We are only a couple of months away from making the turn into 2020. With the end of the ISA year being April, this still leaves plenty of time to invest your Stocks and Shares ISA allocation into worthy areas.
Indeed, as the Brexit deadline is looking likely to be extended for another three months through to January 2020, and the likelihood of a general election is starting to increase, volatility should be high in the markets over the next few months. Volatility provides opportunity, which could mean a good tactical entry point for investors to buy stocks for their ISAs.
Therefore, below I focus on one company I think could be a solid addition to any portfolio: Barclays (LSE: BARC).
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PPI deadline
The scandal of PPI mis-selling among the large UK banks has been well reported over the last few years, so I will not go into it here. The bottom line is that the deadline for claiming against potential mis-selling passed on 29 August. This means any hit to Barclays (and other banks) has now come to a rough conclusion.
In Q3 results that were released last week, it showed that the bank has to set aside an additional £1.4bn for a late surge in PPI claims, dampening the profits generated. Incredibly, the total amount set aside by the bank has now reached £11bn.
Sure, this will be a short-term hassle, but remember the deadline has now passed, so the bank can move on. The provisions set aside, which to some extent has hamstrung the core operations, can now be repaired, boosting profits into 2020. Provided it keeps a lid on future scandals, the cloud of mis-selling can be lifted, giving the share price a tangible boost in the mid term, in my opinion.
Interest rates
Barclays cited in the earnings report that it has been hampered by a low interest-rate environment. This basically means that due to interest rates in the UK being only 0.75%, it has been hard for the bank to make money. It has been unable to get a large spread between the rates it offers for depositing money versus the rates it offers to borrow funds.
I’m not going to make outlandish claims and say interest rates in the UK are going to shoot up over the next year, but I do think it is reasonable to conclude that rates are not going to drop any further.
Uncertainty surrounding Brexit made people wonder if rates could fall, with the Bank of England even saying that there would be a strong case to cut rates if the UK crashed out of the EU in order to support domestic demand.
However, with recent developments, it looks like the UK are going to leave with some kind of deal. This means Barclays is unlikely to struggle further from even lower rates.
I think this puts a floor into the Barclays share price, ensuring that if investors do buy in, there is limited downside due to the positioning of interest rates.
