2021 has been another year defined by the pandemic. However, things have been brighter than 2020, with the FTSE 100 (LSE: UKX) index rising just under 11% year-to-date and year-on-year. As the UK continues to return to normality in fits and starts, the economy should keep growing. In addition to this, as my fellow Fool Rupert Hargreaves points out, 70% of the index’s profits are generated outside of the UK. This makes it a great opportunity to capitalise on both the domestic and global economic recovery.

Variant threats

The index recently saw one of its biggest daily drops. On 25 November, news of the Omicron variant drove the index 3.6% lower by the end of the day. The reason for this is the effects the pandemic has had on the global economy and could have again if the health crisis worsens. Lockdowns, supply shortages, and travel restrictions are just some of the challenges that Covid-19 has inflicted. These factors impinge on almost all businesses in one way or another. Subsequent reports have suggested that the Omicron variant isn’t as dangerous as first expected. However, its presence still highlights the ongoing threat that the virus poses. I think it’s safe to say that ongoing virus threats will hamper the FTSE’s growth throughout 2022 in one way or another. It just depends on how serious these threats are.

Another problem that I see affecting the FTSE 100 is inflation. Recent data highlight that prices have risen 4.2% in the UK and 6.2% in the US over the past year. In order to tackle this, central banks across the globe are deciding whether to increase interest rates. We’ve already seen the US Federal reserve try to combat inflation by tapering its government asset purchases, decreasing the amount of money in the economy. However, this doesn’t seem to be slowing inflation down, and therefore many investors are expecting a rise in interest rates.

To explain why this is bad for the FTSE 100, let’s use some basic economic theory. When interest rates are low, people invest because they can achieve a higher return than if they just let their money grow using interest. It’s also cheaper to raise debts and use these to invest with.  However, as rates rise, the opposite occurs. Some people turn away from investing in equities as they can achieve a similar return from interest on bonds and savings accounts. It also decreases the likelihood of investment as people have to pay more on loans.

FTSE 100 positives

Risks aside, I think the FTSE 100 still offers the safest way to capitalise on the economic recovery of 2022. A key reason for this is the fact that it offers such a diversified investment. Access to a broad range of sectors means that if any sectors underperform, they may be offset by others that are better performers. In addition to this, it allows investors access to all dividend-paying stocks in the FTSE 100. This is a great move to generate passive income for a portfolio.

Yet at present, I’m sceptical of how the FTSE 100 may perform in the next few months and throughout 2022. For me, its progress is heavily reliant on interest rates and how the pandemic impacts the world moving forward. I’m not convinced it can repeat 2021’s impressive growth in 2022. I would therefore hold back from adding a FTSE 100 investment to my portfolio today. 

The post Will the FTSE 100 continue to climb in 2022? appeared first on The Motley Fool UK.

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Dylan Hood has no position in any of the shares 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.

Whitbread (LSE:WTB) might seem like the perfect FTSE 100 stock for me to pick up as the UK’s economy continues to reopen. The company owns Premier Inn and a range of branded restaurants and bars. This should allow Whitbread to benefit from people taking UK holidays and going out to eat and drink.

Or should it? A lot of investors had this idea back in February as the UK emerged from winter and bought into ‘reopening’ stocks. One of these was Whitbread and this resulted in its share price flying to around the 3,500 mark.

Since that time, shares in the FTSE 100 company have fallen to 3,046. Full-year 2021 financials released at the end of last month showed a loss of £1bn for the year and a 71.5% drop in revenue. A tough year but not unexpected because of the pandemic.

The big reopening

The problem for Whitbread is that it won’t benefit drastically from the reopening compared with other FTSE 100 companies. Premier Inn is a major driver of revenue for the company, with locations across the UK, Germany, and the Middle East. However, customers are split evenly between business and leisure. With business travel not recovering to pre-pandemic levels, there won’t be an immediate uplift in numbers here. The company stated that it doesn’t expect this to change until offices reopen in earnest.

For leisure, only 15% of Whitbread’s hotel estate is in coastal and other tourist locations. As a result, its revenues won’t receive a major boost from the ‘staycation’ boom expected in the UK.

On top of this, the food and drink segment of the business is closely aligned with its hotel business. The restaurants are generally located within or next to a Premier Inn. This means that the boom in food and drinks sales expected this summer may not arrive for Whitbread without higher numbers of hotel stays.

