Liz Truss’s resignation will not calm markets
Liz Truss stepping down from her role as PM after just 45 days will only heighten financial markets’ fears as political chaos in the UK worsens.
We’ve seen over the past few weeks how unforgiving the markets are when the Pound plummeted to all-time lows against the Dollar, gilt yields rose, and stocks markets dipped due to irresponsible economic policies set out by the Truss government.
Yet despite Truss’s resignation today, I don’t think this will signal an end to the market volatility.
As I was quoted by Forbes, Business Insider, London Loves Business and Financial Investor 24, amongst other media, investors are aware that the political chaos that has defined Britain this year is far from over, which fuels uncertainty and increases turbulence in financial markets.
Just look at the facts. Over the last four months, the UK has had four chancellors, three home secretaries and two prime ministers. And now a third prime minister will come in who will establish his or her own cabinet.
As it stands inflation is at 10.1%, crippling households and businesses, and there isn’t a functioning government. In investors’ eyes, the UK economy looks more like an emerging market, not a G7 nation.
However, should there be a relief rally in markets now that Truss’s exit has been announced, it will be short-lived as political upheaval is still in play.
The pound, gilt markets, amongst others, will still be under pressure.
When the new Chancellor, Jeremy Hunt binned the majority of Truss’s economic agenda earlier in the week, I said that the new measures would likely only calm markets temporarily.
You can’t expect to regain that monumental loss of credibility that quickly. U-turns and scrapping economic policy after economic policy does little to spark investor confidence and trust.
Right now, UK financial assets are massively unattractive for investors, which will be reflected in the markets.