The Post-Covid world and the impact of Brexit on Investments

We are currently experiencing the most unprecedented time in our history, not since WW2 has our government taken such drastic measures as they have had to take in 2020.

 

Interest rates in the UK are now at a record low of .1% and likely to remain at that level for the foreseeable future. The UK and indeed governments all over the world are focusing their efforts on how to reopen their economies for business. In addition, the UK is days away from the 15th October Brexit deadline and the USA are in election fever stage. More than enough to keep companies and investors to contemplate and refocus their objectives.

 

Brexit talks have been heated but it is still possible at the final hour we could see a deal. Even a slim deal will be enough to send sterling higher and could encourage global investors to revisit their portfolios and reassess their currently underweight position in the UK. The good news is it cannot go on for much longer.

 

Post Covid, Will the world be the same? Well there are many views and opinions on that. One thing for sure, is that Coronavirus has accelerated the demise of sectors that were already in decline, being challenged by technology. Investors will need to reconsider their strategies in this new world Post-Covid, and as always, a well-diversified portfolio will always pay.

 

Until recently data has shown that a slow and steady recovery has been building in the UK after the very sharp contraction in output during the lockdown.

 

Many companies have changed and adapted but there are many more that will have to change and adapt to changing customer needs. Companies that can successfully adapt their business to E-commerce will likely survive and prosper. That will of course take some companies time for transition, but if they have strong balance sheets and fundamentals, I am sure they will survive.

Covid could ultimately prove transitory for some companies. Great companies with strong fundamentals will undoubtedly see earnings and dividends bounce back.

The need for research into chosen sectors and companies with strong fundamentals has never been greater than now. Knowing that the best businesses will eventually return to form will add a degree of comfort to any investor.

 

UK Companies are still on low valuations and historically when this has been the case levels of mergers and acquisitions (M&A) activity has picked up. There is a strong possibility of that happening in time.

 

One thing for sure is there will be a Post-Covid and Post-Brexit world.

 

Stephen Lovelock

Further Reading