Carmignac expects greater UK economic pain in 2018

In his first macro-economic and asset allocation note of 2018, Didier Saint-Georges (pictured), managing director and member of the investment committee at French asset manager Carmignac, warned that in 2018, “issues with a crucial impact on all financial markets will loom much larger than in 2017.”

Listing political and macro-economic factors to watch this year, he highlighted that the financial and economic impact of political events often takes a while to show up on the radar screen.

Nevertheless Saint-Georges foresees a grim year for the UK economy, arguing that “we can reasonably expected the blowback from the pro-Brexit vote would cause greater economic pain in 2018 than in 2017.”

“A weaker pound sterling will raise the cost of imports and thus take a large bite out of household spending. At the same time, the upcoming second phase of the negotiations between Britain and the European Commission on their future trade relations will generate additional uncertainty – regarding both the ultimate terms agreed to and the future of the May government – that is likely to discourage investment in the country.

“And lastly, any monetary tightening by the Bank of England to  defend the national currency would intensify the nascent economic slowdown. We are therefore starting the year with a short position on sterling which should pay off if a downward spiral gets going,” explained Saint-Georges.

Adrien Paredes-Vanheule
Adrien Paredes-Vanheule is deputy editor and French-Speaking Europe Correspondent for InvestmentEurope, covering France, Belgium, Geneva and Monaco. Prior to joining InvestmentEurope, he spent almost five years writing for various publications in Monaco, primarily as a criminal and financial court reporter. Before that, he worked for newspapers and radio stations in France, in particular in Lyon.

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