I’m here to talk about Brexit. Yes, again. You might want to reach for the smelling salts (or some strong liquor) to get through this latest report, but if you’re a share investor it’s definitely worth ploughing on to hear the latest news on the matter.
This time it’s the turn of the Institute for Chartered Accountants for England and Wales (ICAEW) to chime in with a warning over what to expect in a worst-case scenario.
It might not be the best-known of industry bodies but, with a global membership of more than 150,000 firms and individuals, it’s not a shock that the ICAEW was asked to brief the Brexit Select Committee last Wednesday on the possible implications of a disorderly Brexit on UK plc. And its commentary made for particularly chilling reading.
Scary stuff
Regional director of the ICAEW in Europe, Martin Manuzi, told the group of MPs that, irrespective of the preparations and contingency planning currently being made for a no-deal Brexit, “it is likely that, after November 1, [expect] a flurry of profit warnings from companies finding themselves in completely unprecedented circumstances.”
He echoed the “major concerns” that various sectors have over the possible loss of regulated markets in Europe, and of the consequences of this on their profit forecasts. Further, he spoke in particular about the risks to the financial services industry and the possible loss of passporting rights in Europe.
Whilst Boris Johnson’s aspirations to become prime minister may have taken a whack in recent days, he remains the strong favourite to claim the keys to Number 10 next month. And, as a result, the chances of a calamitous no-deal Brexit actually materialising are at an all-time high.
Get some protection
So how can investors protect themselves against the possibility of this becoming reality? Well it stands to reason stocks primarily focussed on British customers would be the biggest losers given the chances of a meltdown in the domestic economy — whether it be the banks like Lloyds, leisure stocks like The Restaurant Group or retailers like M&S — as would those dependent upon seamless trade with European Union nations.
It’s also worth remembering, however, nations on the other side of the Channel also stand to suffer the effects of a disorderly Brexit. I’ve already looked at the impact of a slowing German economy on some UK-quoted stocks in recent days, and it’s obvious things could get even worse if EU27 leaders fail to strike a deal with their British counterparts.
There’s no shortage of great stocks dedicated to North America, or the emerging markets of Asia or Africa, of course, ones that stand a better chance of thriving should the Brexit bus drive off a cliff. And these shares, like those in classically-defensive areas like defence, precious metals mining, and healthcare, could prove significantly better stocks to buy both now and in the months ahead.
But Brexit isn’t the only game in town of course, and we as investors need to consider the impact of US trade wars, an escalating Middle East crisis, and slowing global growth on our shares portfolios.
Happily, though, there’s a galaxy of information out there to help us avoid some of the more common investment pitfalls and help us to reach your goals. So get reading!
