Uncertainty surrounding Brexit has led investors to strike real buyers since the 2016 referendum. The risk of a non-contract Brexit weighed heavily on UK stocks in international portfolios. But now the tide has changed in many respects and British financial assets are cheaper.
Dr. Adolf Rosenstock, Economic Consultant Mainzky Property Management
The agreement between Great Britain and the European Union, negotiated at the last minute, regulates mutual market access to goods. Now again there are customs restrictions and countless free import restrictions. None of those important services have yet been acknowledged. New bilateral agreements regulating financial services in particular are likely to be here. Overall, this will weaken the UK economy more than the EU economy.
Uncertainty is out
Despite all the negative consequences, the uncertainties of how and when to exit the market with the Brexit deal are gone and the fact that it is now in the hands of Great Britain will be very decisive for the foreseeable future. The British financial market wants to trade with countries outside the EU under any circumstances. In the long run, Brexit will lead to stronger relationships with global trading partners such as China, India or the United States.
Better vaccine management
In addition, the British government has managed the corona crisis better than the EU since vaccines were approved. He not only negotiated legally better deals with pharmaceutical companies, but also initially ordered higher vaccine doses per head (preferably: one hand). So far, a quarter of the UK population has been vaccinated at least once, while the EU has not reached even five per cent. So the Great Britain herd must achieve immunity very fast and thus return to more or less normal economic, social and cultural life than many countries.
Favorable stock rating
For this reason, we expect Great Britain to experience a strong cyclical growth in the coming months – thus important months ahead of the EU. So it is not surprising that not only has the pound recovered over the past few months, but the British stock market has now ended its long-term performance. The London Stock Exchange benefits from a list of major energy and mining companies. Despite this recent rebound, the UK stock market is still moderately valuable. Currently with 13.5 forward PE, it is relatively cheap compared to 15.7 with Germany or 22.4 with USA.
British bonds needed again
In addition, as the external value and yield of the pound continue to rise, so does the British securities market. Overall, Brexit is a clear cut in trade relations between Great Britain and the European Union, so it will remain an integral part of future investment decisions. For future market trends, however, the expectation that the outcome of negotiations would be even worse until the end of last year, and the fact that the new system now creates clarity, was previously of great uncertainty.
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