Brexit: It’s not over yet
At the eleventh hour a Brexit trade deal was reached.
British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen have penned a trade deal between the UK and EU following months of talks and tense negotiations.
The deal will come into force this week when the UK finally leaves the European Union after 47 years.
Of course, stocks will be buoyed by the deal and the pound strengthened, but this does not signify the end of Brexit.
Now there will be a period of major readjustment as the UK economy moves away from the world’s largest trading bloc after being a key player for nearly half a century.
Moreover, the UK has to act quickly to establish secure new trading relationships, which are always complicated and lengthy to set up.
It is also likely that influential political voices in other European countries will be bolstered by the UK’s decision and push harder for their nations to leave the EU or make radical reforms, thereby fuelling geopolitical tensions.
As such, as economies and businesses adjust to the substantial changes of a post-Brexit world, investors must factor in disruption and uncertainty that will create market volatility.
Although better than no deal at all, the UK/EU trade deal is certainly a narrow one, covering only goods, not services, which account for 80% of the economy.
Therefore, investors need to carefully monitor the ongoing Brexit saga, or it could negatively affect their portfolios.
Of course, Brexit still represents a huge major economic and political upheaval and next year will be one of major change in terms of how companies do business, as well as the economic adaptation and political adjustment to be factored in.
Consequently, with radical changes ahead, in order to mitigate risks and make the most of the opportunities from the expected volatility, investors should ensure their portfolios are adequately diversified across regions, sectors, asset classes and currencies.
Indeed, a failure to recognise that Brexit is far from over may lead to grave, negative consequences for investors who take their eye off the ball.