James ConeyMar 27 2019

Choose your own investment path

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Choose your own investment path
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So, there we are: a Brexit delay.

To paraphrase Michael Corleone in The Godfather, just when we thought we were out, they pull us back in again. Are we about to enter the dreaded Hotel California Brexit, where you can check out of the EU, but never really leave? Who the heck knows!

Brexit is like religion. You cannot prove the existence of God.

Likewise you cannot prove what will happen when we leave the EU. In both cases though, there are those with faith who will swear blind that they know what is what. No one does.

There have been too many U-turns, too many votes missed, resolutions failed, decisions blocked, that they can no longer be trusted.

Remainers often claim that Leavers were lied to. But that conveniently forgets Remainers were lied to also by George Osborne’s dossier of doom.

Nobody actually told fibs, of course. It is just that economic predictions are no more accurate than guessing the Premier League scores.

And all this is why the time for cash may have come. If you are at the point of decumulation you simply cannot trust these self-interested, often idiotic, frequently childish politicians with your retirement income.

The risk that they will do something stupid over Brexit and wallop your nest egg is just too great.

There have been too many U-turns, too many votes missed, resolutions failed, decisions blocked, that they can no longer be trusted.

My personal moment of revelation came when Brexit minister Stephen Barclay offered an amendment, fought for it, then voted against it. It is time to put the future in your own hands.

You may miss an upturn, but you will not be hammered if this bull run ends.

I have long stood by the motto: “Invest for the economics, not the politics” – but perhaps that philosophy has found its limits.

If I were 60, I would be pulling all my money out of the market now and waiting to see what happens.

Ironically the greatest risk is probably from a deal being struck.

The FTSE 100 is up about 25 per cent since the referendum, all down to the collapse in the pound which boosted the earnings of those 60 per cent of stocks that are more influenced by the price of the dollar.

I have been trying for months to make head or tail of investor sentiment. I have given up.

There have been net outflows from UK equities for 21 months in a row. But also outflows from European funds for nine.

There are lots of other things to consider, such as rising interest rates, the unravelling of quantitative easing, and the threat of a Sino-US trade war.

The latter peril has receded for now, but such is the precarious state of global politics that it could return at any moment.

It is exceptionally hard to time the market. Fidelity routinely trots out the calculation about the damage you do to your portfolio if you missed the 10 best days in the past decade.

But that sum also really only works if you apply it to a lifetime of investing, not if you are at the end and capital protection is paramount.

These are unique times of political uncertainty – perhaps it is time to take a unique investing approach to Brexit.

Solvency II stays

One of the hopes of Brexit was that we would see the end of Solvency II – or at least a scaling back of this mammoth bit of EU-wide insurance legislation.

It costs the sector about £3bn a year. The chief executive of an insurer once explained to me about the hundreds of staff it took just to update millions of pieces of paperwork (we know how Brussels loves red tape).

This legislation was designed to keep afloat the less well capitalised European insurers, not our giant life businesses. As a result, its requirements are holding back the ability of pension providers to offer better priced products, particularly annuities.

Sadly, I think any rolling back of Solvency II is unrealistic, at least not in the short term. The UK market will want to show a strong equivalency to the EU for some time.

And the cost of unravelling this legislation is likely to be highly restrictive at a time when businesses are adjusting to the new world order.

Bring back proper politics

The great benefit of finally having a Brexit deal will be the end of the political nobodies appearing on TV and radio.

MPs who were also-rans on parliamentary committees have suddenly been thrust in to the limelight for their narrow, single-issue opinion.

It has really served to undermine the reputation of our political system. Not helped by the fact that all the biggest political brains in the Labour party are relegated to the backbenches and rarely heard.

I will toast the return of proper politics.

James Coney is money editor of the Sunday Times