FTSE 100 long-term play?

For these reasons, I don’t see Whitbread as a short- or medium-term investment to benefit from the UK economy reopening. On the other hand, I could see it as a potential option for a long-term investment.

The FTSE 100 company does benefit from being well placed as the largest hotel operator in the UK. It is aiming to expand internationally, focusing on Germany where it plans to more than double its footprint from 30 to 72 hotels. Its balance sheet is also particularly strong, with only £46.5m in net debt and cash reserves of £1.25bn.

Whitbread’s share price also hasn’t fully recovered from where it was pre-pandemic at around 4,000p. This means that if the numbers of people staying at its hotels return to pre-pandemic levels and profitability improves, there could be a pop in the share price.

But I don’t see this playing out in 2021. As a result, I will be staying away from Whitbread for now. But I’ll potentially return for another look once the sector is on a stronger path to recovery.

The post One FTSE 100 reopening stock I’m avoiding appeared first on The Motley Fool UK.

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Ben Hargreaves has no position in any of the shares 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.

Dismal economic scenario

So when dismal news on the economy coincides with weakness in the FTSE 100 index over the past two weeks, it’s hardly a surprise. British households are holding back their expenditure, the proportion of workers on furlough has risen to the highest point since July, and public debt is ballooning, reports Reuters.

The future’s also somewhat uncertain. Economists expect the UK economy to contract in the first quarter. The International Monetary Fund has also slashed its forecasts for the UK for 2021 by a whole 1.4 percentage points. 

Reasons for cheer

But while these are big challenges to contend with, I think there are a number of positives to consider too. Despite a growth forecast cut for 2021, the UK is still expected to grow by 4.5%. By 2022, growth is expected to rise to 5%. 

I think this in itself is a good place to start. Additionally, we could soon start seeing proof of activity picking up as the lockdown comes to an end with vaccinations well underway. Many FTSE 100 companies are globalised, which means that even higher growth elsewhere is good news for these UK shares and the index.

Choosing a UK share to buy  

With this as the context, I’m most inclined to buy FTSE 100 shares that meet two criteria:

1. Their share price should have potential to rise further. A lot of shares’ prices have run up in the stock market rally that started in November, even though they are financially weak. My sense is that their return to financial health, as the economy normalises, is already baked into the current share price.
2. Their future should look relatively secure. While there is vulnerability in the current environment, there are some companies doing relatively well. 

Diageo’s one to watch

One such stock for me is the FTSE 100 alcohol producer Diageo (LSE: DGE). It just reported organic net sales growth for the half-year ending 31 December 2020, though its reported sales are down. Nevertheless, organic sales numbers are important, because the increase happened despite the lockdowns and closure of pubs and restaurants. The company has also increased its dividend payout. 

Moreover, it has an eye towards the long-term future. The drinks industry, like others industries such as retail, tobacco, automotive, and oil, is seeing big changes in trends as demand for non-alcoholic drinks rises.  

There are some risks to buying the stock, however. Its share price has run up quite a bit since November, and its earnings ratio is 49 times. I can think of safer stocks with lower ratios, like Unilever, with a ratio of 17 times.

Still, it’s below the all-time-highs seen in 2019. And if things keep getting better, which is more likely than not, I think DGE should be a winner. 

The post The economy’s a mess. Here’s how I’m investing in UK shares now appeared first on The Motley Fool UK.

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Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo. 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.

Is there any way for Foolish investors to come out on top? I think so. Today, I’m taking a closer look at two companies that could offer great protection from the looming fallout.

Recession-proof

Small-cap Begbies Traynor (LSE: BEG) is a company I’ve been positive on for quite some time. The £140m-cap is a property services consultant and insolvency specialist — the latter a service that, sadly, looks likely to experience greater demand as the recession hits. Indeed, today’s trading update was indicative of what’s likely to come.

Revenue for the financial year to the end of April is now expected to be around £70m — up from just over £60m in 2018/19.

Profits at its business recovery and financial advisory division were a highlight. They grew roughly 30% over the year as more firms faced insolvency, even before the pandemic struck. Recent acquisitions and higher average fee levels also provided a boost.

All told, adjusted pre-tax profit is likely to come in at £9.2m, up from £7m in 2019. The firm did say, however, this included a £600,000 hit after several of its property service lines were hit by the lockdown. 

