What Does Brexit Mean For Your Portfolio?
Despite the deadline being just a couple of weeks away, there’s no official word yet on whether a deal will definitely be reached.
Both Boris Johnson and Ursula von der Leyen are making upbeat sounds but admit the two sides still remain some way apart.
All of this uncertainty has been playing havoc with the market, with extreme volatility in particularly sensitive areas, such as forex. UK markets are renowned for their resilience, but will Brexit be the thing that finally causes it to break?
No-one can offer any cast-iron guarantees about the future just yet, but here’s what you should know about Brexit and your portfolio.
Watch Interest Rates
It’s not just Brexit which has affected the economy; 2020 has been one of the most torrid years ever recorded. It has left the economy in a fragile state with concerns about an ongoing recession in 2021 and beyond.
Interest rates are currently at a record low of 0.1%, but some believe the Bank of England may take things further, and plunge into a negative base rate. It’s unheard of in the UK but other countries around the world, such as Japan, have used negative interest rates to stimulate their economy.
This is just speculation for the moment, but the fact remains that interest rates are at rock-bottom and won’t be changing any time soon. And with interest rates so low learning to diversify through investing and spread betting could prove financially beneficial. But what is spread betting, and how do you start? As a market which has the potential to offer solid returns even during a downturn, spread betting could be the smart choice and should be an option for every portfolio.
Uncertainty Creates Opportunity
Markets typically hate uncertainty and right now, despite all the chatter, there’s no clear route for the Brexit talks. Rumours have swung between a definite No-Deal to hope for an agreement. The impact of this sentiment is being seen on the market.
While a No-Deal is expected to have negative consequences, at least in the short term, having certainty over the way forward will come as a relief. In the meantime, expect valuations to tend to the lower side, other than forex, which will show sharp volatility in response to the crisis talks.
If you wait until the outcome of the Brexit talks is known, you’ll be too slow to capitalise on the opportunity. On the flip side, you won’t want to be exposed to too much risk. The key is to spread your investments while looking to take advantage of any prices which seem to be lower than expected. Taking a long-term view in the current climate will be sensible and prevent your portfolio from being vulnerable to sharp swings in the short-term.
Right now, investors are enjoying the worst and the best of times, with some excellent opportunities but also low-interest rates and uncertainty everywhere. Protect your portfolio by spreading your risk, and including some spread bets to take full advantage of predicted falls in the market.