But given the many unknowns about the shape of the UK’s negotiations with the EU, Whitehead said trying to pick the beneficiaries in this scenario is “difficult (and unwise).”
“In many ways it is more important to know what to steer clear of, than to try to isolate potential winners.
“For us this means more intense stress-testing at a company level to ensure that cash flows – and therefore the ability to pay dividends – won’t ebb if the economy takes a harder knock.”
Because the UK finds itself in such an unprecedented and fragile position for the near-term, it might not take much for investors to lose confidence in the region and sterling, which could be disastrous for bond markets, argues Schroders chief economist Keith Wade.
“If we were to see repeated falls in the pound feed through into wages and price expectations then the Bank of England would have to tighten and I think that would create a very difficult situation for markets in the UK, particularly the bond markets.”
Inflation also remains an issue for more defensive investors looking to circumnavigate volatility by beefing up their cash levels or turning to fixed income.
Schroders senior European economist Azad Zangana expects UK inflation to hit 3.5% by the middle of this year, a move “which implies disposable income will shrink further in the coming quarters,” resulting in a slowdown in consumption and GDP.
The worst thing investors can do in the current environment, said Jones, Kames’ chief investment officer, is “over-worry about disruptive events or financial crises that are unlikely to happen.”
Ultimately, “the long-term impact of Brexit will depend on trading relationships,” said Leaviss.
“Higher trade barriers, if implemented, will impact growth and productivity. However, much will depend on how the negotiations will progress over the next two years, and it is simply too early to speculate on what the impact might be in financial markets.”
