Markets love certainty, and on the back of yesterday’s promise that Article 50 will be triggered by March, the FTSE 100 has been on a surge, reaching close to the 7,000 mark this morning.
UK equities performance since the outcome of the vote has arguably been this year’s biggest surprise, though whether we will see this strength continue into next year remains to be seen.
From 23 June to 30 September, the main index climbed 13.5%, with the average funds from UK All Companies (12%) and UK Equity Income (11%) sectors trailing close behind.
However, after a rocky few months, sterling took another fall this morning, with the pound/dollar exchange rate falling below 1.29 as a so-called ‘hard’ Brexit becomes more likely.
"We have seen a change in direction that simply would not have happened had George Osborne still been calling the shots"
“Long term, if the UK does follow through with a hard Brexit, sterling has the potential to come under further pressure given the probable stalling of Foreign Direct Investment,” says Investec Wealth & Investment bond strategist Shilen Shah.
“The weak pound may provide some support to the export orientated FTSE 100. Gilt market issuance is likely to increase given the likely weaker UK GDP profile following a hard Brexit, the Bank of England’s monetary easing however should keep a lid on gilt yields rising significantly.”
As one satirical news website memorably summed things up recently, the lack of any ‘Brexit effect’ in employment, the stock market and the wider UK economy proves that, well, Brexit hasn’t actually happened yet.