How Liz Truss’ Resignation Could Boost Your Passive Income

Liz Truss’ term as Britain’s prime minister is officially the shortest reign in the country’s history. It was a mere 45 days long. It has been noted that it was shorter than the lifespan of lettuce. During her short time in office, she caused the British pound to collapse in value before resigning under public pressure.

Liz Truss’ Downfall

The real issue with Liz Truss’ tenure was the controversial spending plan. Of course, a prime minister must draft and approve various spending plans for the country to continue functioning smoothly. However, the global economy is in the toilet.

During the pandemic, countries across the globe began shelling out billions of dollars in healthcare and stimulus money to businesses, hospitals, and individuals. All of this money floating around the market has since caused massive inflation. Inflation means your money will buy less per dollar/yen/pound than it did before.

The Russia-Ukraine war has also caused heavy stress on energy and other supply lines, driving prices of oil and other commodities higher. With inflation and COVID recovery underway, the war has put massive pressure on companies and households, further reducing the money in the common person’s pocket.

Amid such chaos and difficulties, Liz Truss announced a massive tax cut to the highest earners in the country. She claimed that cutting taxes on the rich would encourage their spending and put money back into the economy. It was truly trickle-down politics at its finest. This announcement was coupled with the announcement to spend a whopping 45 billion pounds without tax money to cover it.

Following these announcements, the British pound collapsed and threw the country into a financial crisis overnight. Mortgage prices rose, and bond yields skyrocketed. With such terrible results, Lizz Truss reversed the announcement and resigned from office.

Capitalize On Liz Truss’ Mistake

Thanks to the announcement and subsequent collapse, the British pound has lost a lot of its value. This might look like a terrible time for investing. However, an experienced investor understands that you always want to buy stocks when prices drop.

Specific British companies are publicly listed on the New York stock exchange. This means they are based in the British pound, but the company is exposed to a global market. When the pound drops in value, these companies benefit because their value is not tied to only the pound.

Diageo (DEO) and British American Tobacco (BAT) are two excellent examples. They are monolithic conglomerates that own liquor and cigarette brands across the globe. Their revenue is mostly from other countries rather than Britain. So, when the pound is lower in value, the income they generate can purchase more pounds, increasing their profit margins. And increased profit margins mean a higher stock price.

As the price of the pound continues to dip, some investors buy into these types of stocks to generate their own passive income. The income is from the dividends of these stocks, which will remain stable thanks to the increased profit margins. For example, BAT pays a 7.5% dividend for each stock held. A healthy portfolio investment in these stocks can yield a decent income over the coming months.

Conclusion

A declining market is not fun for anyone. Liz Truss’ antics have led to a massive crash for the British pound, putting many people out. However, financially savvy individuals, including those from Britain, can take advantage of events like this. All it takes is knowledge about markets and the ability to research and find the right places to invest time and money.