Graham Martin (pictured), managing director of Optima Fund Management, comments on investing in the current market in the UK…

Almost a week on from the Bank of England’s ‘Average Thursday’, it is apparent that the decision to leave UK rates unchanged reflects the fact the inflationary environment is benign.


Though should investors continue to hold their current asset allocations? There are no pressures in price inflation or wage inflation, and there is still capacity in the workforce, as well as an uncertain European economic outlook. Whilst the Bank of England wants to make a symbolic 0.25 per cent rise in rates, this could do more harm than good right now – sterling would strengthen, making life more difficult for exporters, as well as there being no real advantage to be gained. 


In terms of going forward, consensus keeps looking for that pick-up in data to justify a rise of 0.25 per cent at the next meeting, and each time it is wrong – it's possible that rates stay lower for longer than the market currently expects. Thus, we would anticipate that while markets will remain volatile, they are likely to still grind higher and a long/short approach should offer better returns than long only investments.