I'm closely watching the pound to dollar exchange rate, as if sterling rises on 'No Deal' Brexit being taken off the table, it could seriously affect share prices.
Predicting the future direction of exchange rates is difficult and somewhat futile but I'm keeping an eye on the value of the pound versus the US Dollar, as a rise in the pound would hurt the valuation of several shares in my Fantasy Sipp portfolio. Despite the ongoing political storm, I am beginning to think the UK might not end up leaving the European Union and that could mean considerable upside for sterling.
This would be bad news for the FTSE 100, where the translated value of companies' foreign profits would take a big hit, as would the values of global and US-listed shares held in the Fantasy Sipp and many of the best-performing funds today. Yet, while I think it's important to understand the risks portfolios are exposed to, I don't think equity investors should jump to take action. If you are exposed to the current favourable trend in US shares then you will just have to take the ups and downs that come with any currency movements.
Sticking with the best businesses at reasonable valuations is the right long-term strategy for equity investing. This has served investors well over the long run, but that doesn't mean it won't have a bad patch.
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