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No such thing as certainty

The election saga unfolded in apparent slow motion as I endeavoured to detach myself from the ups and downs of investment life several hundreds of miles away from the scene of the action. But a combination of modern communications technology, volcanic ash disruption and indifferent weather found me following the drama more closely than I had intended and it was something of a cliffhanger.

Now that the deals have been done and the first coalition Government in this country since the Second World War is formulating policy, it is time to consider the investment implications.

We have no live experience of a coalition running the country here. In wartime, the dynamics are different. Still, I was encouraged to hear a Portuguese local express admiration at the speed in which it was all accomplished. Less than five days he considered excellent. It would have taken more than five months in his country.

At least the uncertainty is out of the way – sort of. It is hard to be sure whether it has been the threat of a Greek default or the lack of clarity over who would be in charge in Downing Street that has contributed most to the wild gyrations in stock and currency markets. Internationally, the former has created the greatest concern. But the packages that were being assembled as I write demonstrate just how important a deal is for the eurozone.

Interestingly, the principal difference between the way in which the two suitors for the hand of the Liberal Democrats are likely to develop economic policy – the speed at which the deficit is to be brought down – found the Conservative approach receiving support from an unexpected quarter.

We have no live experience of a coalition running the country here. In wartime, the dynamics are different. Still, I was encouraged to hear a Portuguese local express admiration at the speed in which it was all accomplished. Less than five days he considered excellent. It would have taken more than five months in his country

Governor of The Bank of England Mervyn King clearly believes earlier and more aggressive action is essential, given his endorsement of George Osborne’s intentions.

Time will tell how this political experiment works out but markets had appeared to settle down by the end of last week.

Investors have had a lot to contend with recently. A mining tax in Australia, the gushing undersea oil well in the Gulf of Mexico that BP is attempting to cap, rescuing overborrowed members of the eurozone, volcanic ash disrupting air travel and some bizarre index behaviour on Wall Street. Little wonder that volatility rose. Our own little domestic shenanigans look almost insignificant. Doubtless, all will be resolved but what might happen in the short to medium term is anybody’s guess.

Expect Cabinet disagree-ments to translate into market wobbles – particularly in sterling. Banks, too, must be concerned that a less favourable regime may soon be upon them. Investors can be excused for taking a cautious approach for the time being. But these are just the sort of conditions that throw up opportunities.

But perhaps the best lesson to be drawn from the events of recent weeks is that there are no cert-ainties in the investment world. Natural disasters, man-made catastrophes, foreign government action or even the slip of a finger on a computer keyboard as the gyrations on the US market are believed to have resulted from – all can conspire to upset the best laid plans of investors.

Perhaps all will appear clearer when I return but even that cannot be taken for granted, with my local air-port shut thanks to the Ice-landic volcano. Markets and air travel can prove tricky.

Brian Tora (brian.tora@centaur.co.uk) is principal of the Tora Partnership

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