5 Brexit investment ideas


29 June, AtoZForex – The Brexit led global excitement is likely to remain for some time, therefore prompting some unique Brexit investment ideas. A lot of uncertainty still lingers as markets try to figure out the next course of action for the country’s economic and political situation. Hence, investors will be looking to put their money in the best investment vehicles to maximize both returns and safety amid the instability.

Brexit investment ideas

Here, we consider a diverse range of safe investments across various markets and a time horizon of three to six months, to give a reasonably balanced portfolio. Premised upon reasonable diversification across various asset classes, regions and sectors to give a balance multi-asset portfolio.

Safe haven gold

As the name implies, gold remains a safe haven commodity to pile into in times of turmoil. However, to maximize safety on this, it will be safer to buy gold miners’ bonds. Gold miners should experience higher profitability as a result of rising gold price and lower costs. Target profit potential here is around 8 percent by year-end.

Buy US stocks

First, the Federal Reserve is likely to keep monetary policy loose, which should help maintain low company refinancing costs. Also, the US has a limited direct export exposure to the U.K. (3 percent). Hence, the US economy should continue riding on the strength of US consumers, since about two-thirds of their revenues are generated domestically. The target range for this by year end is 5 to 8 percent.

Stake in European dividend-paying stocks

After the dip in stocks following the Brexit votes, the 12-month-forward dividend yield on the MSCI EMU index now sits at around 4 percent, 3.9 percentage points higher than German government bonds and close to an all-time high. This creates an opportunity, in that companies able to grow dividends are likely to offer better total returns than the overall euro-zone equity market. Target yield 5 percent by year end.

Buy the greenback against the Aussie (AUDUSD short)

Expectations of an eventual divergence in policy between the US and Australia, along with risk-off flows should support the U.S. dollar in the near term. While Australian growth drivers are expected to weaken further, coupled with a higher likelihood for global uncertainty to additional impediments to Australia’s transition away from mining-led growth. Target year end returns are 3 percent.

Carry trade idea: Buy Brazilian real against the euro and the U.S. dollar

The Brazilian real looks particularly attractive at the moment due to its double-digit carry rate, alongside Brazil’s positive growth-inflation dynamics from weak levels, as well as the country’s positive adjustment on the external balance. Target year end returns are 3 percent.

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