A few days after the surprise vote in the UK, uncertainty remains high and we believe won’t ease anytime soon given the complexity of the subjects to be dealt with. However, we have some clear perspectives during this time of uncertainty.
- Firstly: this is a political crisis, not a financial one. We are not in a revival of 2007/2008.
- Secondly: there will certainly be some impact on global growth but it should be limited as the main driver remains internal demand; we still believe global growth will be in the region of 3% this year and in 2017.
- Thirdly: the European Union has some challenges ahead but we are convinced they will be overcome– remember that Europe is at its best under pressure. We are not in a revival of 2011.
- Fourthly: we will see more involvement from Central Banks, not less; we believe the Fed will not increase rates in the foreseeable future, ECB, BoE and BoJ will increase their interventions.
- Finally: so far the market movements are totally logical and correspond to a re-pricing of risk premia; some interesting entry points will come in the next weeks for long-term investors.
We are now in an environment where classical asset allocations will prove inefficient in the future as core Govies go globally deeper into negative territories and can no longer be considered as safe in terms of capital preservation on a short and medium-term horizon.