Stocks may have decided to put Brexit in the rear view mirror, but as Deutsche Bank’s Jim Reid lists, there are still numerous outstanding questions.
- When will Article 50 be triggered?
- Will it ever be triggered?
- Will there ever actually be a Brexit?
- Who is the next Conservative leader?
- Will there be a snap general election?
- Will Jeremy Corbyn cling on to the leadership of the Labour Party in spite of a stunning 172/212 MPs in his party supporting a no confidence vote in him? Will the UK have a 2nd referendum?
- On any negotiations will Europe play hard ball or compromise?
- Will the UK let down swathes of the ‘leave’ voters and strike a compromise deal (eg like Norway) that doesn’t address the immigration issue at the heart of many voters’ fears?
- Elsewhere will Italy lose the senate reform referendum in October and could Italy have an EU referendum after a fresh election?
- And will the French elections next year be another spoke in the wheel for Europe?
Keep in mind, these are only the known unknowns. As Jim Reid writes, these questions and many more will remain mostly unanswered for many months which is sure to keep risk premiums on the higher side. However yesterday was a day for thinking the glass as being 10% full rather than 90% empty as various theories were distributed about whether Brexit would actually ever happen or whether some market friendly outcome would eventually be seen.
There’s a possibility of such outcomes but we won’t know that for many many months and possibly much longer so expect lots of mood swings ahead as the prevailing mood changes but there was definitely an air that full Brexit wasn’t necessarily a done deal yesterday.
My favourite comment across the day though was from the Luxembourg PM Xavier Bettel who said “Married or divorced, but not something in between. We are not on Facebook with ‘it’s complicated’ as a status”. Those were the days!!
That came alongside a flurry of other chatter from various EU leaders, all of which appeared to turn up the pressure valve on Cameron and the UK. Late in the evening we heard German Chancellor Merkel come out and say that ‘as of this evening, I see no way back from the Brexit vote’ and that ‘this is no time for wishful thinking, but to rather grasp reality’. Leaders from Belgium, Sweden and Denmark all voiced their frustrations and urged the UK to move quickly towards exit so as to reduce the uncertainty. Meanwhile French President Francois Hollande also added that the ‘UK won’t be able to access the single market without applying the rules of freedom of movement’. Interestingly, yesterday French press Le Figaro released an opinion poll which showed 45% of French citizens would be in favour of remaining in the EU, versus 33% against. Given all of the events of the last week, polls like this will only take on more and more focus.
Or not. Judging by the market’s reaction, and assuming the current pace of low-volume levitation, the S&P may be back at pre-Brexit levels in just 2 more days, at which point the entire Brexit episode will be completely forgotten by the algos.
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