- The UK’s vote to leave the EU has global implications. Markets must assess the path that a new political line-up will choose to go down. Even a ‘soft exit’ may take years just to get back close to square one.
- Once the dust settles, the UK economy will of course survive, given its entrepreneurial flair, increasing focus on non-EU trade, & likely policy loosening by the BoE & UK Treasury. But, further QE would only intensify the pressure on pension funds.
- With elections elsewhere, the erosion of the EU’s safe-haven status offers an additional brake for the US Fed to ‘peak out’ early on rate hikes - suggesting an ultra short rate-tightening cycle.
- Deeper fiscal union in the euro-zone may now come at the expense of a wider one. And, globally, the risk of beggar-thy-neighbour policies, unless checked, could unravel decades of globalisation.
- The UK needs to reassert policy credibility. Outside the EU, we’ll probably have to compromise to retain Single Market access, especially as it’s our second European ‘divorce’. So, future trade tie-ups may not be ‘without strings’ - just like EU membership then!...
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