The general narrative of the UK leaving the EU is that it will be detrimental to the UK. However this may not be what the markets are indicating. The British Pound Sterling currency is weakening – keep an eye on the EUR/GBP cross exchange rate in this regard. British bonds have been doing well, and the UK equity market is outperforming relative to the general narrative expectations.
Markets are becoming ever more fearful of UK Prime Minister Boris Johnson initiating a genuine hard Brexit.
What are the implications? Overall this is looking better for the UK relative to Europe as the British currency depreciates. Investors may look to taking advantage of a steep discount in British assets based on the depreciating currency. Back during the financial crisis of 2008, a similar situation happened as the depreciation of the British currency mitigated the negative effects of the financial crisis.
“If the Greeks, Italians and Spaniards had a currency that depreciated when confronted with financial and economic crisis the duration of the pain would have been lessened. The bottom line is while pundits point to the British pound as proof of the ill-advised HARD BREXIT, I advise looking to other asset classes for an alternative view.”