Brexit noise is obscuring the real risks the UK faces

I hate the term "Brexit". Brexit is a headline writer's dream: at only six characters, to niftily describe a tired, politically contrived dilemma and a PR-machine bandwagon to bolt fresh wheels onto.

Frankly, we may as well call it "Brixingit' or "Bretthehelloutofhere", though I personally prefer the "ShuttheBrikup".

Markets hate uncertainty, as we know, and there is plenty of that around. Every investor and active global fund manager worth their salt is developing a chronic headache straining one eye to the East and another to the West, while monitoring what's happening in the middle.

Hence the extraordinary downward volatility of the FTSE 100, from the exuberance of last summer, at more than 7,000, to the desperation of less than 5,600 in February. The chart looks like the electrocardiogram of a dying man.

Looking East and West

To the west we have an impending US presidential election. It's a regular enough event, except this time it is shaping up as a battle between the apparent heir, the hand-wringing, hugely experienced yet strangely naive Hillary (does she need a surname?) and the Beer-Hall-Putsch, spoiled-brat narcissist Trump (does he need a Christian name?).

Neither of them appear to have a sense of humour, which is worrying. The rest of the world - about which the US cares little - has got a nasty case of market-related collywobbles.

To the east, China continues to cause global gastric attacks every time it burps. The commodity cycle is well and truly chained to the fence, and the lurking spectre of Chinese devaluation haunts us all like a miasma of investment doom.

I have had many reservations in recent months about where to go. Oil looks to have bottomed, but there remains huge over-supply; banks are still in a hole; and even some of my old stalwarts such as ITV and BT appear to have clashed oars.

For example, ITV, which has had a stonking two years, has fallen well away from its near-282p peak at the turn of the year to below 227p at the time of writing.

But, rather than bore everyone, including myself, with a finger-tip value search for detail, it's time to think big, bearish and straight-talking. For this, of course, I need a Glaswegian.

Stay away from vulnerable areas

So lucky me then, off to a splendid salmon lunch with a cheekily crisp New Zealand sauvignon blanc and the invigorating company of John Bennett, long-term manager of Henderson European Focus Trust.

He loves Europe, adores investment trusts, doesn't like France or Germany much (in investing terms), thinks fund managers are next in line for a big bank-like shake-up, wants to abolish benchmarking and believes oil companies should all cut dividends until they've sorted themselves out. Furthermore, he isn't afraid to say so.

"We will have a down year," he says bluntly. "A normal down year. We are in a bear market, and this is normal. This means 15-25%. All you can do is position yourself to lose money more slowly than the next man. We are long only, and we will have a down year." Blimey.

He adds: "Chinese devaluation would cause a lot of trouble in markets in the West, and there is a decent chance of that this year. We have already had a couple of warning shots"

That's the good news then, John. What shall we do? "Stay away from vulnerable areas. European goods look very vulnerable," he says.

"Look what has happened to steel. The Chinese make their own more competitively, as well as everything from cement to high-speed trains. Make no mistake, they are coming after us."

A gigantic red herring

Bennett sees value in big oil now. He has, he says, tiptoed back into the sector with punts on Total and Portuguese firm Galp.

He also loves media plays, Vivendi being his favourite, and he re-coins the well-worn adage that content is king. "Look at ITV's success in the past three years," he adds (he stills views it as a great company, reassuringly).

On banks he is typically robust. He says: "Most of the banks remain uninvestable. Tradable, yes. If you think you can trade them, have a go. I'm not going to. The phrase is 'too big to fail'. Well, maybe. But I think they are certainly too big to manage.

"The business model is bust. Lloyds is healing, but I like small, boring, shrinking banks. Nordic banks are good, especially BMG in Norway." Another Norwegian business he likes is a far-sighted construction firm called Veidekke.

And what is his position on Brexit? "I am a Europhile," he says, "but these major companies are not European, they are global. But the whole thing has been hijacked by the immigrant debate, which is uncomfortably racist in my view.

"The debate has caused weaker sterling, which is an opportunity. The government must be loving it - weaker sterling is reflationary in a deflationary world. But Europe is in big trouble if we go out."

And since I can't better them, I will leave the last words to John. "Brexit is a gigantic red herring," he says.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.