Of course, hitting the Halloween deadline was always going to be a tall order, given many in Parliament’s antipathy towards Brexit. Nevertheless, it seems that with the approval of the withdrawal bill on Tuesday the likelihood of Brexit happening has increased, even if it is delayed for a few months more – assuming Boris Johnson can carry the Conservatives through a snap general election that many speculate could be his next move. Current polling suggests he will prevail, which means investors need to consider perhaps more urgently than ever what post-Brexit life could look like on the markets, whatever comes next on the way out – this week’s cover feature offers up some scenarios, both pessimistic and optimistic.
As Chris Dillow notes, though, it seems that most of the horrors facing UK investors come not from domestic political and economic struggles but global pressures, which amounts to a very long list of indictors that suggest stock markets could do badly in the months and years ahead. I’ll add another factor to the list: that a disappointing third-quarter reporting season in the US prompts a much broader global sell-off – and early indicators from the 1,000 companies set to report in the next few weeks have not been entirely encouraging. Heavy downward revisions to estimates throughout the year mean US earnings are expected to have, according to Factset, fallen 4.1 per cent this quarter, but early warnings from Caterpillar – viewed as a bellwether of global industrial health – and chipmaker Texas Instruments have raised concerns that even this figure may prove too optimistic. The tech-heavy US market has a punchy valuation to live up to, after all.
Yet as I explained to a room full of young investors and would-be investors at a seminar here at the IC last week, you need to be at least mildly optimistic when it comes to investing. You can always find reasons not to invest – the threat of recession or seemingly excessive valuations chief among them. Sometimes those reasons will prove correct, markets will fall and your portfolio will take a hit. But over the long term equity markets have proved remarkably resilient to the worst that geopolitics and economics can throw at them. Events that felt huge at the time, such as Black Monday for example, barely register as a blip on multi-decade charts. As we battle through Brexit and trade wars the world may feel like a fragile place right now – but surely it always has. And if pessimism keeps you permanently out of markets, you’ve lost before you’ve even begun.
