The UK government has played a major role in the impact of Brexit on the stock market. Since the referendum passed in 2016, the UK government has been scrambling to try and set up policies that will soften the blow of leaving the European Union.
Here’s a look at how different governments plans have affected the stock market:
Lower corporate taxes: The UK government reduced corporate tax rate from 20% to 17%, which was seen as a way to attract more investments into British businesses. This had an immediate effect on stock prices, as companies were able to use their increased profits to buy back their own shares and send prices higher.
Lower interest rates: The Bank of England lowered interest rates from 0.75%to 0.10%, in an effort to stimulate investment and create jobs in anticipation of Brexit. While this did help boost consumer spending, it also decreased returns for investors and helped dampen sentiment for many stocks, leading them to lose value in response.
Stimulus packages: The government announced several stimulus packages aimed at specific sectors, such as renewable energy, aerospace, pharmaceuticals and automotive manufacturing. This helped bring some certainty for investors and encouraged them to invest more money into those industries, which then buoyed many stocks associated with those sectors and kept them from falling too far during this period of transition.
Ultimately, it is clear that the UK government has played an instrumental role in mitigating some of Brexit’s effect on the stock market by introducing different policy measures that have helped stabilize prices and sentiment among investors.
Where Is the British Stock Market Headed?
So, where is the British stock market headed? Brexit has caused a lot of uncertainty and speculation, but there are a few key points that can help give you an idea of the potential direction.
Political and Economic Instability
The UK's political instability since the Brexit vote has been a major factor in the UK stock market's volatility. This is especially true for stocks in the industrial and financial sectors, which are more subject to news-driven change and uncertainty.
Currency Fluctuations
The British pound (GBP) has seen extreme volatility since early 2016 — at one point dropping 10% against the US dollar in a single day — which has been reflected in various stocks in British markets as well.
Changing Trade Relationships
The UK's relationship with countries both within and beyond the EU is changing drastically following Brexit, with negotiated trade deals drastically altering certain industries that may create further changes to equity markets.
With all of these factors at play, it's hard to predict precisely which way the British stock market is headed post-Brexit, but understanding these key points can help investors make informed decisions on their portfolios.
Strategies to Capitalize on Post-Brexit Opportunities
Amidst all the doom and gloom that Brexit has brought, there are also some opportunities to capitalize on. Even though Brexit has caused a lot of volatility in the British stock market, there are strategies you can use to take advantage of potential upside potential.
Research and Invest Wisely
It is usually difficult to predict exactly how the market will react to external events such as Brexit. That is why it is important to do your research before investing in any stock. Look out for companies with strong fundamentals that have been severely affected by the Brexit fallout, as they may represent good value investments when the market recovers.
Capitalize on Globalization Trends
Globalization continues to be a trend that investors should pay attention to. Look for companies that are well positioned to benefit from global trends such as increasing global trade and investments, or companies that are well established in international markets.
Diversify your Portfolio
A good way to mitigate your risk is diversifying your portfolio. Instead of putting all your eggs in one basket, spread out your investments across sectors, industries, countries and even asset classes. This way you can minimize downside risks while still capitalizing on any upside potentials in the British stock market post-Brexit.
By doing your research and being smart about where you invest, it is possible to find opportunities post-Brexit and capitalize on them for lucrative returns over time.
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