Positive outlook

Begbies was trading 3% lower this morning, suggesting some traders were banking profits. The stock was, after all, up a stonking 77% since 23 March.

Today’s move aside, I still think the company could be a rare winner in the recession. While the full impact of the coronavirus is unknown, Begbies is expecting “progressive increases in the number of insolvencies” as we move through 2020. This could be compounded, of course, by Brexit.

In addition to this ‘positive’ outlook, Begbies finances look increasingly sound. Net debt stood at £2.8m at the end of April, down significantly from £6m in 2019. The firm had £7.2m in cash last month and undrawn borrowing facilities of £15m.

There’s good news for income seekers too. Having already paid its interim dividend this month, Begbies said it was intending to confirm a final dividend in July. 

Trading on 16 times forecast earnings before markets opened, the stock isn’t screamingly cheap. It could, however, be a great counter-cyclical, recession-beating pick.

Profits “ahead of expectations”

Begbies isn’t the only option for investors in this space. New-stock-on-the-block FRP Advisory (LSE: FRP) could be a great alternative. Larger than its peer Begbies, the company also supports businesses facing insolvency. 

Unsurprisingly, demand for its services has been just as good. In its recent update, FRP said it had “traded strongly” in the second half of its financial year. Revenue will likely to come in at £31.8m with profits “ahead of the Board’s expectations.” For the full 12 months, £63.2m of revenue has been predicted — a rise of 16.4% on the previous 12 months. 

Like Begbies, FRP looks financially sound (and you would hope so!). Like Begbies, the company also expects to pay a final dividend. 

Having only listed in March, the minnow looks to be flying under analyst radars. I expect this to change markedly in the coming months as the recession takes hold. I think those buying this defensive stock now could see great returns in time.

The post Don’t fear the recession. I’d buy these defensive stocks to come out on top appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares 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.

Regardless of whether you agree with his strategy or not, it’s clear whatever shenanigans we witness in the political world over the next month is going to have some kind of impact (good or bad) on your portfolio. With this in mind, here’s how I think investors should prepare.

1. Ditch the crystal ball

It is, of course, hugely tempting to try and predict what’s going to happen and adjust your portfolio accordingly. However, if the last three years have taught us anything, it’s that no one knows exactly how this period of political turmoil will end. Our current prime minister might even be gone before 31 October.

This being the case, it’s therefore important to hold investments you’d be happy to stick with for the long term and match your risk tolerance, regardless of any short-term volatility. Leave the high-stakes, might-just-make-a-profit-if-I-time-this-right behaviour to the traders. 

It’s also worth remembering a resolution to Brexit will simply leave a space for some other event or issue to take its place. There will always be something else for markets to worry about. 

2. If in doubt… drip

Having accepted no one knows what’s coming next, it can still be tempting — albeit counterproductive from an investment perspective — to wait until we know for sure. 

As legendary fund manager Peter Lynch once remarked: “Far more money has been lost by investors in preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” The same will surely apply to Brexit.

All stock market journeys are uncertain and it’s for this reason shares give far better returns than any other asset class over time. We’re rewarded for taking more risk than if we’d simply held our savings in cash (not recommended, thanks to the eroding power of inflation).  

This is why drip-feeding money into your existing holdings — or ‘pound cost averaging’ in market lingo — will help avoid investment paralysis. It may feel counter-intuitive, but the message here is simply… keep calm and carry on.

3. Buy the world

There’s a tendency for investors to stick with what they know. That’s understandable considering we may use a company’s products or services on a daily basis, or know more about an economy if we actually contribute to it. Failing to ensure your holdings are geographically diversified, however, can be problematic if the companies or country you’re invested in enter a prolonged sticky patch.

It’s for this reason I’d recommend having exposure to markets other than the UK. This isn’t about attempting to jump in and out of investments to reap maximum profit. It’s about allocating your capital prudently so your portfolio remains stable and you can sleep at night.

Aside from moving some of your cash into economies that couldn’t care less about Brexit, it’s also worth contemplating whether you’re sufficiently invested in assets that, while unlikely to outperform, tend to be less correlated with shares (e.g. bonds, gold).

The post Your 3-step Brexit survival guide for October appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares 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.

Many of us will be using a Cash ISA for this purpose. The fact that these accounts pay interest way below inflation, however, means it’s vital not to leave any surplus funds in there — that is, anything beyond roughly six months of living expenses.

