Boris Johnson becoming leader of the Conservative party puts an end to a drawn-out leadership contest. But the new prime minister’s options on Brexit remain broadly the same as his predecessor’s. Our eyes remain firmly on the pound, which has fallen sharply against the dollar and euro this month. Meanwhile, with UK stocks cheap relative to peers, this period may go down as one of the all-time best opportunities to invest in UK equities.
With Boris Johnson as prime minister, the options facing the UK on Brexit remain broadly unchanged: a Withdrawal Agreement similar to that presented by Theresa May; a general election to win a greater majority for the Conservative party, or a new referendum.
The outcome will depend on how confident Boris feels in his own political power. His support of the Leave campaign gives him leverage over the right wing while the bluster may win Labour Leave voters. His personal background may help him retain the Tory heartland. But the key question is whether he will be able to extend his charm over the Channel.
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Implications for the financial markets
As far as financial markets are concerned, our eyes remain firmly fixed on sterling, which is reacting, almost by the minute, to the deal/no-deal narrative. And while it is easy to argue that the UK equity markets offer great value versus their peer group, this is especially true of a deal or new referendum scenario. The jury remains firmly out regarding a no-deal as this would be too much of a step into the unknown.
We may well look back in a few years’ time and regard this period as quite simply one of the best opportunities that we have seen to invest in UK equity markets.
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