Brexit is getting silly now. Somehow, much, much sillier than it already was. Rathbones head of multi-asset investments David Coombs unexpectedly finds himself hoping for a no-deal, if only to bring some clarity to British shores.
Last week, I found a Sainsbury’s delivery man at my front door, asking me to sign for a crate of 48 loo rolls. Surely there was some mistake? No – my wife, Tracey, had read that 85% of toilet rolls are imported from the EU, and had decided to stockpile. She asked me not to blog about this, concerned we’ll be vulnerable to begging letters or break-ins from Wiltshire folk desperate for Andrex, should Boris Johnson get his way. What can I say, but sorry Tracey, these are disappointing times for everyone.
And this is not the most ridiculous thing I have heard this week. On a recent Andrew Neil show, hidden on BBC2 (download it on iPlayer immediately), he held both the Chief Secretary to the Treasury and the Shadow Housing Minister to account in his own unique way. Why is he not on Newsnight? Hmm…
The shadow minister was asked what Labour’s policy on Brexit was. Apparently it is to negotiate a new deal with the EU, then to hold a second referendum and campaign to remain. I cannot adequately describe the look on Neil’s face. So you will negotiate a new deal and then campaign to reject it? Yes was the answer, “but we shouldn’t get ahead of ourselves”.
So these are the options we face. A ‘no deal’ Johnson-led government or a Corbyn-led second referendum. Potentially, a ‘no deal’ Johnson-led government might get a last minute deal. So at last we have certainty!!
All these politicians who are said to be acting in the nation’s interest seem to be ignoring the rest of the world, which is thinking we’ve lost the plot and should be ignored from an investment perspective. I will say it again, the longer this debacle goes on the bigger the negative impact on the long term prospects for our economy.
The refusal by the rebel alliance to allow an election, followed by the proroguing of parliament, together with Boris’ stance of refusing to request an extension, leaves all options on the table and makes Tracey’s planning look most opportune.
Strategy-wise, where does this leave us?
No deal means negative sentiment short term, so avoid UK assets including sterling. We may have a chance to buy quality at discounts afterwards. Target list at the ready.
In the event of a deal, buy UK assets and hedge overseas currencies as hard Brexit bets are taken off.
Corbyn moving into Number 10, leading to a longer extension and second referendum – sell UK assets into what is likely to be a short term relief rally as this would ultimately create more uncertainty. The probability of a ‘remain’ win is still a tossup in my view. An extension: see above. A Corbyn led government: avoid UK assets.
Weirdly, when reviewing this list from an investment perspective, I find myself hoping for no deal. At least it brings short term clarity and an opportunity to move back into the UK where there will likely be plenty of value. I suspect investors in New York, Hong Kong and Tokyo may concur. Of course that does bring the risk of a Costco-China type stampede to my door in leafy Wiltshire and Tracey’s smug, “I told you so.”
