I have some savings in a Stocks & Shares ISA. Let's suppose that something is going to happen in the next six months which will cause the value of the Pound to plummet. Will I see the value of the ISA fall too? Are stocks and share values fixed to the pound in that way? Or will their value remain unchanged while the Pound falls, resulting in an increase in the Pound value of the ISA?

If the answer is "it depends", what does it depend on?

  • 3
    What did your chosen investments do in June 2016 when the pound dropped 11% in the couple of days after the referendum? Did they fall or rise by a significant amount in response? Unless the managers of those funds (or whatever you're invested in) have significantly changed their strategy, you'd probably see the same outcome in response to any future pound plummet too. – timday Sep 12 at 20:08
  • Very little I'd say, the pound fell after the referendum but the stock market has performed fairly well since then, ie up around 20% since Jun '16. – davidjwest Sep 14 at 7:07
up vote 6 down vote accepted

It depends.

A Stocks and Shares ISA is really just a wrapper around a shareholding account. The value of the account isn't really dependant on the fact that it's an ISA, its value is based on the shares you hold within it.

Suppose, for example, you decide to hold an S&P 500 tracker in your account if the pound goes down relative to the dollar you could see the value of that go up because the underlying shares will be priced in dollars and they will be worth more pounds. Equally, if you hold a Nikkei tracker and the pound rises against the yen the value of your holding will fall in pounds even as it stays the same in yen value because your pound now buys more yen.

  • Also UK listed companies like Shell report in dollars so a week pound means the dividends are worth more in Pounds – Neuromancer Sep 20 at 19:08

The simple answer is it varies, sometimes they react together, sometimes not. Here's a graph showing the performance of the FTSE 100 versus Sterling since the EU Referendum.

FTSE vs Sterling Since EU Referendum

In fact you could argue the two perform inversely, ie the FTSE does better when the Pound does badly:

http://www.cityam.com/260961/why-ftse-100-rises-sterling-falls-explained-two-charts

The referendum result was a surprise, both Sterling and the FTSE fell quite sharply initially (stock markets hate uncertainty), with the FTSE then rebounding and performing generally well since. The Pound however hasn't recovered in the timeframe shown above and to this day is still some 10% down on where it was pre-referendum, as I type this.

The main reason for this, is a lot of UK based companies make money overseas, so the pound doesn't influence their profits to a great degree. In fact a weak pound has helped exports so even UK based companies can make more profit as they are able to increase exports as their products are now relatively cheaper abroad.

I expect once Brexit happens, if it does, the pound will fall further (more so the harder the Brexit) and based on what has happened since the refendum the FTSE could perform even better, but usual caveats apply, ie past performance isn't a guarantee of future results!

Over a long period of time the US stock markets tend to outperform the UK so perhaps have a look at those.

  • In terms of a brexit, i am sceptical for the ftse. The low pound is good for exports, but loosing easy trade route is really bad (taxes, huge jams at calais and dover ...). The ftse have many players in it, who capitalize money through the fact that london is the finance capital of europe. Those enterprise won't be bancrupt, but they need to transfer to europe in a big manner draining money out of gb hurting there internal trades. The ftse has big chances if they find a solution for the brexit, and i guess right most people expect that there won't be borders in the end. – chris Sep 14 at 15:49
  • The downsides of Brexit have been overplayed, yes there are risks but it isn't in anyones interests to put up tariffs and trade barriers so long term I doubt there'll be any issues. London will remain the finance capital of Europe. – davidjwest Sep 17 at 7:30
  • London can not be the financial capital of europe, since there are rules that the center have to be inside europe. he capital destrict wouldn't die, but it will shrink for sure. The GB negotations are really awful and destructive, and europe would suffer more from remvoing it rules then letting britain go. – chris Sep 17 at 7:43
  • Possibly, time will tell. Certainly at the moment there hasn't been a big shift of jobs away from London and with less than 200 days to go to B-Day you'd expect some movement. Around 750k work in financial services in London, I've heard of no more than a couple of thousand that have moved out: cnbc.com/2017/08/29/… – davidjwest Sep 17 at 7:48
  • 1
    Yes right now, i expect a chaotic brexit ;) Probadly with another year or two extra transition period, as an last second deal before the brexit. – chris Sep 17 at 8:02

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