Deal or no deal? Investors should trust in portfolio quality ahead of an uncertain Brexit
When the United Kingdom voted to leave the European Union in March 2017, the pre-referendum campaign had made little mention of the implications for investors.
The vote to leave resulted in a significant fall in the value of sterling and, in a no-deal Brexit scenario, sterling can be expected to fall again until the markets have adjusted to the new situation.
For all its intransigence, the EU is by no means in a strong economic position and a number of its members are technically bankrupt – in Italy, for example, national debt is greater than total gross domestic product. So should investors be concerned?
It is worth noting that a significant number of companies quoted in the FTSE 100 share index earn a substantial part of their income abroad so, for these businesses, a fall in the value of sterling is not necessarily a bad thing.
It is the uncertainty at the present time that is causing concern, especially in the Conservative party, which has for many years been polarised between Europhiles and Eurosceptics. This was the case in John Major’s government and in part resulted in the Conservatives being out of power for ten years.
Furthermore, because the last general election removed the Conservative majority and left the balance of power with the Democratic Unionist Party of Northern Ireland, Theresa May is unlikely to agree a deal that would fragment the United Kingdom – so what are the prospects of a deal with the EU?
A deal is in the interests of both parties and, although time is now short, a workable deal may still be concluded – after all, it is in no-one’s interest for the situation to be otherwise.
In the meantime investors should trust in the quality of their portfolios, taking time to review quality regularly and taking care to ensure the overall balance of their investments remains appropriate for their requirements. Investments should be spread between low risk such as cash deposits and medium risk such as shares. High risk investing should be avoided.
Those requiring income should take advice because cash deposits are currently yielding returns lower than the Retail Prices Index, which means the possible erosion of capital spending power over the medium term.Business, General, George Ide, Investment, News