As such, here are three resilient companies I’d consider buying for my portfolio with what’s left over. 

Recession-proof

People will always need medicine, regardless of what the economy is doing. As such, my first port of call is the pharmaceutical industry and, more specifically, GlaxoSmithKline (LSE: GSK). 

Despite the fact that it’s not been increased since 2014, one of the biggest attractions to Glaxo, aside from its defensive qualities, is its dividend. The 80p per share total payout for the current financial year means a yield of almost 4.8%. Perhaps most importantly, the extent to which this cash return is covered by profits is starting to look more stable after a rocky few years. 

Unsurprisingly given the Brexit stand-off, Glaxo’s shares have been steadily growing in popularity, rising 11% since the beginning of 2019. Assuming analysts are correct in their predictions, the shares currently change hands for just over 14 times earnings — far below FTSE 100 peer Astrazeneca’s frothy-looking P/E of 24. 

Another stock that should hold its own in the aftermath of Brexit, if it happens at all, is waste management and recycling firm Biffa (LSE: BIFF).

Last week’s trading update was as no-nonsense as you can get with the company stating that trading over H1 had been in line with management expectations with no change to the outlook for the full year. 

Of course, a business like this will never generate the same level of excitement as your average tech company. On a little less than 10 times earnings, however, I’m tempted to say that Biffa looks cheap.

At its current price, the forecast dividend yield sits close to 3.6% and is easily covered by earnings. There’s quite a bit of debt on the balance sheet (something I usually steer clear of), but the predictability of its line of work arguably makes this less of a red flag.

My last pick is a retailer. That might sound strange considering that consumer confidence is usually battered during economic wobbles, but stick with me.

Here I’m talking about discount retailers — the sort that offer people the most bang for their buck. FTSE 250 member B&M European Value (LSE: BME) is the standout candidate here, especially when recent trading is considered.

In late July, the company stated that it had made a “solid start” to FY20 with group revenue climbing 21.4% over Q1 (31 March-29 June). In sharp contrast to high street peers, 12 new stores were opened over the period with lots more planned over the entire year.

This optimistic outlook goes some way to explaining why B&M’s shares trade on almost 18 times forecast earnings. The 2.4% yield is also the lowest of the three in focus today (although it’s been hiked by double-digits in three of the last four years). With signs that consumers are continuing to tighten the purse strings, however, I think this is still a reasonable price to pay. 

The post Never mind the Cash ISA. I think these stock market stalwarts will help you beat a recession appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK owns shares of B&M European Value. 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.

That said, a disinclination to follow political events too closely should not mean turning a blind eye to your portfolio. Indeed, with already-wobbly consumer confidence and interest rates likely to rise at some point (although perhaps not just yet), it’s never a bad idea to consider how you might position your holdings in the event of the UK economy going through a rough patch.

Here are two counter-cyclical, dividend-paying stocks that might appeal.

Market leader

As a holder of stock in small-cap insolvency specialist Begbies Traynor (LSE: BEG), today’s final results made for fairly pleasant reading.

Revenue rose a little over 5% to £52.4m in the year to the end of April with adjusted pre-tax profit rising 14% to £5.6m.

Although levels of insolvency were “broadly in line” with that experienced in 2017/18, the company reported that it had managed to increase its share of the market, helping to maintain its position as “the largest UK corporate appointment taker by volume“. That’s an enviable position to be in if the economy does end up struggling over the medium-term. 

Elsewhere, a 9% rise in the total dividend (giving a yield of 3.5%) should be welcomed by those investing for income. The fact that Begbies’ net debt reduced from £10.3m to £7.5m by the end of the reporting period also suggests that this hike — the first since 2011 — won’t be the last.

So why is the stock down over 3% today? While I would be staggered if any holders were seriously disappointed by these results, such a reaction does suggest that the company was already fairly fully valued (at 18 times forecast earnings), at least for now. A fairly reserved outlook on trading may have also contributed to the slight dip.

Nevertheless, as a hedge against the UK plc, I maintain my positive stance on the stock and will continue to hold.

Big riser

Of course, Begbies Traynor isn’t the only stock worth considering for troubled times. Batley-based home-collected credit lender Morses Club (LSE: MCL) is a company I’ve liked for some time. Based on recent share price performance, it seems I’m not alone.

