Time for U.K. Stocks to Look Beyond Brexit Relief
The “Buy British” trade continued with the anticipated accord between the U.K. and Europe. Now the reality of the deal counts.
This way out.
Photographer: Aaron Chown/PAInvestors bought the Brexit deal rumor, and they mostly kept buying the news too. The 11th-hour agreement as 2020 drew to a close gave the “Buy British” trade yet another jolt forward. The investment case for U.K. stocks must now rest on more than simply relief that a chaotic split from the bloc was averted.
The pound moved 3% higher versus the dollar and euro between Dec. 11, when Brussels and London both warned an accord might not happen, and the end-of-the-year orderly breakup. The U.K.’s main FTSE-100 benchmark dipped slightly in that period: The index’s historically strong inverse relationship with sterling, a function of its predominantly international earnings mix, may now be reasserting itself. The FTSE-250 index of mid-cap stocks gained 4%. Across both indices, domestically-focused cyclical stocks simultaneously exposed to the currency and expectations for a post-pandemic recovery gained about 8%.