The recent election in India is just the latest example that it is very hard to predict human behaviour and opinion polls do not matter. However, in the UK, things seem rather clear, and we are merely a month away from the greatest expected shift in government policy of 14 years. Resisting the temptation to wade into politics, what does it all mean for us as investors?
Not much. Four fifths of the revenues of companies in the FTSE100 index now come from overseas. It is the global marketplace that matters when it comes to the valuation and performance of shares. Many companies have listings on multiple exchanges, and the only thing that keeps the likes of Diageo or Shell “British”, are complex legal arrangements.
Currencies are no different. It is nigh impossible to build a diversified portfolio with products that have exposure to Sterling exclusively. Nor should we forgo buying Nvidia, because you know, it is traded in US dollars. As such, there is always an element of currency risk in our portfolios and the only thing we have to decide, is how much to hedge, regardless of who wins the elections.
Taxes are the big unknown. As investors, we can shield ourselves from deferring liabilities or seeking favourable jurisdiction and structures. However, when we want to take the money out, there is very little that can be done to avoid paying taxes. Other than leaving the country of course, and if things go too far, the UK might go the same way as its stock market index.
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