hard-Brexit: Forget the Fear and Move Forward

Mihir Kapadia, CEO and Founder of Sun Global Investments says even under a hard-Brexit, we can continue to operate in full confidence on our economy.

One of the primary takeaways from Mark Carney’s address yesterday is that the Brexit climate might be reinvented.

The markets have been shifting and reacting haphazardly to news reports about Brexit without any substantial elements to it.

These reactionary movements have been solely driven by investor fears over news reports floating in the media, and it is about time we dust our shoulders and move forward.

The Governor of the Bank of England has now also admitted that the economic forecast for the UK would very likely be improved over the next month – a sign that the country hasn’t slowed down.

The reality is very straight – Brexit is not the biggest threat in the EU region.

Even under a hard-Brexit, we can continue to operate in full confidence on our economy - especially on the financial services front.

The only worst case scenario we have to account is of a sour-Brexit – something politics and politicians handle.

It is up to them to get us the best deal possible, and we are confident things will materialise.

If you look at the FTSE 100, it has closed on a record 12 day winning streak last night.

While its currently looking downhill, it should not be a big concern as markets are always sporadic in their natural habitat.

The current value of the pound is propelling our exports and pumping in international spending into the country. Times are changing and everyone has to reinvent themselves to catch up.”

Investors ‘Unjustly’ Negative

Pessimism is in good supply amongst the investor community according to analysis from Hargreaves Lansdown, the Bristol-based brokerage.

Analyst Mark Dampier describes the period since 2008’s financial crisis as “the most unloved bull market” of his career.

He thinks there is the potential for further gains in 2017 and beyond.

“The reason, partly, is so many investors are still negative - unjustly so in our view,” says Dampier.

And of course, fears on Brexit is playing a big part in this unjust pessimism.

There are signs of caution among professional investors too.

A recent survey of global fund managers by Bank of America Merrill Lynch suggested their allocation to UK shares remains well below its long-term average.

“Again we view this as a positive sign - if sentiment towards the UK improves, institutional investors will increase their allocations and this buying pressure could drive the market higher,” says Dampier.

But surely the combined intelligence of a group would lead to good decision making, and the views of so many professional and retail investors were worth taking note of?

“When it comes to investment it often pays to ignore the ‘wisdom’ of the crowd and take the contrarian view,” says Dampier.