Since last August (and no doubt supported by the implosion at large-cap rival Provident Financial), the company has increased almost 55% in value. If last month’s pre-AGM update is anything to go by, I think there will be more to come.

Trading over the first four months of its financial year (beginning 25 February) has been robust with the company’s net loan book “well ahead of last year” and impairments being around the level expected.  Although the threat of increased regulation will always linger around this sort of business, Morses also appeared receptive to the outcome of the Financial Conduct Authority’s recent high-cost credit review and the proposals that came from it.

Like Begbies, the small-cap is an attractive option for those looking to receive income from their investments during difficult times. A yield of 4.4% already looks great, but this is expected to rise to an even more satisfying 5.1% in 2019/20 if earnings expectations are met.  

Trading at 13 times forecast earnings, I still think Morses is worth snapping up.

The post Bearish on the UK economy? These small-cap dividend stocks should see you through appeared first on The Motley Fool UK.

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• Up 9% today, is this FTSE 250 share’s recovery gaining pace?
• 5 years ago Barclays shares cost just 181p! Are they still a buy at today’s 434p?

Paul Summers owns shares in Begbies Traynor. 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.

Weak US jobs data

While unemployment rates in the US are hanging around the 4.9% mark it’s the non-farm payroll data that’s receiving most of the attention. The Federal Reserve was poised to raise rates but sluggish non-farm payroll data has quashed an interest rate rise this summer. In August the US created 151,000 jobs, which was under the 180,000 forecast and put a damper on the two previous months of good growth. US manufacturing also shrank in December, which added weight to the argument that the US economy is slowing. If the US slips into recession next year then it’s likely that the world economy will be dragged lower too. 

Chinese slowdown

Although China has fallen out of the news since February it’s still a worrying situation. GDP data does look promising but analysts pointed out that this growth was driven by government stimulus rather than expansion in the private sector. Private sector investment was actually down 3.8% in the half of 2016. China remains a key part of the complex global economic landscape and any further slowdown in China would have serious knock-on effects in the US and the rest of the world. I think all investors should have one eye on China at all times. 

Debt crisis

I think it’s fair to say that in the last few decades the world has gone debt mad. Developing country debt rose by a whopping $31trn between 2000 and 2014 and emerging economies also took on vast amounts of debt. However, corporate debt is the main issue and that figure currently stands at $51trn. Faced with poor organic growth alongside rock bottom borrowing rates, businesses have leveraged balance sheets and used debt to buy back shares, acquire businesses and pay dividends. This has led to a lack of organic growth across the world and if the ‘debt binge’ ends, then we could see lots of companies in deep trouble. 

Europe’s banks look weak

The banks of Europe have been struggling for years and it looks like the first big victim may be on its way. After worrying over French, Italian and Greek banks for years the focus has switched to Germany. The German banks and in particular Deutsche Bank don’t look solid. It has over $70trn of derivative exposure, billions of dollars worth of fines and lawsuits to pay and deep connections to most of the world’s banks. This makes the company key to the health of the global banking system and in particular Europe’s banks. 

However, if you think we’re slipping into recession, there’s still value and upside to be found in equity markets with a number of solid, defensive shares. Defensives like British American Tobacco and Centrica could provide a great safe haven for cash and pay you a nice dividend. AstraZeneca for example returned over 29% in crisis year 2008 while the FTSE 100 fell a whopping 31%. That’s an impressive outperformance of 60% in just 12 months. 

The post Are we on the brink of a recession? appeared first on The Motley Fool UK.

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• Tesla stock’s up 50% in a year. Could it go even higher?
• Up 9% today, is this FTSE 250 share’s recovery gaining pace?
• 5 years ago Barclays shares cost just 181p! Are they still a buy at today’s 434p?

Jack Dingwall has no position in any shares mentioned. The Motley Fool UK has recommended AstraZeneca and Centrica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

In the organisation’s first calculations since the Brexit referendum, the BCC reduced its forecasts for the current year and for the following two years arguing that uncertainty around the UK’s long-term political arrangements with the EU and the timescale of the Brexit process will “dampen growth prospects towards the end of 2016 and over 2017.”

No recession

On a brighter note, the BCC reckons the UK will avoid a recession even though the economy will flirt with decline. GDP growth forecasts are down from 2.2% to 1.8% for 2016, from 2.3% to 1% in 2017, and from 2.4% to 1.8% in 2018. However, ongoing weakness in sterling against other currencies should help bolster Britain’s net trade position.

