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What’s the Brexit timeline and what does it mean for the FTSE 100?

Over the past week, I’ve been seeing a lot of interest in what the next steps are for Brexit. With Parliament sitting again after Christmas, there’s a desire to understand what now needs to happen. 

For investors, this is hugely important, given that we’re making calls on how best to navigate the financial markets for 2020. As the FTSE 100 was very sensitive to politics in 2019, there’s no reason to think the situation will change for this year. So let’s get the calendar out…

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January 31 

Assuming that the deal passed in the House of Commons in December is also passed in the House of Lords this week, the UK is set to officially leave the EU at the end of the month. Although this is largely a symbolic date, as soon as we leave, the UK and EU can start to negotiate trade deals. 

And the FTSE 100 reaction? I expect it to be muted as the market is already anticipating this departure date, so there might not yet be much opportunity to top up your portfolio with your favourite shares at possibly depressed prices.

March 26-27

This is the next European Council meeting, where any potential trade deal would be voted on by the member states. The issue here is that if nothing is agreed upon, the next meeting is in June, which coincides closely with the potential need to extend the transition process. Therefore, this could be a key date for volatility on the FTSE 100 index. But should a deal be agreed upon in March, uncertainty would be lifted off many domestic firms such as Lloyds Banking Group, which could be followed by a strong share price rally.

June 30

This is the deadline for the UK to extend the transition period beyond the end of 2020, in order to have more time to negotiate a trade deal. While the Government has said it won’t extend the date, should we get to June with nothing agreed and an extension isn’t requested, this could trouble the markets.

The potential at this point is that the UK might face leaving at the end of 2020 with no trade deal agreed, which could have a significant impact on business. With that fear in mind, it means the FTSE 100 index could fall in anticipation on this date should the above chain of events happen. Those particularly hard hit could be firms that have a lot of trade with Europe (think of Royal Dutch Shell for example).

December 31

As mentioned above, this is the date when the official new relationship with the EU (however it may look) will come into play. For the moment, we’re too far away from being able to properly write about exactly what could happen at this point, especially as a deal could even be agreed months ahead of this deadline, however unlikely that might seem.

In conclusion, the events surrounding the March EU summit and the end of June extension deadline are the two major Brexit dates to mark in the calendar. For the FTSE 100 and the firms within it, these are the two points where we could see major volatility. But while it’s never fun to watch the value of your shares falling, if you’re invested in companies you really believe in, that volatility could be a golden opportunity to buy more.

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Jonathan Smith owns shares in Lloyds Banking Group. The Motley Fool UK has recommended Lloyds Banking Group. 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.