Another negotiation deadline passes and the markets breathe another sigh of relief, but what will be the ultimate Brexit effect on markets?
We’ve been here before – several times. “Brexit will be resolved one way or another by…” has been uttered many times in different forms since the UK voted to leave the European Union.
Each time the negotiators blink the UK markets shudder. The biggest impact on stocks will be on those directly affected by any changes to trade rules and tariff charges.
However, in an increasingly connected world there will be a ripple effect. That means that the outcome of Brexit talks can and probably will affect markets across the world.
Uncertainty means speculation
Markets thrive on good news and being able to plan. With deals in place, fully signed off, investments can be made with increased confidence.
When talks advance in a haphazard, stop-start manner the UK-linked stocks are sensitive and react accordingly.
If the UK Prime Minister expresses concern that talks are stalling and a “hard Brexit” is likely, stocks tend to dip.
Conversely, optimism about returning to the table, going the extra mile and working to reach an agreement gives investors cause to be bullish.
As ever, speculation prompts many different outcomes.
The FTSE effect
The UK’s FTSE took its first significant hit in the hours immediately after the June 2016 referendum result was announced. For many, we left the union as that occurred.
The post-referendum impact was a near 10% drop in share values.
At that point, there were many things to resolve. Still, few thought that it would take over four years to sort out.
Across that time the likely impact of a trade agreement and being forced to operate under WTO (World Trade Organisation) rules has been factored in on many occasions.
Throw Covid vaccine positivity into the equation and many wonder if we have already seen the most serious reactions to the Brexit conundrum.
As the talks [surely, this time] go into the end game, the question remains whether there will be ongoing reviews of the regulations being agreed.
With that will come further uncertainty. Future tweaks to rules or trade tariffs could spook markets again. Will this ever end?
Maintain a balanced portfolio
As trusted independent financial advisors, Logic Wealth Planning always looks to achieve balanced portfolios for clients. That’s always the most sensible approach to achieving long-term goals.
The Brexit effect will boost or punish UK stocks most. It makes sense to ensure that investment portfolios are not over-exposed to such markets that could swing too much one way or another.
Short-term gains are wonderful, but you cannot base pensions and retirement goals on such flimsy foundations.
There are myriad global investment opportunities available to investors that are spread across a diverse range of sectors. We help clients find the balance that is right for their situation.
Please call us on 0808 1234 321 or email email@example.com to assess your current position.
Please be aware the value of investments or income from them can fall as well as rise. We are here to help you make informed decisions as you put important things in place for you and your family.
* Logic Wealth Planning provides independent financial advice in Manchester, Bury, Rochdale, Cheshire, and the surrounding area, but not limited to the region.