Brexit is getting close for the UK and now the ‘remainers’ are beginning to howl for a second referendum.
They may get one.
The argument goes that the electorate was promised an outcome that has not been delivered and that it was lied to about the likelihood of a good outcome.
This is to an extent correct, but being lied to by politicians and litany’s of broken promises have never been the reason for an election recount. If they were, no democracy could operate.
But another referendum is the only hope for ‘remainers’ and their number is great in the halls of power.
It was said that there was only 130 EU ‘leavers’ MPs in Parliament and the Euro-philes in the elite are by far a big majority. The trouble is the electorate want to leave the EU and they voted for it.
Gone the phoney referendums of Europe, the UK electorate said ‘leave,’ and the UK politicians are honouring that wish.
The elite cannot put the Brexit back in the bag because support is deeply felt and the political calculus leaves no one standing if a Brexit is not enacted.
Of course it will be catastrophic for the UK economy. Already global corporations are rolling up their operations and shipping them into Europe. The City of London will be devastated, however much they say otherwise.
Huge swathes of GDP are going to vaporise.
‘Remainers’ know this but ‘leavers’ do not care.
Investors should care because if there was to be a second referendum the FTSE 100 would likely go through the roof.
It would be a funny market that didn’t respond that way having swooned when the Brexit vote went to the ‘Leavers.’
Since the referendum, the FTSE’s progress versus the DAX makes an interesting comparison,
Even the sluggish Cac40 looks good:
The US market has gone into orbit too, while the UK has been lacklustre, no doubt because Brexit will be such a hard blow, when the hammer falls in 2019.
A second referendum could avoid all this.
People will see sense, the ‘remainers’ hope, they will see that being part of Europe is critical to their wellbeing. They will vote in their own self-interest.
A second referendum however is no guarantee of a ‘remain’ win.
Who can trust polls these days?
While the press and various political factions will call for a second referendum it seems unlikely there will be one and time is running out.
So what of the downside of Brexit. Surely by now the FTSE 100 has factored in the cost of it. A hard Brexit must according to market theory be already in the numbers. It is obvious to all that the EU is going to drive a very hard bargain if they drive one at all.
So with this in mind, is the FTSE 100 at a base where there is only upside?
A second referendum would send the market up.
A remain win would send the FTSE higher.
A less than extremely hard Brexit should be a tail wind to the FTSE.
If Brexit is in the price and it should be, we should have already seen its worse impact on share prices.
The fact this hasn’t been too bad suggests that either the UK is in denial about the impact of Brexit or that it won’t be so bad after all.
As a contrarian I must imagine it is the later.