Sponsored column: Investors must stay calm as Brexit talks head for critical phase

Carolyn Black of Myddleton Croft
Carolyn Black of Myddleton Croft
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By Carolyn Black, Associate Director, Myddleton Croft Investment Managers

As we all settle back into our day jobs after a long hot summer, the one topic which I seem to be debating above all others is…where will we be in six months’ time!

Forget Trump’s trade wars, the direction of interest rates and elections in Europe and America, the UK’s focus is firmly fixed on the ongoing Brexit talks and the wranglings and resignations of the Conservative party.

Hardline Conservative Brexiteers are clashing with steadfast Remainers on issues concerning trade and service agreements, matters of immigration and the free movement of people. Indeed, Theresa May’s recent challenging trip to Salzburg to meet with fellow EU heads was likely a reprieve from the continuing attack on the Chequers plan, which she outlined as the route to Brexit back in July.

Despite claims by Michel Barnier, the EU’s Chief Negotiator, that a Brexit deal can be reached, the two sides remain poles apart on most of the major issues. The negotiations are entering a high-risk phase – political chaos, a new leader, a reversal of the Brexit vote and a no deal exit all remain very real outcomes should the Chequers Plan be allowed to collapse.

The UK stock market is all too aware of the fragility of the situation. With each swing of the Brexit pendulum, the stock market reacts.

At the beginning of the year the UK blue chip index rose on the back of the weak Pound and a surge in merger and acquisition activity. The FTSE 100 climbed to a peak in May, before succumbing to Brexit jitters as the talks stalled and political chaos intensified. Money ringfenced for UK investment was being held back as investors waited for some clarity. International blue chips took another leg downwards at the beginning of September as Sterling rose, following hints that Barnier was open to compromise concerning the Irish border post Brexit.

This softening in the UK markets has led to certain domestic sectors, which appear cheaply valued, now being worth a revisit. We do not expect plain sailing between now and next March but, when the dust finally settles, investors who have shunned the UK of late may wish that they had not been so hasty in turning their backs on traditional UK industries.

The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Investors should refer to their financial adviser to ensure that our service is suitable for their investment needs.