A Brexit trade deal has been reached. Albeit at the last minute.
UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen have penned a trade deal between Britain and the EU following months of stressful negotiations.
The deal will come into effect this week when the UK leaves the European Union after 47 years of membership.
Naturally, stocks will be lifted by the deal and the pound strengthened, but this does not mean the end of Brexit.
Coming up now is a time of considerable readjustment as the UK economy departs from the world’s largest trading bloc after playing a key part for nearly half a century.
In addition, the UK has to act fast to set secure new trading relationships, which are always complex and lengthy to establish.
It is also probable that influential political voices in other European nations will be strengthened by Britain’s decision and push harder for their countries to leave the EU or make radical changes, thereby hiking geopolitical tensions.
Therefore, as economies and businesses adapt to the significant changes of a post-Brexit world, investors must consider the disruption and uncertainty that will create market volatility.
Although better than no deal, the UK/EU trade agreement is certainly a narrow one, taking into account only goods, not services, which make up 80% of the economy.
As a result, investors need to keep a close eye on the ongoing Brexit saga, or it could negatively impact their portfolios.
Of course, Brexit still represents a huge economic and political upheaval, and 2021 will be a year of major change in regard to how companies do business, as well as the economic adaptation and political adjustment to be taken into consideration.
As such, with radical changes ahead, in order to sidestep risks and make the most of the opportunities from the expected volatility, investors must make sure their portfolios are sufficiently diversified across regions, sectors, asset classes and currencies.
Not recognising that Brexit is far from over may lead to serious, negative consequences for investors who aren’t paying attention.
Nigel Green is CEO and founder of deVere Group, one of the world’s largest independent financial advisory and fintech organisations.
Photo: (Mick Baker)rooster