After a titanic Brexit battle the UK government finally delivered on the promise of the referendum and Britain is now outside of the EU, or rather will increasingly be as it disengages.
This disentanglement from EU rules and regulations may be minor or maybe major, that is yet to be settled but the question is, will Brexit be a success?
The answer is, that the success or otherwise of post Brexit Britain lies almost entirely in the hands of the British government.
What is happening is the UK is now proceeding on a high risk road, a dramatic break from the lower risk path of being a region in a European super-state.
Risk is meant to equal reward, but it only does so, on average. Risk opens up the cone of possible outcomes, so things can go better or worse and those results are down to execution. Brexit reset the platform that is the UK economy.
Foolishly, I’m am very hopeful that the outcome will be positive as it seems on the face of it, to naive observers like myself, that the current team in charge have the bite and will to create what amounts to a post-EU revolution in the UK. That is a giant task.
Many think they will not succeed and the UK will suffer years of setback and failure.
However, if you look at the UK’s market progress even back into the 80s, the UK has been failing as far back as you care to go.
Here is the UK’s FTSE 100 index against the German index.
Does that look like UK economic success to you?
Where there is growth, a graph must turn exponential, that’s what growth does to any value. Straight line growth is barely growth at all.
The UK markets growth is linear, the German’s exponential. In a nutshell, that is the comparison of progress in the UK and Germany. More of the same for Germany looks tremendous, more of the same for the UK looks dire.
Now France’s stock market has this straight line growth as the UK, while the US has the exponential growth in its stock markets as the Germans. It seems to highlights two economic states. Exponential growth = a growing economy, straight line growth = stagnation. Few would disagree that this is the case for France’s economy and I strongly suggest the FTSE 100’s returns is a symptom of the same problem in the UK.
Enough moaning, what next?
If Brexit is going to be great, the FTSE will go straight to 10,000, if it doesn’t then the British lions can lie down and suffer being led indefinitely once again by Donkeys.
This miserable outcome would be very sad but there seems to be a chance that there is enough will power and gumption in the current administration to go all at an attempt to break out of this economic miasma. If the market gets wind of this, as the Coronavirus scare falls away, up will go the FTSE for a historic run.
The FTSE 100s trend is not a difficult trend to break, so if you see FTSE go upwards and out of bounds, then the Brexit gamble will be paying off.
Here is the chart and trend lines to watch.
What do I think will happen? (Caveat the 4 horsemen of the apocalypse) I think the FTSE will smash these levels in 2020.
We will find out soon enough.