
A full English Brexit
Paul Jackson. Global Head of Asset Allocation Research and András Vig. Multi Asset Strategist
Already challenged by the Brexit process, the last thing the UK needed was a global pandemic and it seems to have suffered more than other countries (see chart below).
The Brexit process is coming to a conclusion. Financial markets have already passed judgement, with sterling failing to recover after slumping in 2016 and UK equities not reaping the usual benefit from such depreciation.
The path of the pandemic is of greater importance but we believe the effect of Brexit on UK assets depends on what sort of deal is agreed with the EU ("full-deal", "compromise" or "no-deal"). We outline our expectations for each case.
We believe the balance of probabilities favours sterling and UK risk assets but the chances of a "no-deal" outcome are uncomfortably high.
The fact that Brexit is a very English phenomenon suggests there is a long term risk to the union of the United Kingdom, with Scotland and Northern Ireland the most likely candidates to leave. Just as we always face ridicule when investment choices backfire, the UK government could end up with egg on its face.
Investment risks
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The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Important Information
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Data as at 09.10.2020, unless otherwise stated. This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities.
Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals, they are subject to change without notice and are not to be construed as investment advice.