Brexit vs Trump: What poses the biggest risk for investors?

Money Marketing conference panel meets volatility debate head on - By Justin Cash

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May 30, 2017

Investment experts have pointed to the threat of Trump and Brexit to cause volatility in the markets in the coming years, but have disagreed over which poses the biggest risk to investors.

In a panel session at the Money Marketing Interactive conference, Investment Association senior policy adviser Richard Normington identified the biggest political risk to investors in the medium to long-term as what Britain relationship with the EU will look like.

Mattioli Woods chief investment officer Simon Gibson agreed that the future of the EU posed a threat to markets, and singled out Italy as a particularly vulnerable country.

While he acknowledged the impact an unpredictable Trump could have on markets, he said that the practical approach for investors would be to react to Brexit as it unfolds.

He said: “Clearly We have to consider Trump and America because it’s the largest part of the investment universe and it would be false of me to say that a series error of judgment, perhaps involving a button, by someone in the White House might not be a good thing.

“But we can’t invest for nuclear war so we are going to base ourselves on the fact that I think Europe is going to be in turmoil over the next two or three years. I don’t happen to think Brexit is the cause of it; it might have lit the touch paper.

“Actually [the main risk] might not be political at all it might be the central banks.”

While Gibson and the panel noted that a vote for an independent Scotland was another significant factor on the horizon, it was lower down the list of priorities for investors.

Gibson said: “I’m not sure quite how the Scottish National Party are going to come out of this general election – my sense is not quite as completely and utterly in charge as they were after the last one. My sense is we will remain a United Kingdom until at least the next election.”

Wealth Management Association deputy chief executive John Barrass argued that Trump still posed the biggest threat to the fund manager and adviser members of the trade body.

He said: “The big thing is whether the clients are going to inconvenienced by the drops in the market that are going to reduce the values of their pensions and portfolios. The big issue for us is what causes mass volatility in the market? The biggest problem there is actually not with Brexit. It’s actually going to be in the US. It’s going to be with Trump and if something were to happen for example some difficulty with North Korea or some problem with an American aircraft carrier in the Sea of Japan, that would lead to such volatility in the markets that the retail sector would fly and take panic, and we would have real problems with our members trying to stop their clients selling up.”

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