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David Kempton: 5 new stocks for my AIM portfolio

Experienced investor reflects on markets and adjusts portfolio of Alternative Investment Market shares after 34% gain since September.

David Kempton: 5 new stocks for my AIM portfolio

I am writing this in New York where president Trump’s surprising sabre rattling is proving popular, although the face-off between the US and North Korea is terrifying.

I’ve been surprised by the support for the new Trump regime both on Wall Street and in industry. They like his accessibility and raw humanity. He attacks problems with a fresh approach, albeit there’s a palpable fear of his unpredictability – you never know quite what policy he will adopt next.

However if you are a car maker, textile manufacturer or banker seeking an audience, he won’t make you wait three months but will see you for an hour tomorrow, accompanied by an expert adviser.

Trump is seen as having a commercial understanding of the issues and an urgent wish to do something effective. Despite all the political gaffes and outrageous policies, Americans seem surprisingly relaxed with the situation, helping to push the US stock market onwards in its eight year bull market.

No golden age

Back in Blighty we have very different issues. On the surface we look to be in a golden period of low inflation, low interest rates, increasing exports with strong global trade helped by China's growth, and a FTSE All Share index that has compounded at 6.2% a year since 1985.

Looking forward, however, the picture is very unsettled. We are more certain to see economic change in the three years leading up to Brexit than we’ve seen in the last 30 with no more quantitative easing or interest rate cuts from the Bank of England to help us.

Irrespective of the recent improving growth rates across Europe, the EU is bust under a mountain of debt – the project is not working and even looks likely to be reconstituted with Britain’s exit possibly a catalyst for change. There is further real uncertainty cast by the unpredictable September German and this Sunday’s French election.

If the anti-business Le Pen or Melenchon are eventually elected at the second stage in May, it would throw European markets into turmoil. Macron should win, though, in which case there’ll be a powerful relief rally as investors snap up euro stocks fast.

In the UK we have no idea of what lies ahead with just seven weeks from our own election. We appear to start from a position of hard Brexit and will negotiate down from there, whilst both sides are mindful that 43% of UK exports go to the EU, whilst 8% of theirs comes to UK – who starts from the stronger position in any negotiation from that standpoint?

In fact, 53% of all UK imports come from the EU – 20% of German cars, actually made in Germany, come to the UK, making us their single biggest world market in volume terms.

We have a long period of uncertainty ahead, but will 10,000 City workers really relocate? Nobody knows but there is a huge reluctance to leave; people like London with its established financial infrastructure, education and entertainment, though sadly there seems a real expectation that banks and financial firms will lose the passport which lets them trade freely across Europe.

With a watchful eye on all this turmoil and the certain significant changes ahead, I continue to invest cautiously.

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