How will Brexit affect your finances in 2018?

Share prices, inflation and interest rates are all likely to react as the terms of our EU exit become clearer, says Richard Evans

This is the year that should see the shape of Britain’s future relationship with the European Union emerge, with inevitable consequences for everyone’s personal finances. The stock market, inflation and interest rates could all be affected by the character of any agreement and by the twists and turns in the negotiation process.

Telegraph Money will resist the temptation to gaze into its crystal ball, aware of the future’s habit of refusing to conform to predictions, but will attempt to make clear the relationships between the various economic forces involved so that readers can at least be better prepared for the unexpected. Investors are now familiar with what happened to share prices after the EU vote, and why. The markets initially fell in panic, but soon realised that the sharp decline in sterling that followed the referendum boosted the profits of firms that make most of their money abroad – as many FTSE 100 firms do.

Hence shares in international firms rose. This has given rise to a strangely split market: overseas-focused stocks have continued to do well, but their performance has diverged markedly from that of domestically focused firms, whose shares have languished (see chart on page 2).

The stock market seems to be expecting a “hard Brexit” that results in the British economy suffering