Yahoo Finance Where to put money if you're worried about Brexit
As a Brit, it’s easy to fret right now.
The value of the UK pound (GBPUSD=X) has fallen by roughly 15% since the Brexit referendum, and London’s benchmark FTSE 100 index (^FTSE) has dropped by about 11% since the start of the year.
There’s no denying that we’re living in uncertain times as the UK’s divorce with the European Union is just around the corner in late March 2019.
But leading UK-based market experts aren’t panicked. And they’re certainly not telling people to hide money under their mattresses or exchange all their cash for US dollars as a form of insurance.
Dan Kemp, the chief investment officer at the financial firm Morningstar in London, said it’s important to think for the long term and not get overly concerned about the drop in the pound over the past few months.
“The pound has fallen quite a long way … There’s a lot of bad news priced into sterling at the moment. For us, it looks undervalued relative to the US dollar,” he told Yahoo Finance UK.
He believes the pound will rise in the long term and there are bargains to be had in the UK stock market.
“If you look at portfolios, we are positive about large UK companies, in contrast particularly with large US companies, which look overvalued to us,” he said.
Morningstar analysts noted this week that UK and European companies that are “most immune to a worst-case scenario Brexit” include consumer stocks such as Unilever (ULVR.L), Nestle (NESN.VX) and Danone (BN.PA).
Kemp notes that for people who are based in the UK and pay their rent and living costs with pounds, it makes sense to stick with sterling and not swap huge chunks of cash into foreign currencies.
“At the moment, in our portfolio we have overseas currency exposure … there are some diversification benefits. But we see sterling as more attractive than dollars,” he said.
Others echo this sentiment.
“If you live in the UK and have your assets in the UK, there’s not much currency risk,” said David Cheetham, chief market analyst at the online broker XTB.
He acknowledges that the pound could have further to fall, so it’s important people don’t hold all their wealth in cash. But he’s not expecting the currency to crash in the coming months.
“I don’t think overnight the pound would lose 30% to 40%” in the event of a worst-case scenario, he said.
Michael Hewson, chief market analyst at CMC Markets UK, said that having a mix of “internationally diversified stocks” remains a good path forward, and having some cash on the side to buy stocks when they fall is a solid plan.
He said large London-traded consumer-focused firms like Diageo (DGE.L), Reckitt Benckiser (RB.L) and Unilever (ULVR.L) were sound companies right now. They’re protected from any market shocks in the UK since they sell their products around the world, in both developed and emerging markets. Plus, they pay dividends, which gives investors a steady stream of income.
“Those are the companies that, no matter how bad things get, generally do pretty well in the long run. It’s about the long run. It’s not about being short-termist,” he said.
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