Five views on positioning for a ‘no deal’ Brexit
By Kristen McGachey, Jessica Tasman-Jones and Sebastian Cheek, 3 Aug 18
With reports the government is stockpiling food and medicines, the threat of a ‘no deal’ Brexit is becoming increasingly tangible. Portfolio Adviser examines how investors can position themselves if the UK fails to exit the European Union in an orderly fashion.
David Coombs, head of multi asset investments, Rathbones
“The UK Government’s in disarray. The EU’s in disarray. It seems every government in Europe is struggling with the legacy of austerity, too much debt and fractious politics. Why would you commit capital to Europe right now? There’s an illusion of value but it’s precarious. The UK has served up a huge slice of fudge for its Brexit strategy, upsetting remainers, leavers and the EU alike. The situation feels ever-more binary, and sterling looks set for increased volatility as calls grow for ‘anotherendum’. At the same time, the ECB will wind up its QE purchases of euro bonds by year-end. The euro economies have been doing well lately but the banking system remains a mess, and higher borrowing costs may start to squeeze debt-laden companies. None of this bodes well, so we remain very light on domestic UK.
“It’s difficult to say what changes we would make to the portfolio in the event of a no-deal Brexit, as much would depend on the impact on sterling, which we already believe to be undervalued. It’s important to reiterate the number of variables involved in this scenario, but we are unlikely to radically change our stance on UK-domestically focused companies.”
Coombs’ Rathbone Strategic Growth portfolio had 15.14% invested in UK equities at 30 June 2018. His UK and European holdings are chiefly companies with international earnings streams.
Tags: Brexit | no deal | Uk Equities