The election yesterday in the UK offered something that has been a rarity during the three-year-long soap opera called Brexit: some clarity. British voters gave the conservatives (Tories), led by Prime Minister Boris Johnson, a clear mandate to go through with a Brexit as exit polls indicated 368 of 650 seats for the party.
For Johnson, this means gaining an absolute majority as well as the possibility to secure a fast Brexit. Since he already has a deal ready to present to the parliament. The markets reacted immediately to the news and the British pound soared on the result.
The next step after the exit on 31 January will be negotiations about future ties with the European Union, in other words the actual divorce. Based on past experiences we don’t expect this to be a walk in the park, thus leaving some continued political risk surrounding the issue.
However, relative to the situation yesterday, the risk level has decreased markedly., leading to forecasts for Europe and European shares looking brighter. The slow down in the region has mainly affected the manufacturing sector but there have been some signs of a stabilization in the past months. With a straighter Brexit path ahead and yesterday’s trade agreement between the US and China, Europe should start looking more attractive to investors, who have been exiting the region en masse since 2016. We are keeping our overweight stance on European shares.
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Nordea Asset Management has taken home the ‘ESG engagement initiative of the year’ prize in the 2020 Sustainable Investment Awards
Markets and investments
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