After grappling with the impacts of a global pandemic and the continued Brexit overhang in 2020, the Franklin UK Equity Team outlines how the removal of these uncertainties in the United Kingdom could bring brighter investment prospects in the year ahead.
Even if investors could accurately predict events, 2020 has proven once again that predicting market movements based on this foresight is near impossible. However, this doesn’t mean that we should abandon our investing principles; we should remain vigilant to what we believe the market is factoring in and be nimble enough to adapt to a dynamic environment.
Below outlines some of the important events and milestones that we see on the horizon for a UK-based investor in 2021.
The economic impact of the Brexit deal uncertainty has been somewhat overwhelmed by the fallout from the COVID-19 pandemic. At time of this writing, a deal remains elusive, but the dividing issues should not be insurmountable. A resolution would lead us to a broadly constructive picture for sterling and, in turn, favour domestically orientated equities. Whatever the outcome, it is hoped that greater clarity will allow the conversation to move on after four years of wrangling and uncertainty.
Removing the ‘Brexit overhang’ could entice the return of the international investor to the UK equity market and serve to narrow the valuation discount that persists for UK shares versus their international equivalents.
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