Brexit – a conscious uncoupling

Can breakups ever be truly amicable? When she separated from her husband in 2014, wellness enthusiast Gwyneth Paltrow believed so, and her characterisation of the split as a ‘conscious uncoupling’ drew international attention. But maintaining civility as long-held bonds are broken and financial ties are unravelled can be difficult. Here in the UK, it’s been a mere fortnight since the UK left the European Union, placing the country in our own post-break-up phase.

To some, our uncoupling from the EU has brought a sense of excitement and anticipation. To others, it’s a time to mourn a lost relationship and the benefits it brought. To investors, it presents a time of opportunity, with UK stocks potentially poised for recovery as the Brexit fog clears.

After years of uncertainty, the fact Boris Johnson has pressed his deal through parliament is an achievement in itself. Although the details have yet to be thrashed out, we finally have some clarity. That removes the huge barrier that has been discouraging investment in UK markets.

The UK: single and ready to mingle

Since his election victory, Boris Johnson has been sounding out potential suitors with a view to a trade deal. The shape of our new relationship with the EU will be all-important, and now investors are looking for clarification about how the financial services industry will be treated. A key component of the UK’s economy, financial services is an area the prime minister needs to get right. Financial services stocks are highly sentiment-driven and can move the wider economy.

There’s also the issue of trade with the US and other trading partners around the world. Negotiators need to define common ground and hammer out compromises, which can be lengthy and delicate work. The protracted spat between China and the US has been a timely reminder of the power of trade to unnerve investors.

It will take some time for the dust to settle from Brexit, and for the UK’s new trading relationships to be formed. Sajid Javid, who yesterday experienced his own conscious uncoupling, spoke enthusiastically about a “tidal wave of funds that are waiting to be invested in Britain”. Of course, we’d remain pragmatic and take it with a pinch of salt, but certainly more clarity will be welcome by investors.

Please remember that past performance may not be repeated and is not a guide for future performance. The value of shares and the income from them can go down as well as up as a result of market and currency fluctuations. You may not get back the amount you invest.

Please note that SIT Savings Ltd is not authorised to provide advice to individual investors and nothing in this blog should be considered to be or relied upon as constituting investment advice. If you are unsure about the suitability of an investment, you should contact your financial advisor.