Investors got yet another surprise election headline out of the U.K. on Thursday after no party achieved a majority in Parliament. The vote may have major implications on the approach the U.K. takes to its exit from the European Union, a key area of uncertainty for investors who own stocks with exposure to the U.K.
While uncertainty is rarely a positive for financial markets, the lack of a clear mandate may prevent Prime Minister Theresa May and the Conservative Party from taking a more aggressive approach to Brexit negotiations, which were set to begin on June 19.
“Today’s result will in part be seen as a vote against a definitive break from the EU, and the market may soon begin to reassess the probability of a so-called hard Brexit,” UBS strategist John Wraith says.
A hard Brexit could potentially involve the U.K. and the EU applying tariffs and other trade restrictions, a scenario which would be bad news for the large British companies that do the majority of their business outside of the U.K.
Many of these British companies trade on the FTSE 100 Index, which initially bounced more than 1.3 percent on Friday on the news that a hard Brexit may no longer be the most likely path forward. However, the FTSE 250 Index, which includes companies with more exposure to the domestic U.K. market, was down slightly on the day.
The U.S.-listed iShares MSCI United Kingdom ETF (ticker: EWU), which tracks stocks representing roughly 85 percent of the total market capitalization in the U.K., initially dropped more than 1.1 percent following the vote as U.S. investors weigh the uncertain future of the U.K.
Fortunately, the political drama in the U.K. will likely have little impact on the majority of global financial markets in the long term.
“The U.K. is…
Click here to continue reading
Want to learn more about how to profit off the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!
