Rallying by as much as 3% at one point, the FTSE now sits roughly where it started towards the end of the Monday session. The closing stages of trading, and where things pick up on Tuesday, will surely be influenced by the sentiment towards the Brexit talks between Boris Johnson and Ursula von der Leyen.

Though negotiations appear to be going down to the wire, there seems to be some pricing in of the fact that this is the EU’s due process – with commentators noting that deals tend to be done at ‘the eleventh hour’. So, while the looming NYE deadline may appear like a do-or-die juncture, it could also mean we’re closer to a deal than ever before.

Speaking on the likelihood of a Brexit Deal, and the impact this will have on the FTSE, Kingswood CIO, Rupert Thompson, commented: “Very likely, we will know in the next couple of days whether there will be a Deal or not. As far as the markets are concerned, a Deal is clearly the preferred outcome. It would give a boost to both UK equities and the pound and favour domestically oriented small and mid-cap stocks over the FTSE 100. However, the impact is unlikely to be that great. After all, any deal will be a bare-bones one and is still likely to lead to short term disruption to the economy.”

“If there is No Deal, the reaction will be the reverse and the impact could be rather larger. Even so, it is unlikely to be that big for the simple reason that UK equities have underperformed substantially over the past few years, look particularly cheap and already price in a fair amount of bad news. The same seems true for the pound. It may be back up to $1.33 from a low of $1.16 in the spring but this is primarily due to weakness of the dollar rather than any great strength in the pound itself. Indeed, against the euro, sterling is still languishing at around €1.10 – only a little above its spring low of €1.06.”

Indeed, the FTSE has begun its bounce-back in the last couple of months, from years of poor Brexit sentiment, and a particularly harsh lockdown fallout. Amid this rotation from trendy growth stocks (such as tech and ecommerce) to value stocks (such as finance and energy), the FTSE has benefited more than its Eurozone and US index counterparts. And while a No-Deal Brexit would certainly darken the mood somewhat, the seemingly inevitable upsides from vaccine roll-outs and a pick-up in manufacturing in the new year, cannot be ignored.

Similarly, the UK should not be singled-out for its ongoing Brexit difficulties. As the old cliché goes – everyone has their own problems. For instance, France faces its own political tensions from within, between anti-police-violence protests and the uncomfortable discussions about fishing rights. Germany has its next election in September 2021 – with the likely departure of Angela Merkel spelling uncertainty for the company’s future agenda. Chinese companies now have to contend with greater exposure to domestic political influence, having been threatened with delisting from US exchanges within the next three years. And in the US, there is mounting pressure to reach an agreement on the next round of Fed stimulus, with mounting infections casting doubt on a triumphant recovery.

Further, Mr Thompson adds that: “the EU on Thursday will try to secure agreement on its own €750bn economic recovery package. This had been signed off in principle last summer but is now in danger of being de-railed by Poland and Hungary. The same day should also see the European Central Bank announce a sizeable increase in its quantitative easing program but the truth is central banks everywhere are increasingly pushing on a string. Fiscal stimulus and vaccine roll-out, rather than further monetary easing, are the key to securing the strong economic recovery we now anticipate for next year.”

In summation, the result of Brexit uncertainly offers some downside for British equities, though as far as the FTSE is concerned, a lot of this downside has likely been (and is being) priced in, with a 2021 return to normality set to bolster the index. The situation with customs and the exact allocation of fishing rights and the level playing field appear less certain, though there have already been discussions that non-agreed areas might carry on in limbo, until the final details are hammered out.