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Investment Talks - Brexit: Where do we stand and what should investors expect?

United Kingdom, 11/27/18,  by Amundi

  • Where we stand and possible scenarios ahead: After the EU approval of Brexit deal, we are going to pass through some tough times until the UK parliamentary vote on Brexit Withdrawal Agreement in December. UK Parliamentary ratification of the deal will be very difficult and will likely bring new episodes of market stress, but we think the most likely scenario is that the deal will ultimately be ratified (but probably not on the first attempt on 10th December). Whatever happens, uncertainty is likely to remain until the end-March Brexit date.
  • UK Economy: Even though Brexit-related uncertainty is weighing on confidence, we assume that in the event of a Brexit deal (our base case scenario) the UK economy should experience a slight acceleration in 2019 and 2020. Furthermore, the labour market is in good shape and real wages, which are positive again, should support consumption.
  • Investment implications: In the fixed income market, we have a relatively neutral view on Gilts (government bonds), becoming more constructive in case of a no-deal and more bearish in the other case. In the equity market we remain cautious on UK-listed equities, especially on UK stocks exposed to domestic growth. We look with more favour to more sinternationally-focused stocks and sectors with a majority of their earnings abroad or which report in a currency other than sterling. On currency: developments and trading in British Pound (GBP) are becoming increasingly binary: our base case scenario is that there will ultimately be a Brexit deal with the potential for the GBP to appreciate, but we expect the currency to show a very erratic pattern though. So, the sizing of position and risk management for investors willing to take GBP exposure will be of utmost importance.

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Amundi is Europe’s largest asset manager by assets under management and ranks in the top 10[1] globally. It manages more than 1.470 trillion[2] euros of assets across six main investment hubs[3]. Amundi offers its clients in Europe, Asia-Pacific, the Middle East and the Americas a wealth of market expertise and a full range of capabilities across the active, passive and real assets investment universes. Clients also have access to a complete set of services and tools. Headquartered in Paris, and listed since November 2015, Amundi is the 1st asset manager in Europe by market capitalization[4].

 

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Footnotes

 

  1. ^ [1] Source IPE “Top 400 asset managers” published in June 2018 and based on AUM as of end December 2017
  2. ^ [2] Amundi figures as of September 30, 2018
  3. ^ [3] Investment hubs: Boston, Dublin, London, Milan, Paris and Tokyo
  4. ^ [4] Based on market capitalization as of September 30, 2018

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