Formal discussions between the UK’s Brexit secretary David Davis and Michel Barnier, a French politician who is serving as European chief negotiator for Brexit, started as scheduled on 19 June.
There had been concerns the general election, which ended in a hung parliament, would delay further the official start of the Brexit negotiations.
But it still leaves the government with less than two years from now to have a new deal in place, potentially prolonging an already uncertain period for the country.
What should investors and advisers be watching for as the discussions progress?
Should they be making investment decisions based on what they think will happen at the end of the two years?
Undoubtedly, there will be plenty of fund managers and stockpickers who will be watching the negotiations closely, and positioning their portfolios to benefit from any perceived opportunities in asset classes.
Glyn Owen, investment director at Momentum UK, says: “The UK market has performed well since the sharp falls immediately after last year’s referendum and we have been anticipating a period of consolidation and drift in equities in the shorter term.”
Momentum’s portfolios are already positioned for this possibility.
“Should there be unexpected shocks and weakness in markets in the UK, our current thinking is to use these as buying opportunities, but the moves so far are insufficient,” explains Mr Owen.
“Sterling is an undervalued currency but as with Brexit, the uncertainty created by the election is most likely to fall on the currency, so further weakness cannot be ruled out in the shorter term. Patience and calm seem the best approach in this environment.”
The winners and losers from the process had seemed relatively clear cut, as the falling pound appeared to initially boost FTSE 100 stocks which generate much of their revenue overseas, leaving mid-cap domestic companies at a disadvantage.
Stephanie Flanders, chief market strategist for Europe at JPMorgan Asset Management, notes: “I think we’ve taken the view there was so much uncertainty, both about the shape of the deal but also the impact on the domestic economy of high inflation and other more short-term Brexit effects that this wasn’t a time to make clear plays on small and mid-cap or large-cap, or that you had to make sure you were basically fairly neutrally positioned with regard to UK equities.
“But, of course, when you’re talking about the UK equity market, neutrally positioned usually means having a very large allocation to large cap. And we would certainly support that, given the level of the pound and given the early momentum for some of the key parts of the FTSE 100 has been pretty positive.”
She continues: “There’s no obvious strategy you should take at a big picture level but I think it’s actually the opposite, that you have to get very specific and quite active in the way you think about the UK market because of the way that a given set of arrangements will affect different companies in different ways, even if they’re in the same sector.”