Did you miss the Brexit bounce?

Do you remember when investing in the UK stock market wasn’t all about politics, the EU, and who was going to be the leader of the country for at least the next six months?
 
No, me neither.
 
This limbo feels like it has been going on for centuries – that investing before that vote involved riding a horse into town to visit a stockbroker to buy some paper certificates that entitled you to a piece of a new-fangled railroad.
 
How can three and a half years go on forever? I imagine this is what it feels like at a dinner party when you ask me out of politeness what I find so fascinating about investing…
 
Yet in reality, three and a half years is, well, three and a half years. There really was a time when Britain was bothered about other stuff – I distinctly remember traffic cones for starters – and one way or another we will get there again.

And when the fog clears and life returns to normal, UK shares should rally.

Deal or no-deal

I’ve written before about how British shares looked unloved – when you have to fill an eternity against the backdrop of a never-ending stalemate, you tend to repeat yourself – and that’s still true today…
 
…except they don’t look quite as unloved as they did two months ago. There’s been a Brexit-related bounce!
 
Consider Royal Bank of Scotland. The High Street giant began the year at roughly 250p a share and climbed towards summer, but then a long slump began. By the middle of August the shares were priced under 180p.
 
Or what about the house builder Persimmon? Priced at £19.40 at the start of the year, the shares cost nearly £25 by early March. Yet by August they’d rattled all the way back down towards £18.

These companies had some of their own things going on, of course.
 
But they and many like them also danced to the tune of Westminster – especially the waxing and waning chance of us leaving the EU at the end of October without a deal.

What a relief!

Whatever you personally think of that prospect, it’s clear investors in the London market hated it. Because as that risk receded – both through Boris Johnson winning EU support for a tweaked Withdrawal Agreement, and by MPs forcing him to request an extension to the 31^st October Brexit deadline – shares rallied.
 
Persimmon soared around 25% between early September and late October. RBS was up 30%. It was a similar story with other Brexit-sensitive stocks.
 
Rightmove for instance rallied around 20%.
 
Even defensive-ish Tesco was up more than 20% off its lows.
 
Was that it then? Did you miss the fabled post-Brexit bounce?
 
I don’t believe so.

British steal

Domestic shares were hammered in late summer by the perception and rhetoric that a no-deal Brexit was now a real possibility. When no-deal was taken off the table again, that bout of share price damage was reversed.
 
Yet many of these shares looked quite cheap even before the summer swoon.
 
Also, since that recovery in late October, some of these shares have started sliding again.
 
There’s a General Election been announced, you know. And depending on which combination of parties wins control, almost anything could happen.

Thus we’re back where we started – with political uncertainty likely to continue to bat the shares of British companies about like a shuttlecock in a game of wiff-waff.
 
The good news then is it’s not too late to tilt your portfolio to capture some upside from UK stocks when all this is finally resolved. The movements of the past few months clearly illustrate that the potential for big moves isn’t just a fantasy dreamt up by exasperated commentators like me.

And the bad news?
 
That the wait for that day continues… and continues… and continues…