Here’s how I’m protecting myself from Brexit financial chaos now
So, Theresa May’s Brexit deal has been rejected by parliament with the heaviest defeat for a sitting government in history. The pound, for now at least, is remaining stable, and the FTSE 100 is down a modest 33 points at the time I write these words.
What’s going to happen next is impossible to guess at. Successful vote of No Confidence followed by a new General Election? A delay in the implementation of Article 50 to provide time for yet more talks? A cancellation of Article 50 and an indefinite shelving of our withdrawal from the EU? A no-deal Brexit?
With this defeat, we are possibly one step closer to a possible no-deal scenario, which I reckon (along with most of the EU and with most UK experts) will be an economic disaster. So what am I going to do with my investments to protect myself from the worst of it?
A few days ago my Motley Fool colleague Harvey Jones gave us his list of five things to do now to protect ourselves from Brexit chaos, and his first recommendation was to stay calm. Thankfully, so far, that’s what the markets appear to be doing. It is largely down to the fact that everyone knew the government was going to lose the vote, so the result was perhaps the least surprising development in the whole sorry saga so far.
And there is also surely a hefty portion of no-deal fear already built into market expectations and share prices, though I’m sure we’ll still see some panic should that potentially devastating scenario come to pass.
No change there
But I’m already doing all that — the staying calm and not panicking thing. I’m also patient, and not paying much attention to the news (I left the telly switched off on Tuesday because I just didn’t want to listen to an endless stream of clueless talking heads).
I’m ready to buy too, with some cash waiting in my SIPP while I make my final decisions on what to choose. And that brings me to Harvey’s final suggestion, to go hunting for opportunities. But how do we spot them?
One approach is to look for shares that we think are unfairly marked down by Brexit fears and which we think will not do as badly as the doom-mongers fear. Two obvious candidates there, I think, are the banks and housebuilders.
Banks will surely suffer, but with share prices so low that some are on valuations around half the long-term FTSE 100 average, I see them as mostly oversold. And though Brexit has already had a slowdown effect on house sales, I can see the long-term demand keeping dividend returns high.
The best strategy?
But the investing strategy adjustment I most strongly favour is to buy dividend-paying FTSE 100 stocks whose businesses are global and shouldn’t be significantly impacted by the UK economy or by our status in Europe. But then, I think that’s the best way to invest anyway, even when the UK economy is booming and when global trade is expanding nicely.
So what are my strategy changes for helping me deal with Brexit? Well, none.
Views expressed in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.