The FTSE 100 (INDEXFTSE:UKX) has not yet been able to record a 1-year high after falling marginally yesterday. I think more volatility could be ahead for the index in the short run, but I’m also optimistic about its long term future.
I believe the uncertainty surrounding Brexit could be good for the index. It may mean the pound depreciates and this could cause a positive forex boost for many of the companies on the index.
Just yesterday, there was further uncertainty cast into the public domain on the issue of Brexit. The Chancellor Philip Hammond said that spending on a ‘no deal’ scenario would be held back until it was absolutely necessary. However, hours later the Prime Minister Theresa May said that £250 million had already been spent on planning for no deal between the UK and the EU.
I expect further contradictions to take place between now and the end of March 2019, when the UK leaves the EU. I feel such uncertainties could reduce confidence in the UK’s economic outlook and lead to a weaker pound.
Even though I am of the view that an interest rate rise is imminent, I think falling confidence in the UK political and economic outlook will offset this over the medium term.
One thing I am feeling confident about is the FTSE 100’s long term future. While I believe the index may be volatile in the short run, I see good value opportunities which could be boosted by weakness from Brexit. Therefore, I’m still taking a closer look at some of the stocks within the index as I seek out more investment opportunities for my portfolio.
While such stocks may not rise significantly in the short run, I think buying them for the long run could be a good move for me.