The downgrades to the BCC’s forecast suggest the UK economy will fall short of the organisation’s previous forecasts by £43.8bn by the end of the forecast period. Adam Marshall, acting director general of the BCC said: “Although individual businesses continue to report strong trading conditions, the overall picture suggests a sharp slowdown in UK growth lies ahead.”

Should I worry?

Considering the magnitude of the political and economic tremors rippling over Britain’s economy as it begins the process of disentangling itself from the European Union, the BCC’s forecasts don’t look too bad to me. GDP growth of just 1% in 2017 is still growth, which suggests a benign economic environment for firms to operate in.

However, macroeconomic forecasting isn’t a source of too much worry and concern for me in any case. The important news I’m following is that coming from the firms I hold or want to buy as investments. As long as the business economics behind firms I’m watching don’t deteriorate and their finances remain strong, there’s every reason to hold on tight to shares as the underlying businesses trade their way through any forthcoming economic soft patch. 

An opportunity to buy?

It’s possible that sentiment could work to put pressure on share prices, but any setback could throw up opportunities to buy more shares of great companies at better prices rather than selling in a panic. That’s what the great and famous investors such as Warren Buffett have always done, of course. A little bit of economic doom and gloom in the headlines sparking off volatile share prices is just what the long-term business-minded investor needs. Such conditions make it possible to build a portfolio of shares of great businesses with compelling economics bought at attractive prices.

I’m not going to sell my shares because of the BCC’s revised forecasts but I am switching to red alert in the hope of picking up some investment bargains over the next couple of years. 

The post Should I sell everything? appeared first on The Motley Fool UK.

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What’s happening in Britain after the Brexit vote? Is Britain doing well, or doing badly? And what’s the impact on companies and the stock market?

After a political earthquake, it takes time to get a picture of exactly just how things have changed. And sometimes all that we can go on are bits of evidence from data and surveys.

The story so far

So what evidence do we actually have? Well, between the three months to February 2016 and the March to May 2016 period, the number of people in work increased by 176,000. Admittedly, this data was collected prior to the 23 June vote, but it was after the announcement of a referendum in February 2016. It seems that the uncertainty over the referendum had little effect on hiring. If, as I suspect, the numbers released this month show employment increasing again, then this is strong evidence that the economy is still motoring ahead.

Then there are the GDP growth figures. GDP was estimated to have increased by 0.6% in Q2 (April to June) 2016 compared with growth of 0.4% in Q1 (January to March) 2016. So, despite the uncertainty of the referendum, the economy has been growing at a steady pace, even speeding up slightly. Again, it seems to be full steam ahead with scarcely a hint of trouble.

OK, how about industrial output? Total production output is estimated to have increased by 2.1% between Q1 2016 and Q2. That’s a substantial increase and the ONS said “very few” respondents had been affected by the uncertainty from the EU referendum vote. Again, these seem to be strong figures and suggest that Britain’s economy is so far unaffected by our decision to leave the EU. Likewise, retail data shows consumers continuing to spend.

And, surely, if the economy is slowing, this will affect company profits, and thus the stock market? Yet the FTSE 100 has bounced by more than 10%, and now stands at over 6,800, buoyed by a weak pound. Plus there have yet been no signs of recession.

Low confidence

This seems fairly convincing so far, but in contrast to the data, several surveys suggest business confidence is weak. Business optimism fell to 97.9 in July from 98.9 in June, though still some way above the 95 mark denoting contraction, according to a recent BDO survey. Other surveys, including manufacturing, have also been negative.

Why this dichotomy? Has the economy been ticking over nicely, only to suddenly grind to a halt? I think this is unlikely. Instead, people have kept calm and carried on, going about their normal day-to-day business. Hiring has continued, and companies and the stock market have been doing well. I think that we should learn from the data over the surveys, because human opinion is fallible, whereas data is generally more consistent and reliable.

My view is that Britain has withstood the shock of our future Brexit surprisingly well, and the economy will still thrive. A cut in interest rates and further QE will only buoy the economy even more, and the FTSE 100 could well reach 7,000 by year-end.

The post The FTSE 100, the Bank of England and the Brexit paradox appeared first on The Motley Fool UK.

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Prabhat Sakya has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.