Home bias and currency risk

Notepad_Phil

dividendhero wrote: »

UK trade deficit is already one of the worst in the world at nearly 5% of GDP. It's not unreasonable to assume UK exports will fall at least 25% after Brexit...GBP might well strengthen against the likes of the Turkish Lira, but big falls against the major currencies looks pretty much nailed on

I think you may mean 'current account deficit' rather than 'trade deficit' as the last figures I can see reported at end October has the trade deficit at 1.8%.

But regardless of whether the trade deficit is 5%, 1.8%, or any other value, if big falls are pretty much nailed on, why are the currency markets where they are today?

The markets are extremely selfish, if they see that something is pretty much nailed on then they'll react today, the fact they haven't is proof that yours is just an opinion in amongst many other opinions and overall the current consensus of those opinions is that the UK will muddle along.

But that consensus changes over time and no-one knows for sure what will happen, so for me the best thing is to just keep investing in a globally diverse manner.

dividendhero

Notepad_Phil wrote: »

I think you may mean 'current account deficit' rather than 'trade deficit' as the last figures I can see reported at end October has the trade deficit at 1.8%.

But regardless of whether the trade deficit is 5%, 1.8%, or any other value, if big falls are pretty much nailed on, why are the currency markets where they are today?

Yes the quoted figure is for the current account deficit - according to the Economist league table, the UK CA deficit is dire at 4.3% only Columbia is worse at 4.4% (though I suspect their figure is actually better due to illicit exports )

It's a bit of a mystery why there's so much complacency on this, US deficit is near top of their agenda and UK's figure is nearly twice as bad :mad:

Don't forget this is after the fall in the pound, a devaluation is normal tonic by IMF for a country in this position. As to the future, just about the only person predicting a post Brexit rise in UK exports...is Boris Johnson :rotfl: