It seems the market likes Boris.
Here are the charts:
First the Pound versus the Euro
And the FTSE 100 the London’s main Index is also up and away but the German and French markets are flying too. This might be because it is clear the uncertainty for the UK and Europe is about to be over or that there a bigger issue driving stocks than Brexit.
However, it looks clear that the markets think the UK is a little bit better off now Boris is in the driving seat, but it might also be relief that someone other than the past tortured Prime Minister has their hands on the wheel.
Looking back to the election of Trump, few expected his win to be good news for the makrtes, in fact on the early news, the Dow dropped around 700 points on the early shock results. The following rally was a shock to the vast majority of investors, albeit a pleasant one.
I favor a similar outcome with Johnson as PM
Outside of the fact many companies are not reliant on the UK for large chunks of their business the worst outcome going forwards is ‘funk.’ A remain would clearly rally the FTSE but a tough Brexit would hit the pound and force protective monetary policy which would also likely push the FTSE a lot higher. Couple this with the depressed state of the UK stock market and we are left with a high probability of a significant rally in the FTSE ahead.
Now I still reserve my position that the institutions of the UK will do everything possible to kill Brexit and they do have a chance to succeed. You can see from the rabid ‘Remainer’ press just how desperate certain corners of the UK and its institutions are. This venom may still carry the day, but on the face of it Brexit is on the fast track to be delivered.
So lets look at the FTSE 100 chart.
I’m a form believer in drawing very simple charts that show the tendency of the market without the bumps and wiggles of random emergencies that force prices of a steady boring path. From the tendency of about the last 10 years it looks like the market is due for a 10% rise. This will be a pretty good outcome against a back drop of a lot of global difficulties.
It also does to recall that even factoring in dividends, the UK market is a sluggish beast and if awaekened is quite able to power ahead much further than I project.
UK valuations are nothing like US metrics and we can expect that gap to close and hopefully not because of a US slump.
What is about to unfold is certain to be high drama theatre of a historic scale but what to do?
I think ‘holding’ and ‘buying the dips’ is the way to go, picking up solid blue chips with big dividends.
Meanwhile we will soon see the battle lines between Brexiters and Noexiters and any buying opportunities this war throws up should be aggressively bought.