It is much easier to write this the morning after the general election than the day before. It is a well-known maxim that investors dislike uncertainty and a big one has been removed; there is no doubt that the election result is business-friendly and market-friendly. Not wishing to dampen those positive tones too early, I will leave the ‘buts’ until the end. 
Firstly, it’s worth bearing in mind that in the UK, like most countries, we have a domestic bias in our outlook and this largely follows through into our investments. That is the case for our Diversified funds.
However, the rest of the world is not as wrapped up in our political situation and Brexit (although it matters to Europe) as we are. On a global scale the US-China trade talks are of a more significant economic impact and the US presidential election next year has greater ramifications.
When setting the asset allocation for the Diversified funds, and when the team members are making the specific investment decisions, all the various factors are taken into account and most recently that led us to increase the weighting in UK equities and reduce the exposure to other global equities.
I wish I could say that was down to extraordinary political forecasting prowess, but it wasn’t. In fact, we try and remove such difficult to forecast outcomes from our decision making. It was simply driven by the excellent value being provided by the UK equity market and, more importantly, the high quality companies trading at attractive valuations that we could find within the market.
This decision effectively reversed one we made back in March to reduce our UK exposure and move more global due to the risks in the UK not being factored in, in our view. That call worked and in the short term I think the latest one will as well, but (the first but) Brexit still needs to be finalised.
However, the relief and certainty bodes well for domestic companies and sterling; therefore less well for large internationally orientated companies. Our UK equity portfolios are structured to benefit from those traits, with a good exposure to domestic small- and medium-sized companies. Over and above that, though, our focus is on companies that are not overly reliant on economic growth for profits growth, in other words they display structural growth and their shares should perform well in different market conditions.
That’s the domestic bias dealt with; the range of Premier Diversified funds invests across fixed income, equities, property and alternatives. We remain positive on equities, generally, with the economic data and comments from the US central bank providing increasing confidence that the US and the world economy is not going to fall into recession next year and the possibility of the much sought after soft landing is increasing. This is good news for equities, which whilst not overly cheap in many regions are not that expensive, and if some earnings growth can be achieved, markets should benefit.
In other asset classes, our property exposure is focused on listed UK and European REITs and specialist property companies where the outlook is positive.
Alternative investments provide the ballast to the portfolios and their low correlation to bond and equity markets, so if we’re wrong they help take the strain. Similarly, we can’t predict markets with certainty; a bad outcome from the US-China trade talks would hurt equity markets and there are many other things to worry about that we can’t predict, so we have bought a cheap insurance policy by way of put options on the S&P 500 index.
Overall, I remain very happy that our Diversified portfolios covering different risk profiles are well positioned for the market outlook as we see it.
Back to the domestic bias; through 2020 some form of Brexit will take place. Domestic government, corporate and consumer spending is likely to increase and international investors are likely to come back to the UK.
But (yes, the second but; I’m paid to worry), once Brexit has happened there will probably be a period where the economy suffers as we deal with the outcome; it’s 8.30am on the morning after the election and I’ve ready seen forecasts of a mild UK recession in 2021 as a result. However, that’s the year after next, giving plenty of time to worry about it and adjust portfolios if necessary.
Neil Birrell is chief investment officer at Premier Miton Investors and manager of the Premier Diversified fund range. The views above are his own and should not be taken as investment advice.