With Brexit being an issue that seems to be causing a degree of uncertainty for consumers and businesses, investors may be wondering what opportunities may be available for them to benefit from it.
While UK-focused shares may offer good value for money, as well as recovery potential, their prices could underperform in the near term. As such, for many investors, the international appeal of the FTSE 100 may make it a worthwhile purchase at the present time. And with the index seeming to offer good value for money, as well as income potential, its long-term performance could be impressive.
Brexit opportunity
Should Brexit continue to be viewed as an uncertain event by a range of consumers, investors and businesses, it could lead to a period of weakness for the pound. A weaker currency may benefit FTSE 100 shares that report in sterling, but which operate mostly abroad. They may see a positive currency translation as a result of a weak pound that could increase their earnings, as well as lead to a premium valuation.
With around three-quarters of the FTSE 100’s income being generated internationally, it could be a good place to invest for investors who are concerned about the uncertain outlook for the UK economy. Since the index is globally-focused, it is likely to be more dependent upon the performance of the US and Chinese economies, rather than the UK. As such, it could be a worthwhile place to invest at a time when investor uncertainty regarding Brexit is high.
Track record
Perhaps the one issue with investing in the FTSE 100 is its lack of capital growth in the last 20 years. At the time of writing, it trades less than 10% higher than it did almost 20 years ago. During that time, the FTSE 250 has recorded significant growth, while other major global indices have also experienced strong upward momentum.
The problem with comparing today’s index price with that of 20 years ago is that investor confidence is very different. Two decades ago, investors were probably as positive as they could possibly be about the world economy and the growth that was expected to take place in the 21st century. Now, it is somewhat the opposite, with risks and fears dominating investor sentiment.
Global growth
While there are possible setbacks ahead from a slowing China and weak economic data in the US, the world economy appears to have a bright future. The use of artificial intelligence could lead to major cost savings across a variety of businesses, while the emerging market growth story appears to have some distance left to run.
Therefore, investing in the FTSE 100 could be a shrewd move. Its international exposure, as well as the fact that its dividend yield of over 4% suggests it offers good value for money, could make it highly appealing for the long term. It may have disappointed in the last 20 years in terms of capital growth, but it could generate impressive returns in the long run.
