We have lived with the uncertainty of Brexit for four years now, and UK equities have suffered on the global stage as a result. Indeed, as much of the rest of the world seemingly bounced back after the stock-market crash back in March, the recovery in UK equities has been far more muted. With years of pent-up demand, 2021 looks set to be a rewarding year for the FTSE.
 

The UK is a value stock, ripe with opportunity

When we invest on behalf our clients, we don’t try to second guess the outcome of political wrangling. Instead, we focus on investing in high-quality businesses that can prevail regardless of the outcome, while waiting for opportunities to arise. With global equities increasingly expensive, the UK market has become a large ‘value stock’ (cheap relative to the rest of the market).
 
We are optimistic about 2021 for the UK market, and our continuous and rigorous analysis means we can take immediate advantage of opportunities as they arise. As sector agnostic stock pickers, our bottom-up analysis of individual companies means we have already identified quality businesses that can now make a good recovery in the wake of this deal. There will also be opportunity to top up our high conviction positions.
 

The impact on sterling

As we’ve seen throughout the Brexit debacle, sterling has borne the brunt of the damage, so we expect today’s announcement to trigger a considerable rally in the currency. Strong sterling and the continued absence of EU tariffs on imports are both good news for inflation. Given that the threat of inflation is the key catalyst for investors becoming spooked about monetary policy tightening, an environment of low inflation is good news for markets which have come to expect the tailwind of accommodative monetary policy.
 

Summary

Perhaps, at long last, we can lay the ghost of Brexit past to rest. This is a good result for the country, and we fully expect the UK to have its day in the sun once again.


Phil Smeaton
Chief Investment Officer

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