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    Home » Impact of Brexit on the UK markets

    Impact of Brexit on the UK markets

    npsnps11 March 2021Updated:26 June 2024
    — Filed under: Focus
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    Many have questioned how promising the UK stock market is now, since Brexit has long gone. It has been more than a month since we officially left the EU and since then, there has been much to say for the volatility of the UK stock market at present.

    The key question from investors is if the FTSE 100 (one of the UK’s largest stocks) should be still included within investment plans for the future. Many still believe it is a yes, despite sceptical tangents in the market which could suggest otherwise. Read further down below to understand more about why.

    A fast-growing trend currently is Robo investing in the UK, which is proving extremely popular with the under-30’s demographic. With so many changes happening, there is bound to be alternative solutions out there to counteract the volatility of the stock market to date.

    The FTSE 100 is priced low

    The FTSE is a great long-term investment, especially as it is at a low price currently, meaning it could give you great return over the next 5-10 years as the economy in the UK stabilises from Brexit. The reason as to why it is so low currently, is due to the negative impact of Brexit, which will not be an instant recovery to the market. That decline to the FTSE investment could take a while to stabilise again. The question here of course is, how can you actually know that and make that assumption? Well, there are currently tools within stocks that are used to measure the earnings growth, dividend payments and cash flow. By looking at the raw metrics, you will be able to determine what is considered a good value, or expensive value when you decide to make a purchase in the FTSE 100. While currently it is pretty cheap, in comparison to the long-term look of things, you will come to realise that it is definitely worth making that investment now, more than ever!

    The Brexit uncertainty is actually a good thing for investors

    There are many investors out there that are known for investing within moments of risk. It is those key investors that rise from such moments of greater risk and reap in the rewards after the low stoop within the market. While Brexit poses great risk to investors, it is not enough time yet to come to a conclusion of now risk, especially with the current pandemic surrounding the economy. There will be few investors who see this as a huge opportunity and therefore buy shares like FTSE 100, now when it is much lower in price, to wait for the time they see huge returns. Yet, as we said, it is still uncertain and there is no clarity on that matter just yet.

    What does the pound have to do with FTSE 100?

    The pound falling in value does not really have a correlation to FTSE 100’s performance. Here is why. The FTSE 100 does of course operate locally, but it is globally available within nature, meaning some of the top company’s earnings globally actually generate 75% of their earnings internationally. The large proportion of overseas earnings means that despite the pound falling, their other assets in multi-currency will rise and for that reason, when the pound first dropped from Brexit announcements, the FTSE 100 stock shot up instead. This demonstrates how large companies rooted internationally will still benefit from a weak pound value in correlation to the rest of the world’s top currencies.

    The FTSE 100 is a diverse group of companies

    As you have probably gathered from above, the FTSE 100 is made up of geographically diverse locations, in the companies it has submerged, meaning the UK stock markets always cover a huge ground in terms of location and sectors. Many companies will operate across different industries, which may not even be affected by Brexit, some actually will benefit from this drastic lifestyle economy change.

    Is the UK stock market a good place to invest then?

    The answer is yes of course. You just need to make sure that your investment plan is diverse and dynamic. Spreading the risk across your investments is also the best way to be less exposed to the volatility that Brexit has brought to the stock market. If you are a long-term investor who is in it for the long run, you will still find comfort within your investment, when looking to put funds within the stock market itself. It is just a case of making the logical decision for the long term benefit.

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