So how do you think it will go if we get a no-deal Brexit on 31 October? Are we heading for Armageddon? Or is this a brave new dawn for Britain? I imagine the country is split, roughly as it was on the day of the referendum.
Show no fear
However, I would recommend investors put on a united front and treat this as an opportunity to buy top FTSE 100 stocks at bargain prices, whatever happens on Halloween. While you’re at it, buy some for your children too.
In some respects, Brexit has been good for UK blue-chips. When the pound crashed in the wake of June 2016’s shock referendum result, the FTSE 100 rose because constituent members generate more than three quarters of their revenues outside the UK. These were suddenly worth more when converted back into sterling. Every Brexit cloud has a silver lining.
Fighting shy
Despite that, UK stocks have trailed many global markets, notably the rampant US S&P 500. Private investors have been flooding out of UK equity funds, with outflows totalling £11.5bn between June 2016 and this February, according to the Investment Association. May saw the first monthly inflows for two years, as investors cheered up and diverted £532m into the unloved asset class.
International investors continue to shun the UK as they await further clarity on our departure from the EU. But they are watching closely. If we do get some kind of last-minute deal there will be a flood of relief – and a flood of overseas money because the truth is, the UK economy isn’t in such a bad shape. There are some incredible dividend stocks outs there, like this 12%+ high yielder.
Yes, GDP did shrink by 0.2% in the three months to 30 June, the first quarterly drop in six-and-a-half years. However, this partly reflected stockpiling in the previous quarter, while we aren’t the only European economy slowing – Germany is close to recession. UK unemployment is at a 45-year low of 3.8%, while wages are now rising at 3.6% a year, the fastest rate since 2008, and inflation was bang on the Bank of England’s 2% target in the year to June.
Fortune could favour the brave again
You can prove anything with figures, and a disastrous no-deal departure could wreck those positive numbers. If Project Fear comes true and the FTSE 100 does crumble, that could be a great chance for long-term investors to get greedy, and load up on top dividend and growth stocks at bargain prices. The opportunity may not last long, though, as sterling could act as a shock absorber yet again.
Interesting times
There’s a chance there will be no meltdown, and all those foreign lorries and medicines will continue to make it through. If that’s the case, people get ready. There may just be a wall of international money coming our way. The recent acquisition of Greene King by one of Asia’s richest families may only be the start.
The truth is nobody knows how markets will react on 31 October. All I know is that the next few weeks could be fraught, and that’s generally a good time to buy shares, especially if you plan to hold for the long run. As you should. One day, even Brexit will seem like just a blip.
