COVID and Brexit risks rising

The concerns about the consequences for the economy from a second wave of COVID-19 and a no deal Brexit, which have reduced the FTSE 100 almost back to April’s level and weakened the pound from $1.35 to $1.27, seem justified. After all, the new guidance to work from home where possible and the 10pm curfew on restaurants and pubs will slow the pace of the economic recovery. A no deal Brexit would set back the recovery even further and could prompt the pound to fall to around $1.15. As such, the risks to our forecasts that the FTSE 100 will rebound to its pre-crisis level by the end of 2022 and that the pound will climb back to $1.35 if there were a Brexit deal are firmly on the downside.