The ‘Trexit’ aftermath, all eyes on the Tory leadership race
Following Theresa May’s announcement on Friday that she’s resigning as leader of the Conservative party on June 7, it’s imperative that UK and global investors take action to mitigate risks to their wealth.
Sterling immediately rallied against the euro and dollar following the announcement, subsequently giving up its gains.
The race to be the next Prime Minister of the UK is now very much on, which is likely to bring further uncertainty, both politically and economically for Britain’s future.
Typically, uncertainty leads to a fall in confidence in the market, meaning the pound and UK-based assets can be expected to fall in value as a result.
Therefore, with the ongoing uncertainty due to ‘Trexit’, UK and international investors in UK assets should mitigate risks to their wealth by ensuring their portfolios are properly diversified geographically and by asset class and sector.
Having exposure to equities and bonds from several different issuers will help safeguard investors’ savings from the uncertainty as well as make the most of the inevitable opportunities that will be presented.
Indeed, investors will be keeping a very close eye on the Conservative party leadership battle, with Boris Johnson, Dominic Raab, Michael Gove, Sajid Javid, Esther Mcvey and Jeremy Hunt reportedly in the running.
It’s highly likely that the future PM will be a fervent Brexiter, such as Johnson or Raab, who could drive towards a no-deal Brexit.
This would, in turn, create more downward pressure for the pound, among other assets.
In regard to the European elections, the results of which will be announced on Monday, it’s predicted that voters have steered away from the two main parties, Conservative and Labour, and moved towards the Brexit Party, the Liberal Democrats, Change UK and The Green Party, dramatically changing the political landscape.
Expectations are rife that Nigel Farage’s Brexit Party will do well, which would send a very clear message to the Tories. This will undoubtedly mean than the next leader – and Prime Minister – will be a Brexiter.
As I’ve been saying this week, Boris Johnson, a favourite in the leadership race, has pushed for a no-deal Brexit in the past.
Nevertheless, although the outcome of the European elections could well lead to a minor knee-jerk reaction in the currency markets, I believe focus will be firmly fixed on the Conservative leadership.