With all signs suggesting the UK government will trigger Article 50 imminently, despite the best efforts of opponents of Brexit in the courts, investors could be forgiven for thinking the best course of action is to steer clear of UK assets for a couple of years until the storm has blown over.
A ‘safety first’ approach is certainly one way to go. However, this could be too simplistic and in some cases may not even be possible, as many portfolios are forced to contain UK assets. There is also the risk of missing out on some great opportunities when taking such a broad-brush approach.
Caveat emptor
F&C multi-manager co-head Rob Burdett is among those who believe an underweight position for UK assets is the best course of action to take.
“The IMF upgraded the growth forecast for the UK. In fact, they have done it by more than for any other economy in the world,” he says.
“But, despite that, we are actually underweight the UK. Although the currency has reacted to the possible impact of Brexit, we don’t believe the impact on corporate earnings is known.
“The terms of trade are just not available and will not be for some time. In addition, the market has run ahead a long way. As a result, we are happy to be underweight the UK at the moment.”
A more positive outlook is held by head of fund selection at AJ Bell, Ryan Hughes.
“I am slightly bullish on the prospects for the UK but I have to caveat that with the fact Brexit still creates significant uncertainty. Nothing has really changed yet,” he says.
“As we move through the triggering of Article 50, we really need to try and understand what that means for UK equities.”
