Beaufort Analysis No. 308 – Weather Forecast

Beaufort Analysis No. 308 – Weather Forecast

“Earlier on today, apparently, a woman rang the BBC and said she heard there was a hurricane on the way…well if you’re watching, don’t worry, there isn’t!” The famous words of Michael Fish’s 1987 October forecast. What followed the very next day was a hurricane, with winds up to 110mph, causing over £5bn of damage in today’s money. Last week, both the Treasury and the Bank of England released statements on their possible scenarios for the UK economy when we leave the European Union. Both have modelled possible effects to the UK economy based on different Brexit outcomes, with the Governor of the Bank of England, Mark Carney’s most extreme prediction that the UK economy could suffer an 8% drop and be in the worst position since World War II.

Worst case scenario sees unemployment rising to 7.5%, house prices would drop 30% and inflation could reach 6.5%. The following steps would see the base rate hiked to over 5% to temper inflation. There has been much criticism of Mark Carney and the Bank of England for his predictions, as his comments could be seen to not be independent and walking into politics. The Bank of England was made independent to ensure policy and the economy are not influenced by government or politics. The Central Bank has previously criticised its own forecasts made ahead of the Brexit vote, as the UK economy remained stronger than they anticipated after this historic referendum.

This weekend saw another resignation over Brexit, as Sam Gyimah, Universities Minister and MP for East Surrey, quit over the proposed deal and encouraged Theresa May to consider a second referendum. This week, Theresa May is expected to come under pressure from many other parties to publish the Brexit legal advice.

Whatever your views on Brexit may be, the markets don’t like uncertainty. Whilst a possible scenario or forecast may seem like some certainty as it gives a vision for what may happen, Michael Fish is a prime example that forecasting is not always accurate. We maintain that continuing with your investment strategy and maintaining a well-diversified portfolio will provide the best outcome for you as investors.

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