Cutler Cook, Associate Director at PAAMCO, shares his thoughts on last nights UK election result.
“The U.K. election has been a case study in the complexities of polling; turnout patterns have changed in the aftermath of the Brexit referendum, which mobilized young voters, who now know where to find their polling station; age trumps social background, which may be the beginning of a new global phenomenon, and we have seen two in/out referenda going on in parallel with voters making clear their opinion on a May-led Conservative party as well as the desire for a softer Brexit.
While the Election results certainly suggest a degree of political chaos, unlike a year ago when the currency plunged over 15 points into territory not seen in 30 years, we have seen a move overnight of 2 points, reflecting uncertainty, but not panic. The further the political chaos goes, the higher a chance there is of a new election and an eventual long-shot BreUnion. Markets struggle to price these low probability outcomes and we expect to see some heightened volatility around any major new political developments, which will create opportunities for nimble traders. More broadly, a softer Brexit seems possible and we expect European markets to be sanguine.”