Yesterday the British Prime Minister met with the Irish Prime Minister, with the result being positive for British related assets. The Irish PM (who had previously been skeptical of the possibilities of a deal) came out and said that he was “convinced” the UK Government wanted a deal.
While there is still a long way to go to ensure the UK leaves with a deal and therefore an orderly exit from the European Union on 31 October, could this be the start of something? The stock market rallied along with the British pound, a surprise de-coupling of the traditional correlation between both asset classes.
Therefore, below are two stocks that I believe could be ones to add into a portfolio to look for a boost if the news remains positive.
Bank on it?
My first pick is Lloyds Banking Group (LSE: LLOY). It is a bank with very much a domestic focused, in comparison to some of the other major banks in the UK. For example, HSBC has a very diversified client base around the world, and therefore it not as sensitive to Brexit developments.
By being focused predominantly on the UK market, Lloyds would likely perform very well should a trade deal be reached in the near future. The uncertainty that has dominated the market for the past few years following the EU referendum in 2016 has weighed heavily on domestic banks. Reasons for this include the impact of an interest rate cut from the Bank of England, lower consumer spending, and falling demand for credit as consumers tightened their belts.
On the flip side, signs of Brexit optimism would counterbalance all of the above, primarily through increased demand from consumers. If a deal was done, consumers would likely to return to spending habits (ranging from personal loans to mortgages).
Lloyds is the top performing share in the FTSE 100 today, up over 9% in trading so far.
Building for tomorrow
My second pick is Taylor Wimpey (LSE: TW). It is a domestically focused housing developer, with most exposure to the UK, and some in Spain. Again readers can see the link here on why I like this stock – a Brexit deal would be positive for domestic businesses over exporters.
Taylor Wimpey have been a gauge for Brexit sentiment for several years, with its share price largely flat following the EU referendum in 2016. It has not been able to benefit particularly from the weaker British Pound.
Uncertainty over future growth prospects in the UK has led to a slowdown in house construction. Further, the housing market is struggling to stay above water too, with a newspaper reporting yesterday that London house prices have fallen 1.7% year on year, the fastest drop since 2009.
Taylor Wimpey is up over 8% today, as optimism on a trade deal could really stimulate growth in the business. First time buyers through to buy-to-let landlords would likely be interested in buying again once the uncertainty is over, which would grow revenues for the housing developer.