Brexit Contributes to Global Uncertainty

January 17, 2019 | David Hernandez, CFA, Senior Research Analyst, Non-U.S. Equities

Political instability increased dramatically in 2018 and the Brexit looms as a major contributor to the uncertainty in 2019. The UK is scheduled to leave the European Union (EU) on March 29th, 2019 however there is no current plan in place for the exit. On Tuesday, January 15th, the UK government resoundingly rejected Prime Minister May’s Brexit plan, 432 votes to 202. May had negotiated this agreement with the EU in an attempt to organize an orderly departure.

On Wednesday January 16th, a day after her plan’s defeat, Prime Minister May survived a vote of no confidence, 325 votes to 306. With her leadership role intact, May must develop an exit plan that the UK leadership will pass, and the EU will approve. This must be done with the clock ticking and as we move closer to March 29th, the possibility of a “no deal” Brexit increases. This is an outcome neither the UK nor the EU want, and if this occurs, volatility in equity markets is likely to spike. To avoid this, we may see a vote to delay the exit and should the UK fail to reach an agreement perhaps we may see a second referendum. Ultimately, as is usually the case with these types of issues, markets will welcome any resolution that clears up the uncertainty surrounding the event.

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The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

 

David Hernandez, CFA
Senior Research Analyst, Non-U.S. Equities

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