The Brexit Effect: One Year On

One year on from the triggering of Article 50, how has the UK fared?

Overall, any cliff edge that was predicted pre-brexit has not eventuated, in addition, the fact that the Bank of England is widely expected to raise rates suggests that the economy is moving along relatively well.

An increase of 17% was recorded by the UK stock market since the brexit referendum, however, a rise of 39.8% has been recorded in Japan, with the S&P 500 rising by 32.8% and the MSCI Europe ex UK rising by 30.6%.  

Cyrique Bourbon of Morningstar says:

'The first thing to acknowledge is that the UK economy is not the UK equity market.' This is due to the fact that the earnings of companies on the FTSE are heavily internationalised with 70% coming from overseas.

‘The next, and arguably more important point, is to acknowledge valuations. We must recognise that fundamental uncertainty is ever-present, but often over-hyped, ‘ adds Bourbon. ‘At the same time, sentiment has clearly turned negative for the multinationals, and this negativity is being priced into the asset class – creating the cornerstone of a contrarian opportunity.’

A net withdrawal of £6.7 billion has been removed from the Investment Association's UK all companies, UK equity income and UK smaller companies sectors. Compare this with £8.2 billion being invested in to global funds in the same time period.

UK funds that focused on smaller companies have produced good results, as they are judged by their own progress rather than on the sentiments on the market as a whole. Steven Andrew of M&G is optimistic stating:

‘Despite concerns to the contrary, the UK is likely to continue to be an externally facing country post-Brexit, and will continue to engage on a global scale through a range of trade agreements. Based on these views and the strong underlying data we are seeing from a macro and company perspective, the UK market looks a lot less gloomy than it is currently priced.’

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The value of investments and income from them may go down as well as up and you may not get back the original amount invested.

Information is based on our current understanding of taxation legislation and regulations which is subject to change.