‘Trexit’ reaction is pouring in to Theresa May’s unsurprising resignation, with experts warning of the uncertainty lying ahead.
The UK prime minister made a tearful announcement outside Number 10 this morning announcing her intention to step down as leader of the Conservative party on 7th June, triggering a leadership race with the likes of Boris Johnson and Dominic Raab expected to lead the way.
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Reaction to Theresa May resignation
“With the uncertainty intensifying due to ‘Trexit’,” says Nigel Green, CEO of deVere Group, “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.
“Exposure to equities and bonds, from as many different issuers as possible will help safeguard their savings from this uncertainty and take advantage of the opportunities that will inevitably be presented.”
Green notes that Theresa May’s successor is likely to be an “ardent Brexiteer” increasing the likelihood of the UK leaving the European Union without a deal.
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By GlobalData“This would cause more downward pressure for sterling, amongst other assets,” he concludes.
“Uncertainty, typically, causes dips in confidence in the market, meaning that the pound and UK-based assets could be expected to decrease in value as a result.”
This is also the view of Dean Turner, UK economist at UBS Wealth Mangement, who notes the delay the leadership race will cause to Brexit negotiations.
“In light of the list of candidates to succeed Theresa May, markets have increasingly been pricing in the risk of the next Prime Minister taking a much harder stance towards Brexit, putting the possibility of leaving with no deal firmly back on the agenda,” he says.
“Despite what he or she may claim on the campaign trail, the new PM will not find delivering Brexit any easier than Theresa May did.
“While the possibility of a no-deal exit has risen, we still do not believe this outcome will prevail. Going back to the voters increasingly seems like the only way to break the deadlock.”
May’s resignation will also throw up concerns of a general election and the possibility of a Jeremy Corbyn-led government, which would disconcert investors further.
Sterling reaction to Theresa May resignation
Dean Turner however also notes the opportunities that this situation can bring as sterling inevitably shoulders the burden.
“For investors, today’s news builds on the existing layers of uncertainty around sterling, though we remain alert to opportunities in the pound.
“Sterling is down almost 4% against the dollar this month; from here our bias is to buy the dips below USD 1.24.
“If investor anxiety pushes the pound as low as 1.15, the case for larger long sterling positions would strengthen.”
Chris Towner, director of financial risk adviser, JCRA, adds to this, pointing out positive data on the economic front.
“Half an hour before her resignation retail sales were released showing volumes up 5.2% y/y. This is on top of a 44 year low in the unemployment rate.
“If only Theresa May could have brought the focus back to the economy, the exit may not have been so sad for her.”
