Hard Brexit and stronger than expected UK inflation: It’s time to ‘go more global’

The Prime Minister’s big Brexit speech and strong UK inflation data should urge investors to reduce UK asset exposure and take a more international approach to investing.

Theresa May confirmed that Britain would be leaving the single market and customs union, in her most important speech since becoming PM. Despite this being widely forecast by the markets  it is probable that Mrs May’s confirmation of a hard Brexit will generate several years of ongoing uncertainty.
Indeed, the markets loathe uncertainty.  Therefore, investors should prepare themselves for a potential fall in the value of UK assets, and sidestep firms who rely on UK-only earnings.

This can be done by increasing exposure to non-UK investments, including international stocks, bonds and property.

The stronger-than-forecast inflation data recorded yesterday – the UK has reached the highest level since mid-2014 – also adds impetus to the argument that the Bank of England will soon increase interest rates.

However, irrespective of the impending hard Brexit, and the increasing probability of a rate hike, many investors should be looking to rebalance their portfolios away from the UK.

Indeed, investing across geographical regions is one of the essentials of a suitably diversified portfolio – and, of course, investors who possess a well-diversified portfolio are in a far stronger position to mitigate risk during times of market turbulence, and best-placed to make the most of the opportunities that may present themselves.

The more diversified the portfolio, by focusing on a more global approach to investing, the greater the reduction of overall risk.

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