The Lloyds Banking Group PLC (LON:LLOY) (LLOY.L) share price could continue to face an uncertain future over the first half of 2019 in my opinion. Brexit is likely to become an even bigger issue as we move towards the ‘business end’ of the process.
As a UK-focused company, Lloyds may be more susceptible to an uncertain outlook for the UK economy than some of its FTSE 100 peers. Given that politicians seem to be averse to a no-deal Brexit, and yet cannot decide on a deal, there could be further twists and turns ahead. There may even be another referendum, or a general election. As a result of elevated political uncertainty, investors may demand a large margin of safety in UK-focused stocks.
In terms of the UK’s economic outlook, it is forecast to grow by 1.7% in 2019. This would be a positive result in my view, given the political risks which may be ahead. However, since Brexit has the potential to cause disruption in the short term at least, I would not be surprised if there are further revisions to the GDP growth outlook.
As a result, I feel that there could be further volatility for the Lloyds share price in the near term. It seems to have a sound strategy in my opinion, as well as a low valuation, but could be impacted by investor sentiment that could become increasingly risk averse. Therefore, while it has experienced a tough 2018, there could be a continuation of its recent performance in the first part of 2019.
In the long run, I’m optimistic about the potential impact of its current strategy. I believe that the investment it is making, as well as the efficiencies it is seeking, could boost its financial performance. However, in the meantime, it continues to be a relatively risky FTSE 100 stock in my eyes.