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Should I stay out of the FTSE 100 until after Brexit?

UK investors are currently facing one of the most uncertain environments from many years. First of all, there’s the general election on December 12, the outcome of which is far from clear. Then there’s the prospect of Brexit, which could continue indefinitely, depending on who wins the election.

So far, the polls show the Conservatives are on track to win a majority, and they’re promising to push through the first stages of their legislation regarding the UK’s exit from the European Union by Christmas.

However, there’ll still be a trade deal to negotiate, which means there could be a no-deal Brexit at the end of next year.

On the other hand, if Labour manages to get into power, it’s promising another six months of negotiation before having another referendum. It’s impossible to tell how long this entire process could take.

Difficult to plan

With so much uncertainty surrounding the UK’s future relationship with its largest trading partner, it’s difficult for investors to plan. But I don’t think investors should avoid the market until we have a decisive outcome. Instead, I think the best option is to buy high-quality, blue-chip stocks that offer international diversification, which should produce healthy returns for investors no matter what happens with Brexit.

In my opinion, the FTSE 100 is one of the best ways to play this trend. More than 70% of the index’s profits come from outside the UK, which suggests its constituents will still be throwing off cash no matter what happens with Brexit.

As long as the global economy continues to grow, these global businesses should continue to reap the benefits. The other bonus is that most of the profits produced by FTSE 100 companies are generated in dollars.

So, if the value of the pound falls further, their earnings should receive a boost and, in theory, this should push the share prices up, acting as a hedge against Brexit uncertainty.

Long-term investing

If you’re investing for retirement, then it doesn’t make much sense to try and guess what the future holds for UK and international stocks over the next 12-24 months.

While we don’t know what will happen with Brexit right now, it’s highly likely the global economy will be bigger in 10 years than it is today, which should mean global stock prices are higher too.

That’s how I am viewing the stock market right now. While it’s impossible to tell where stocks will be 12 months from now, I’m confident the market will produce a positive return over the next five to 10 years.

That’s why I’m still investing in high-quality blue-chip stocks with global operations and durable brands. These companies should continue to generate shareholder returns for the foreseeable future, no matter what happens to the European economy over the next two or three years.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.