The risk of contagion remains high

There are two areas of concern here; global and domestic political uncertainty. On a global level there is large political uncertainty in the UK and following close behind is the U.S. The UK has selected a new Prime Minister, but uncertainty remains following the Brexit leave vote and the associated impacts. The risk here is around confidence and how much of an impact this has on UK GDP over the next few quarters. Companies with large exposures include the diversified financials like Clydesdale, Henderson, BT, and QBE. We have seen some stress in the commercial property fund manager space in the past few weeks, and the risk of contagion to the rest of the financials such as equities businesses like BT and Henderson remains high. On a domestic front, the uncertainty appears to have caused little impact with feedback from corporates that conditions remain relatively stable. The latest NAB confidences figures released show little impact on businesses and have in fact reflected an increase in confidence. (Matt Haupt, Portfolio Manager)