Keep an eye on the pound and trust in quality shares

Markets have been fairly flat this week, although there is plenty to reflect on given the state of the UK government finances and the challenges for investors positioning their portfolios amid a tough time for the economy. 

The UK government will announce its spending review and will show the perilous state of its finances not just in 2020 but for many years ahead. Big tax rises look to be inevitable and this has the potential to depress consumer spending. The value of the pound and gilt yields need to be closely watched.

Trade negotiations with the EU look like going down to the wire and have the potential to create some turbulence. For what it’s worth, I think a no deal scenario could be on the cards, but I think some form of acceptable deal will be in place in 2021 if both sides compromise their current negotiating stance.

I have made some more changes to the Fantasy Sipp having added Domino’s Pizza (the US parent) last week. The most significant change is that I added some new money to the Sipp for the first time in over two years. As the portfolio is supposed to replicate someone managing their own Sipp portfolio, I thought I would take advantage of this and add some fantasy cash so that I could add a new stock.

I am looking to run this portfolio in a conservative way, built around mainly big companies that can chug away and quietly compound in value over the years. There is also a big focus on avoiding losses - which can really hammer long-term portfolio performance and are hard to recover from -  rather than shooting the lights out which means owning businesses with very strong competitive positions and recession resilience.