We find ourselves at the edge of the ‘no-deal’ precipice again with a strange sense of calm. We’re a little over four days until Britain potentially exits the European Union under economically and politically-disastrous conditions. And yet sterling is remarkably stable, gold prices unmoved, and share markets strangely settled.
The market may be factoring in another extension to the Article 50 withdrawal process and that the deadline of 11pm on Friday will fall just like the prior one of late March.
This would be a cavalier attitude to take, in my opinion. France, Belgium and Spain have all taken a hard line when discussing an additional time extension to June 30, with prominent political figures all on record as stating their preference for a no-deal exit this week over more UK attempts to delay Brexit a little longer.
With Theresa May remaining a hostage to her party, Parliament, the country and the European Union, it’s quite possible that we could fall out of the continental trading club at the end of the week by accident, as many have been cautioning, even if the Prime Minister’s appetite for a disorderly withdrawal is rumoured to have evaporated over the past week.
In great shape
Even though a range of Brexit options are still on the table, like a so-called soft exit or even a revocation of Article 50, these remain dangerous times for stock market investors.
One way to protect yourself though, is by buying up some of the FTSE 100’s big hitters, and particularly firms where the lion’s share of profits are created outside the UK. With this in mind, I’d like to bring your attention to Prudential (LSE: PRU).
While the insurer has extensive operations in its home territory, profits sourced from here are smaller than those in its growth marketplaces of the US and Asia. And anyway, Prudential has been taking steps to mitigate the possible impact of Brexit, last month transferring tens of billions of pounds worth of assets to its newly-created Luxembourg office.
That’s not to say that profits created in Britain would nosedive in the event of a troubled European Union withdrawal though. Thanks to the country’s ageing population and thus the rising demand for retirement and investment products, the firm’s soon-to-be-demerged M&GPrudential unit remains well-placed to enjoy bubbly business growth through its broad range of products.
Dividend grower
Prudential would notice some near-term earnings impact should its British operations take a hit, but I believe any such problems are more than offset by the rate at which business is growing elsewhere. In Asia, for example, new business profit leapt an impressive 14% in 2018 and I’m confident that favourable demographic factors should keep driving regional revenues skywards now and in the years ahead.
This is why City analysts expect annual earnings to keep rising until the end of 2020 at least, and that Prudential will therefore keep hiking dividends as well. This means the business boasts chubby yields of 3.4% for this year and 3.6% for next year, figures that sail above the rate of inflation.
I consider ‘The Pru’ to be a share for these tumultuous Brexit times, then. And one to hold long into the future.
