Four new polls released over the
weekend continue to paint the picture of a statistical dead heat in the
Scottish Independence Referendum.
There are three macro channels
through which the referendum and a yes vote are likely to impact investments. A
weaker pound, higher bond yields and potentially a higher equity risk
premium. We expect the pound to suffer
the majority of the impact.
There are some investment managers
who fear that the markets are under discounting the possibility of a yes vote.
Certainly the impact to date remains muted but in the current low interest rate
world it takes a lot to persuade investors to part with their equities – as we
have seen with the US growth scare, Ukrainian crisis and rise of ISIS. Also notably the pound and gilts bore up
better than most expected during 2010’s hung parliament. The message is that
markets are more resilient to uncertainty than investors generally might
expect.
With all the focus firmly on
Scotland, there was little coverage on Mark Carney’s testimony to MP’s last
week. Mr Carney struck a more balanced tone than the one he has offered in
recent months. He commented that the MPC would hit its target if rates rise by
spring and then proceed to rise very slowly. This seems to all but rule out an
increase this year, but tips the balance in favour of February in preference to
May. Nevertheless, the committee’s options are still fairly open.
In company news, Harrogate-based Engage Mutual has proposed to merge
with the Brighton company, Family
Investments, in a deal that would create one of the UK’s largest mutuals
with more than 2 million customers. The proposed merger remains subject to
regulatory approval but could potentially conclude in the first half of 2015.
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