen.
“Five ideas that have yielded success for our clients are contingent convertible bonds, UK equities, investments in China, investments in Japan and US tech stocks – which continue to provide value, albeit from a higher starting price than the other four ideas.”
