I would like to say we are reaching the Brexit endgame, as Tuesday’s parliamentary vote on Prime Minister Theresa May’s deal looms, but nobody knows for certain. The process has been slow torture since June 2016, so don’t expect sudden resolution next week.
Certain defeat
At time of writing, analysts reckon that the PM will lose the vote by a majority of more than 200. She will struggle to turn that around in days that follow, so markets are bracing themselves for further confusion and volatility.
Maybe it won’t be so bad. Everybody expects Mrs May to lose on Tuesday so where’s the shock value? Latest reports suggest Britain is asking the EU to delay its 29 March deadline, easing some of the pressure, although I can’t see the point if it simply means kicking the can further down the road.
This could drag on, but you need to do the following things now to protect yourself.
1. Stay calm
Brexit isn’t even the biggest problem facing stock markets right now. The US-China trade war is a far greater threat to global growth, as is the pace of US Federal Reserve interest rate hikes. Also, no deal is now partly – although not wholly – priced in.
2. Be patient
Rome wasn’t destroyed in a day, and the UK economy won’t be either. It seems like there is no Parliamentary majority for no deal, so that may never happen. Even if it does, the dangers may possibly have been overstated. The truth is, nobody knows. Just remember how the FTSE 100 crashed in the wake of the referendum result, then staged a shock recovery as buyers realise that the falling pound made it a massive buying opportunity.
3. Ignore the news
Like me, you’ve probably had it up to here with Brexit. In that case, it won’t be too difficult to tune out the political nonsense, which will shield you from the temptation to trade based on the latest piece of ‘shock’ news. Ignore the short-term noise, and concentrate on the long term.
4. Get ready to buy
The UK is arguably the most underpriced opportunity in global stock markets today. While the S&P 500 has been trading at a P/E of more than 30 times earnings, the FTSE 100 has been closer to 15 times. If we get some kind of resolution, money will pour into the UK from all over the world. The FTSE 250 could look attractive, as this is crammed with domestically-focused stocks. Here are three moves you could make today.
5. Go hunting for opportunities
Let’s say we crash out with no deal and it’s every bit as bad as Project Fear said it would be. Even then, there will be some beneficiaries. Sterling is likely to fall again and this could be another boost for the FTSE 100, as foreign buyers rush to snap up dirt cheap blue-chips, although admittedly, that could go either way. If everything heads south, there will still be beneficiaries, such as this secret small-cap that specialises in corporate rescue and recovery.
It’s an ill wind that blows nobody any good. Whatever happens in the weeks ahead, you should be looking to buy shares.