Friday, 8 December 2017

Brexit Economic Impact Could Irreparably Damage Portfolio

Brexit’s economic impact could irreparably damage an investor's portfolio. To me, it seems like a good time to reassess investments and consider alternatives.



Officials here in the UK believe that the nation should prepare itself for "a profound shift in the way the economy operates." Some have suggested that it will operate in a manner that is similar to that of the 2008 financial crisis. If that is true, Britain and UK investors must prepare for a "paradigm change" in the economy.

According to the National Institute of Economic and Social Research (NIESR), Britain’s economy grew at a solid rate of 0.5 percent in the three months leading up to November 2017. The CBI expects that the GDP will expand by 1.5% in both 2017 and 2018. It also argues that CPI inflation peaked at 3% in October 2017, and "should now ease gradually."

GDP growth at 0.5 per cent is somewhat higher than the economy’s speed limit. If, as we expect, the economy continues to expand around this pace and inflation remains elevated, there is a case for the Bank of England to gradually raise the policy rate to stop the economy from overheating. - Amit Kara, NIESR Economist

Making Brexit matters even more challenging for British officials is that, at the moment, it has been said that the UK government has made no formal assessments of Brexit’s economic impact of leaving the 28-nation European Union. This has many of us fearing that Britain may not have a deal by the time it leaves officially on March 29th, 2019. Failing to do so, could mean that May's government would collapse and create irreparable damage to our investment portfolio. To me, it seems like a good time to reassess my holdings and consider alternatives like those offered at Davenport Laroche.

On a more positive note, new analysis from bankers at Bank of America Merrill Lynch, suggests that the negative impact of a hard Brexit on the UK economy has been "surprisingly small."

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