All I want for Christmas is…

I know it’s only November and as I don’t work in retail the title of this piece might seem a little premature. However, my request is something that I’ve been awaiting for over a year and I just want to make sure my request is near the front of the queue.

Go to the profile of Blake Crawford
Nov 27, 2019

I know it’s only November and as I don’t work in retail the title of this piece might seem a little premature. However, my request is something that I’ve been awaiting for over a year and I just want to make sure my request is near the front of the queue. The one thing I asked for, more than anything else, is clarity.

Now I know this may not be the typical Christmas gift request. But, as an investor in UK equities, at the moment I desire clarity more than anything else. Although market volatility has been relatively low, uncertainty is currently extremely high and the wide range of possible economic outcomes is complicating stock picking and bringing increased focus to risk management.

The problem is that the world appears to be in limbo, with political leaders unable to reach a conclusion two key issues—trade tensions and Brexit. Rather than take decisions (for better or for worse), the main protagonists seem content to keep kicking the can down the road in a never ending loop of negotiations, sudden changes in direction, more negotiations…and tweets.

Trade tensions between the US and China are a particular concern given the impact they are having on the global economy. The US began by imposing levies on imports of washing machines and solar panels back in January 2018, before attention was turned to steel and aluminum imports. However, in July this year, tariffs were imposed specifically on Chinese goods. Since then it’s been a story of escalation, retaliation, truce, repeat—often with very little forewarning and limited transparency. Therefore, I’m really hoping that Santa will bring me some clarity on global trade. 

As a UK equity investor, I would also dearly love to have clarity on Brexit. Since the referendum in June 2016, this polarising topic has ensured politics has never strayed too far away from the headlines. But it’s the ongoing uncertainty that is having such a debilitating effect on the UK economy.  The stats make for quite some reading:-

709 - Pages of Brexit Withdrawal Agreement1

10 – Conservative candidates put forward to battle it out to lead in a post May era2

8 - Alternative options to the original withdrawal agreement put forward, all of which were subsequently voted down3

3 – Different chief negotiators/secretary of states for exiting the European Union4

2 – PMs/deadlines missed5

1 – General election - which was put forward, rejected, and then swiftly accepted overnight6

Heading into the referendum vote on 23 June 2016 I was clear in my mind which way I would vote. Three and a half years later, my view has softened, as the continued uncertainty threatens to cause a more damaging impact on the economy than either option; 1) Leaving the EU with a deal in place, 2) Remaining in the EU. You only have to look at the latest manufacturing purchasing managers’ indices and other key economic data to see the impact the Brexit impasse is having.

Christmas is known to be a time of year for hope, joy and cheer. December the 12th is the date for the UK general election and I for one will be hoping for an early Christmas present. Whichever way the result goes (and a range of outcomes are possible with the press commenting that tactical voting could have a major impact on the result), I’m just hoping for a clearer path forwards and something that resembles a modicum of clarity and with any luck investment fundamentals will once again come to the fore as we head into 2020. 

Blake Crawford is portfolio manager of the JPM UK Dynamic Fund. Find out more >


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Sources: 1 gov UK, November 2019, BBC October 2019, 2 Guardian October 2019, 3 Gov UK March 2019, 4 Gov UK November 2019, 5 BBC, October 2019, 6 BBC, October 2019

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Go to the profile of Blake Crawford

Blake Crawford

Fund Manager, JPM UK Dynamic Fund, J.P. Morgan Asset Management

Blake Crawford is portfolio manager of the JPM UK Dynamic Fund within J.P. Morgan Asset Management's UK Equity team.

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