Hell in a hand-cart | Heaven on earth

STERLING WORRIES Trade | FDI | Balance of Trade

STERLING COLLAPSED

FORECAST IF WE STAY IN

FDI | TRADE Continuing to import more than export. FDI is volatile, but picking up

TERMS OF TRADE Key points – (terms of trade = Value of exports : Value of imports) Signed up to free trade at all time low – huge benefit On average, tends to be below 100 If it is 99, we buy widgets for £1 and sell widgets for 99p

EQUITY OUTLOOK Crystal ball gazing

US EQUITIES – 08/02/16 ‘Cheap’ 8.5% 374/4376 Fair value 34.3% 1499/4376 ‘Expensive’ 65.7% 2878/4376

UK EQUITIES – 08/02/16 ‘Cheap’ 7.9% 53/670 Fair value 33.6% 225/670 ‘Expensive’ 66.4% 445/670

GERMAN EQUITY – 08/02/16 ‘Cheap’ 10.2% 63/616 Fair value 45.5% 280/616 ‘Expensive’ 54.5% 336/616

VALUE

POLISH EQUITY – 08/02/16 ‘Cheap’ 19.5% 43/220 Fair value 59.5% 131/220 ‘Expensive’ 20.9% 46/220

POLITICAL SHOCKS What next?

NATIONAL DEBT CONCERNS Source: Trading Economics National debt doesn’t work like individuals Japan is at its highest point ever and rising Greece and Italy are concerning. Ireland is on the road to recovery and Portugal is coming off peak – but fragile.

GREECE Source: Wall Street Journal

EUROPEAN POLITICAL RISK Migration Crisis Fiscally net positive (OECD) If the EU can get over the hurdle they will benefit Aging economy needs young motivated workers Brexit Huge risks to global economic system Will add uncertainty Boards express uncertainty by not investing

DEBT Credit ratings et al

UK GILTS S&PMoody'sFitchTE(i) UK 2015AAANegativeAa1STABLEAA+STABLE94STABLE UK 2016AAANegativeAa1STABLEAA+STABLE95Negative Ratings are good, so credit is cheap in the UK. Yield curve looks normal, even if prices are high and prices have increased (15 left, 16 right)

CREDIT SPREADS Bunds are expensive T-Bills seem cheap, actually they are expensive Credit ratings are important Why would anyone buy Swiss debt? – BFG? Bond prices are high overall

PROPERTY The eternal question

RESIDENTIAL Prices expected to rise steadily, supply gradually increasing. London worrying…

GLOBAL MARKETS Brazil – Cheap, yet unfashionable Spain – Expect big things? UK – fair value and expanding France – low demand, perceived expensive

And any questions? Markets are volatile We are seeing a small number of crazy valuations Most markets seem to be revaluing rather than entering a recession The main asset classes look to be still expensive despite losses Everything appears to be fine?!? Data Sources : Financial Express Analytics, Financial Times, RICS, Trading Economics + others