Upcoming Brexit talks will trigger investors to dump UK-based assets
The Prime Minister on Sunday announced that she would trigger Article 50, which kicks off the Brexit process, no later than March 2017.
With this in mind, we can expect uncertainty in the UK in the run-up to Britain’s formal departure from the European Union.
Until the negotiations get underway, there will be no definitive answers to the significant questions regarding the UK’s future relationship with the EU, or indeed the rest of the world, which, naturally, will create ongoing uncertainty.
This sense of the unknown suggests higher risk for investors, and it can be reasonably assumed that a large number will subsequently dump some of their UK assets as a precaution.
We’ve already seen this trend present itself when sterling fell to a three-year low against the euro, and its lowest level against the dollar since the beginning of July, following the PM’s announcement. This trend is expected to gain pace as the negotiations loom closer.
On the other hand, UK property is likely to remain, on the whole, unaffected. Demand is still soaring from UK and overseas investors, primarily due to the strength of residential property investments in the UK, and of course, the pound’s drop in value.
What we will probably see now is investors increasing exposure to other global markets.
Of course, investing across geographical regions is essential to maintaining a well-balanced portfolio, and provides investors with a key way to manage risk and make the most of inevitable opportunities during times of market volatility.
Indeed, the more diversified the investment portfolio as a result of a global approach, the less the overall portfolio risk.
We are now starting to see a general sense of how the UK will fare within the Brexit negotiations, bringing about risks and resulting uncertainty.
Therefore, investors will be looking into rebalancing their portfolio away from the UK, towards global stocks, bonds and perhaps property.