Brexit – Deal or Delay?

March 08, 2019 | Nicole Johnson-Barnes, Research Analyst

With merely 21 days left before Britain is due to leave the European Union, global investors are keenly watching their daily news feeds in hopes of clarity on the likely outcome – deal or delay. Note that hard exit was excluded from the list of options. Many economists and leading global financial institutions, like JPMorgan, Credit Suisse, and RBC, have lowered that probability to less than 10%1,2 in response to Prime Minister Theresa May’s compromise on February 28th that allows MPs to vote on a short delay and to rule out a no deal exit in the short term.

So what has exactly transpired since the initial divorce deal’s failed vote and May miraculously passing the no-confidence vote on January 25th? There have been several debates within the Parliament chambers on revisions necessary to secure a positive vote, including an option to remove the 21-day wait period required before voting on an international treaty and amendments to the Irish backstop. As of March 6th, a revised deal between Britain and the European Union has yet to be accepted, with recent talks being characterized as difficult and inconclusive. Albeit too early to know, there’s a strong likelihood that one of the following scenarios will occur: 1) May’s top lawyers will come to compromise with EU and present a palatable deal to Parliament by March 12th, or 2) MPs will vote no on the revised deal and agree to an extension on March 14th.

In this week’s chart, we show FRED’s Economic Policy Uncertainty Index for the United Kingdom3 along with U.K.’s Economic Sentiment Indicator over the last three years. As depicted, indecision over the Brexit outcome remains and drives the uncertainty index into the 450 range, up 56 points from January month-end. At the same time, sentiment within the world’s fifth largest-economy continues to wane as both consumers and many businesses hedge their stakes and prepare for the worst-case scenario, a disorderly Brexit.

Print PDF> Brexit – Deal or Delay?

 

1. Bloomberg, “Things Are Looking Up for the Pound, Strategists Say”, March 4, 2019.
2. Business Insider, “The City of London is finally starting to believe that the UK will avoid a no-deal Brexit”, March 3, 2019.
3. Baker, Scott R., Bloom, Nick and Davis, Stephen J., Economic Policy Uncertainty Index for United Kingdom [UKEPUINDXM], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/UKEPUINDXM, March 7, 2019.

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.

Nicole Johnson-Barnes
Research Analyst

Get to Know Nicole

Related Content

05.15.2019

Are Low Default Rates a Reason to Reach for Higher Yields?

As indicated in Moody’s 2018 Annual Defaults Report, recent default rates on corporate debt have been significantly below long-term historical…

05.08.2019

Municipal or Taxable Bonds for High Net Worth Investors?

Municipal bonds remain attractive and still make sense for high net worth investors on a go-forward basis…

Hedge Fund Favorites Rebound to Start 2019 chart of the week

05.07.2019

Hedge Fund Favorites Rebound to Start 2019

This week’s chart shows the performance of Goldman’s portfolio of hedge fund favorites, which draws from over 800 fundamental-driven hedge…

U.S. Equities Rally as Outflows Persist chart

05.02.2019

U.S. Equities Rally as Outflows Persist

This week’s chart looks at Morningstar fund flow data among the broad category groups of U.S. equity, international equity, taxable…

IPOs Are Coming chart showing recent share prices since Pinterest, Lyft, and Zoom went public

04.25.2019

IPOs Are Coming

This year has seen a burst of unicorn IPOs paving the way for Uber’s IPO later this year. While Lyft,…

04.18.2019

Global Central Banks React to Slowed Economic Momentum

In 2017 the global economy underwent a synchronized move upward and investors saw equities throughout the world generate double-digit returns….

More articles

Subscribe to Research Email Alerts

Research Email Alert Subscription

Research alerts keep you updated on our latest research publications. Simply enter your contact information, choose the research alerts you would like to receive and click Subscribe. Alerts will be sent as research is published.

We respect your privacy. We will never share or sell your information.

Thank You

We appreciate your interest in Marquette Associates.

If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.

Contact Us >