The global economic implications of Brexit could result in substantial gains for Guernsey if the United Kingdom leaves the European Union (EU), according to Julius Baer’s global chief economist, Janwillem Acket.
Mr Acket was in Guernsey to address an invited audience and update them on the latest performance of worldwide economies and financial markets.
Regarding Brexit, Mr Acket said that Guernsey looks set to benefit: “Guernsey is in a very nice position because you are outside the EU and have established relationships with the EU and the UK. The island will probably profit from Brexit as firms channel their work into the UK through Guernsey,” he said.
“Julius Baer is actually expanding its operation in the British Isles and now has offices in Manchester, Leeds, Edinburgh and Belfast, as well as our London office. We also have an office in Dublin. Our Guernsey office is a key component of this network and regularly works closely with its counterparts to handle our clients’ portfolios.”
The event focused on global economic results and the impact those are having on investments via a range of vehicles.
2019 is already showing signs of global economic recovery after a particularly volatile end to 2018 provoked by geopolitical concerns. Throughout 2018 only the US market exhibited growth, performing ahead of expectations.
The ongoing trade dispute between the US and China is affecting economies worldwide, with EU nations in particular suffering slowdowns in performance due to their dependence on exports to the Chinese market. China is currently experiencing growth slowdown due to being in transition from an export-oriented manufacturing economy to a domestic consumer-driven one.
“The end of 2018 was a difficult moment for the global economy, but 2019 reflects in leading indicators already a bottoming out of the economic dent of last winter and this is mirrored by the best equity market recovery we have seen since 1991 for the beginning of a year,” said Mr Acket. “For investors volatility can be an opportunity, but you need to have nerves of steel.”
Also speaking at the event was Craig Allen, head of investment management for Julius Baer Guernsey. Mr Allen referred to Warren Buffett’s investment strategy as an example of positive investing.
“Holding your nerve with investments is often the key to delivering long-term returns,” said Mr Allen. “Warren Buffett is one of the most successful investors in the world and he is known for purchasing equities during periods of market weakness and for investing for the long term.
“Markets are cyclical and the value of investments naturally goes up and down, but investors should remain calm and stay invested to ride out the short-term bumps in the road and reap the benefits in the long run.”
Mr Allen pinpointed the moment that the UK Parliament indicated that its majority was opposed to a ‘hard’ Brexit as the point when the UK equity market and Sterling started to increase in value.
UK inflation for 2018, as measured against the Consumer Price Index (CPI), was 2.1% and Mr Allen showed that the yield on assets such as equities, high yield bonds and Contingent Convertible bonds was higher than this. Cash and UK government bonds are still yielding less than inflation and therefore should be avoided.
“At Julius Baer we’re tracking global markets all the time and identifying which areas are best for our clients to be invested in. We invest globally and our clients are not overly tied to the performance of the UK economy.
“Our advice to clients is generally consistent: stay invested for as long as you can and take a long-term view. It’s our job to keep an eye on market movements and to manage portfolios through the periods of volatility such as in the fourth quarter of 2018.”
Julius Baer employs more than 120 people in Guernsey and has had a presence on the island since 1989. It was recently recognised as the top private bank in Guernsey in the 2019 Euromoney Private Banking and Wealth Management Survey.
